Two giants, International Business Machines Corp. (NYSE:IBM) and Microsoft Corporation (NASDAQ:MSFT), seem headed for a fierce battle in the cloud computing for business for corporate clients. From the results of the two companies for the previous quarters and the subsequent conference calls to the investors that the executives of the two companies gave, it appears that both companies are set on shifting from their traditional businesses to something new.
However, in what many analysts believe to be an interesting dimension to the development, the results of the companies raise the question of whether the two companies are giants on their deathbeds or whether we are going to witness a sizzling performance from them in new ways.
The financial results of IBM are indicative. In general, the revenue of the company has been falling over the last few years. The current results indicate that the revenues of the company fell by 11.9% to get to their current level of $81.7b. Further, its share price has been declining steadily for the last two years.
On the contrary, Microsoft has been doing pretty well over the recent past. For example, the company first posted quarterly results that were better than those of Microsoft a year ago. Many observers, including CNBC, pointed out that that was a watershed moment since Microsoft had started as a small company that supplied operating system to IBM.
IBM was then a giant in the industry, controlling the global computer hardware business. Currently, the good performance of Microsoft has been underscored by the fact that it managed to post revenues of $88.1b for the 12 months of 2015.
What is important to note is how the results of the two companies reflect the performance of their separate strategies. IBM has been struggling to shift from its old technology business to what it says is the new frontier of growth: cloud computing. This explains why the company sold its division of making servers and decided to concentrate on analytics, security and cloud computing businesses.
Similarly, Microsoft has concentrated on cloud computing business, going by its recent pronouncements and actions. Its CEO, Satya Nadella, has said that the company is excited by the massive size and dynamic nature of the cloud computing business. Interestingly, the cloud computing business that is operated by the company is based on letting businesses run their activities on their own data centers or on the data centers of the company.
Therefore, it appears that IBM and Microsoft are set to experience fierce competition from each other in the cloud computing business. Microsoft seems to have taken the initiative while IBM is a limping giant.
