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Comment by animationwill | Hacker News Reader

>> The "underperforming" segment may now perform better now that it's free to use AWS/Azure/Google cloud tools instead of just IBM's...

The contrary point of view is that this means that either:

1. crapIBM will need to pay betterIBM for access to continue using the ERP, QRadar, Remedy, licenses, etc tools they use today. This is better for betterIBM and worse for crapIBM

2. crapIBM will need to stop using betterIBM's tools, and have to quickly negotiate new licenses/tools and spend 6+ months of their first fiscal year just moving platforms (moving SAP has often been a 2 year failed IT challenge, good luck). This will make crapIBM continue to look worse, making betterIBM's leadership look good for divesting themselves of it.

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When a company is spun off, oftentimes the parent company still continues to own a minority stake, and/or shareholders will wind up with shares in both.

It's in nobody's interest for "betterIBM" to succeed at the greater expense of "crapIBM". With so much shared ownership (at least in the medium-term, practically speaking), shareholders want both to succeed.

That's the whole point -- shareholders think both halves will do better as separate entities, and it's in nobody's interest for one half to exploit the other.

Surely your "crapIBM" will continue to have access to "betterIBM"'s tools at a reasonable price, but they'll also be free to migrate to better ones, as they choose, at the pace that is most profitable for them.

It's win-win because that's the entire point of the split in the first place. The two resulting entities aren't even competing with each other, they're in totally different markets.

I used to work for IBM. When working on customer engagements the services teams are required to pay for IBM software that it uses. This goes back to the consent decree with the Justice Department after the anti-trust investigation in the late 70s. So splitting up won't effect that.

But (honest question) can the services business NOT offer an IBM product?

Most certainly - IBM will happily support software products from companies with competing products like Oracle and SAP in service agreements.

Well, as an example for the original POV, I believe printerHP is doing much better than cloudHP. So it's possible that cloudIBM will flame out.

I fully expect cloudIBM to be mostly irrelevant with their watson and cloud vaporware; and boringIBM to do boringly ok with their IT services

I think you're right

Is it clear that boringIBM will keep services, rather than cloud IBM? I can't figure it out from the announcement.

If you ever personally split up a company, I strongly advise you to hire a branding consultant. :D

Why couldn’t they just agree to let each other use the other’s tools for free / massive discount for some limited period, or even in perpetuity? It doesn’t have to be one company shafting the other?

> Why couldn’t they just agree to let each other use the other’s tools for free / massive discount for some limited period, or even in perpetuity?

A big point of splitting up is so that (in both directions, to the extent that it applies) cross-unit costs aren't baked into operations. Subsidies like you suggest directly undermine that.

Interesting, Google spun off many companies under Alphabet umbrella, but essentially continues to provide base tooling/compute/IT support to them.

> Interesting, Google spun off many companies under Alphabet umbrella, but essentially continues to provide base tooling/compute/IT support to them.

Those aren't actually spinoffs in the sense of what IBM is doing; "Google" was effectively just renamed "Alphabet", with its core business in a new subunit called "Google". They are all still within the same corporate ownership structure. Its an internal organizational change, not a separation into separately-owned organizations.

It's not that simple, for example Waymo has external investors alongside Alphabet, https://blog.waymo.com/2020/03/waymo-raises-first-external-i...

Sure, it's a bit more complicated, but the point here is that Waymo remains an Alphabet subsidiary, external investors are investing under that understanding and with full knowledge of Alphabet’s control of Waymo (which is why the blog entry you link to links to the Alphabet 10-Q reporting the external investments and the resulting “noncontrolling interests” in the subsidiary.

A “spin-off” within a common corporate umbrella is a different thing done for different reasons than a corporate divorce kind of spin-off like IBM is doing.

Even if they 'spun off' businesses, they still have transfer pricing schemes among each and every subsidiary of Alphabet. This is just BAU for small and large organizations

[1] https://www.pwc.com/m1/en/blog/intangibles-tax-risks-opportu...

[2] https://prospect.org/economy/decisive-tax-defeat-for-the-mul...

You really need to look up the definition of words.

That would be a more useful comment if you pointed out the flaws in the definitions that vl is using.

Sure, but you could do something to ease initial shock?

Like: We'll give you an 80% discount in the first quarter, and the discount goes down by 20% per quarter, eventually you'll either be negotiating your contracts with us like any other potential customer, or you'll have moved off to some other platform.

That way betterIBM can extract as much value out of crapIBM as they can.

As a shareholder you may require the business to guarantee that every deal negotiated with customers and suppliers are defined on an arm's length basis or face negligence or wrongdoing.

Every holding has transfer pricing [1] as BAU, and I can assume that it is also the case for IBM

[1] https://en.wikipedia.org/wiki/Transfer_pricing

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