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Ibm?s ?smarter Planet? Needs A Tutor

Just as it did when it sold off networking, hard-disk, and PC businesses, IBM is moving away from making physical things and toward selling the software and services that make physical things work. For a long time the company argued that hardware tie-ins would help it sell more software and services. Now, though, IBM clearly thinks it doesnt need the hardware, and some market researchers agree. While IBM does generate significant revenues from Linux and Windows software sales, there is limited tie-in to hardware (in contrast to UNIX and Mainframe servers) and accordingly we expect limited impact on other parts of IBMs business, Toni Sacconaghi, an analyst at Sanford C. Bernstein ( AB ), wrote in a research note. Still, the underlying context behind this deal is more troubling for IBMs long-term business. Its hardware sales have plummeted as the cloud computing business of Amazon.com ( AMZN ) has soared. By the thousands, customers have shifted to renting much or all of their computing capacity from Amazonand Google ( GOOG ) and Microsoft ( MSFT )rather than purchasing equipment.

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