Ballmer: IBM should ignore profits, get back into the hardware business

Steve Ballmer hasn't exactly shined as Microsoft CEO, but he's confident enough in his business acumen to offer this stunningly bad piece of advice to IBM: It's time to get back into the hardware business. This, despite the fact that focusing on high-profit businesses like services and consulting has turned IBM back into a money-making powerhouse.

Ballmer told The New York Times that IBM made a mistake when it quit the PC, hard disk, and networking equipment businesses, because companies need to diversify if they want to profit over the long term. Here's what he told the Times:

"I.B.M. is the company that is notable for going the other direction. I.B.M.'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.

IBM shareholders may be surprised to hear that. The Times accurately points out that since 1999, when IBM sold off its networking business, and began selling off its other hardware businesses, its shareholders have much to be happy for, in contrast to Microsoft's shareholders. Here's what the Times says:

I.B.M.'s strategy has worked out O.K. for its investors over the last decade. Shares of I.B.M. are up about 30 percent since 1999, while shares of Microsoft have dropped about 30 percent over the same time span.

As the Times points out, Ballmer's criticism reflects the state of low-level warfare between IBM and Microsoft. IBM is a big Linux backer, for example, and competes against Microsoft on several fronts, including in cloud computing, email, and collaboration.

So it just may be that IBM getting back into the hardware business was a bit of wishful thinking on Ballmer's part, because if it did, it would distract itself from its battles with Microsoft.

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