Microsoft CEO Steve Ballmer says the best strategy for technology companies today is to continually expand the scope of their business into new areas. In Ballmer's view, companies like IBM, which has taken the opposite approach, may not be doing what's best for investors.
"IBM's footprint is more narrow today than it was when I started. I am not sure that has been to the long-term benefit of their shareholders," Ballmer said earlier this week in an interview with The New York Times.
In the past decade, IBM has sold off its networking equipment and some hardware businesses to focus more attention on software and services. That move appears to have paid off, as many partners attribute the success of IBM's public sector business, which has continued this year in spite of the uncertain economic situation, to the expertise IBM has built up since it decided to decrease its emphasis on hardware.
Ballmer's comments are ironic given that IBM's share price has grown roughly 30 percent in the last decade while Microsoft's has dropped about the same amount during the period. What's more, IBM actually has been just as active as Microsoft when it comes to recent acquisitions.
Since the beginning of 2008, IBM has acquired 19 companies, adding enterprise storage, business intelligence, data de-duplication, virtualization, source code analysis, and online messaging and collaboration technologies to its portfolio. Microsoft, during the same period, has acquired 18 companies, the bulk of them bringing in mobile, search, and virtualization technologies to fuel the software giant's push into these areas.
Ron Herardian, president of Global System Services, a Mountain View, Calif.-based solution provider, finds it ironic that Ballmer would criticize IBM for cutting its hardware business given Microsoft's own struggles with the handful of hardware product it has brought to market.
IBM still has plenty of breadth within its product portfolio to maintain a strong competitive position in the market, according to Herardian.
"IBM offers multiple operating systems, an office suite, a database system, a Web application server, development tools, messaging and collaboration platforms and many, many more software products," said Herardian. "On software alone, IBM competes with Microsoft in practically every category."
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