NEW YORK (TheStreet) -- International Business Machines (IBM) is adding retail kiosks and point of sale hardware seen at checkout lines across the globe to the list of ubiquitous tech products that it no longer wants to make or own.
On Tuesday, IBM divested control of its Retail Store Solutions unit to Japan's Toshiba TEC for $850 million, one more signal from IBM that data analysis -- including a retailer data and analytics initiative called Smarter Commerce -- trumps hardware manufacturing.
Like a similar divestiture of its PC business to Lenovo in 2004, IBM's deal shows that it would rather tilt its revenue to high margin consulting and data analysis operations, while allowing others to compete in manufacturing hardware that may increasingly become commoditized, otherwise dubbed by IBM as its "Smarter Planet" strategy.
IBM invested heavily in its Smarter Commerce initiative by way of a December 2011 acquisition of cloud services specialist DemandTec and 2010 purchases of Sterling Commerce and Coremetrics.Big Blue's multi-decade turnaround has moved it from manufacturing tech hardware toward the IT services market, where its global services consulting unit contributes $60.2 billion to overall revenue of nearly $107 billion, as of 2011. IBM will also be exiting a point of sale business where it competed against the likes of Toshiba , NCR (NCR), VeriFone Systems (PAY) and Micros Systems (MCRS). Previous divestitures like Lenovo had moved IBM from direct competition against Hewlett Packard (HPQ) and Dell (DELL) in some PC and hardware markets with declining sales and profit margins. "In our view, IBM's POS [point of sale] business is not strategic to its positioning in our "Four-Legged Stool" analogy of enterprise infrastructure and the business is likely dilutive to IBM's pre-tax ~20% margins," wrote ISI analyst Brian Marshall in a note to clients. Marshall also says that the move is likely to lower IBM's net debt, while allowing the company to invest or acquire assets in its analytics, smarter planet and cloud computing initiatives. IBM's track record of divestitures and acquisitions may be used as a model by other tech giants like Hewlett Packard and Research In Motion (RIMM) as they iron out strategies to negotiate declining profitability and market share in PC and smartphone businesses. Both companies have strong data security and virtualization assets that could be further emphasized in strategic M&A decisions. Meanwhile, a flurry of security and cloud computing deals by Dell (DELL) has the world's third largest PC maker primed to move beyond the dying PC market.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV