IBM's Cloud Strategy May Remind Investors of Microsoft's Comeback, but Cloud Industry Changed During That Time
International Business Machines (IBM) has redefined itself primarily as a cloud company.
After stagnating for years as an IT services company, it orchestrated a $34 billion takeover of Red Hat in 2019, and in 2021, spun off its managed infrastructure business into Kyndryl.
Microsoft (MSFT) also transformed itself into a cloud company (in the 2010s), and in many respects, IBM's metamorphosis resembles that of Microsoft years ago. Moreover, the cloud business has changed significantly over the past decade.
These evolutionary changes for the two companies have some investors asking whether IBM is trying to make itself into the next Microsoft and, if it is, whether it can succeed in that effort. Both companies have made some radical changes in the last 42 years. IBM exited the PC business in 2004, and providing PC operating systems is no longer a primary growth driver for Microsoft. Today, Microsoft prospers due to cloud growth, and IBM has followed its lead by building a new identity as a cloud company. IBM even made its cloud and cognitive software head, Arvind Krishna, its CEO, in January 2020. Likewise, Satya Nadella headed Microsoft's cloud efforts before becoming CEO in 2014.
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