IBM. It’s a company we think we know so well. Its brand is recognisable everywhere. It is one of the world’s biggest employers. Its employees have received Nobel Prizes, Turing Awards, National Medals of Technology and Science. In the eyes of some, its time in the spotlight has come and gone.
For more than half a century after its founding in 1911, ‘Big Blue’ was synonymous with innovation in the field of information technology. From Unit record equipment, the company expanded into electric typewriters and other office machines. In the 1920s, with Thomas J. Watson at the helm, the company embraced the motto ‘THINK’, and by the 1940s and ‘50s the first experiments with computers were being conducted. By the 1960s, the Model 360 mainframe had come into being. In the ‘70s and ‘80s, IBM was the most admired corporation in the United States.
It’s no secret that a lot has changed since then. Microsoft, Apple and Google became the new tech giants, and a boom in the sector, unlike any before it in human history, began and is still ongoing. In the public consciousness, IBM calls to mind grey and box-like computers, rolling green text over a black screen, and the clack-clack-clack of the keyboard. But in the modern age, such an impression is unfair. Since the late ‘80s and early ‘90s, when the company faltered through a period of adjustment, IBM has gone from strength to strength. In 1997, the supercomputer Deep Blue defeated World Chess Champion Garry Kasparov. By 2006, IBM translation software was being used in Iraq to overcome the shortfall of military linguists. And in 2011, Watson, IBM’s cognitive artificial intelligence programme, capable of responding to queries given in natural language, won the quiz show Jeopardy!.
Watson thinks like a human in order to understand, reason, learn and interact, and already it has started to show its promise in fields such as health and finance. Far from being a novelty, it now assists with treatment options for patients at certain hospitals; IBM Watson’s former business chief, Manoj Saxena, reported that 90% of the nurses who use Watson follow its guidance. But Watson has potential value for almost any industry you care to name, since in most industries, hundreds of billions of dollars are spent in inefficient ways. The Watson technology could transform entire sectors by calculating where money should be spent and saved.
Aside from artificial intelligence, IBM has identified core strategic imperatives and over the last decade has been restructuring the company to encompass these based in the fields of cloud, analytics, mobile, security and social. In order to do this, IBM has ensured they have the right people, with the right skills, to realise their vision, with more than 50% of employees hired in the last five years. IBM has also acquired 34 companies in three years in an effort to increase exposure to these imperatives.
Initiatives such as Smarter Planet, which aims to achieve economic growth, high levels of efficiency and societal progress in other areas, also show the company’s desire to have a wider positive impact on the communities around them. This was clear to see in the construction of a ‘green’ data centre in Boulder, Colorado, part of a $350 million effort by the company to help customers reduce energy costs and cut their carbon footprint.
Today, IBM holds the record for the most U.S. patents generated by a business, as it has done for 25 years, and has some of the greatest cognitive solutions technology in the world. It is one of the leaders in blockchain, and has launched a distributed ledger food safety project with major companies including Walmart and Nestlé.
As the company transitions to focus on its ‘strategic imperatives’, IBM’s total revenue has been falling; last quarter, however, these strategic imperatives accounted for more than 50% of total revenue, and underlying revenue growth was the highest in over seven years. We have yet to see many of IBM’s ideas translate to revenue, however signs suggest they soon could: IBM has been awarded a $740 million contract with the Australian government to digitise and automate services for citizens, and Crédit Mutuel became the first financial business to buy into deep-learning tech when they struck a deal with Watson. IBM built and sold the world’s most powerful supercomputer to the US Department of Energy, and made cloud deals elsewhere with ExxonMobil, Amtrak and Telefónica.
In the Digital Age, we have seen many major companies who once seemed all-powerful and unmovable get knocked off their perch or collapse entirely. IBM, however, rode out just a few years of turmoil, the blink of an eye in a 100-year history, and emerged on the other side with ideas, with ambition and with a statement of intent to rise once again to the dizzying heights of the ‘70s and ‘80s. Far from being a brand of the past, IBM has its eye trained on the future. It is at the very forefront of quantum computing, deeply involved in smart computing and an unabating inventor of new ideas and items that can change our lives for the better.
IBM combines strong technical capabilities with deep industry knowledge. And it has always been slow and steady in its approach. That’s why, 107 years after its creation, it is still relevant, respected and looking ahead to a positive future.
This story is designed to throw an everyday lens on some of the issues being discussed and debated by investors across the world; it is not research, so please do not interpret it as a recommendation for your personal investments. However, if something has piqued your interest and you would like to find out more or discuss what investments might be suitable for you, please contact one of our Investment Managers on 020 7337 0777.
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