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IBM’s billion-dollar bets mean less today, but you still can’t ignore them

Yesterday’s news about IBM creating a new Watson Group and investing $1 billion in it was surprising to me because the company just announced a different billion-dollar bet on Linux on its Power architecture back in September, another billion on flash memory in April, along with another major investment in DevOps over the past couple of years. Not to mention its $2 billion acquisition of SoftLayer to develop a stronger cloud story. [Sidenote: Watson is IBM’s Big Data software aimed to do what IBM calls “cognitive computing.”]

IBM initially made a big bang with its announcement of a billion-dollar investment in Linux back in late 2000. Significantly, it was $1B to be spent in a single year, not some indeterminate future (best of luck verifying that). Given the apparent acceleration in extremely large commitments by IBM, I thought a couple of quick calculations were in order to put the recent ones in context.

Inflation since 2000 puts $1B today at $739M in 2000 dollars (when IBM announced the billion-dollar bet on Linux). Furthermore, IBM’s net income (profit) doubled to $16.6B in 2012 from $8.1B in 2000. The inflation means a $1B bet goes only ~75% as far as it did in 2000, while the significance to IBM’s financials is roughly half of what it was back then. In other words, a bet that was the size of an 800-pound gorilla is only 400–600 pounds these days — but that’s certainly enough to crush most humans, as you might imagine some of its competitors to be. IBM’s increasingly long series of billion-dollar bets continue to draw headlines, but you can’t ignore the reality that an investment like that is going to make a significant impact.

Disclosure: IBM is a client.

by-sa

Categories: big-data, devops, ibm, linux, marketing, open-source, operating-systems.