Summary
- IBM is implementing a strategy wherein in exchange for helping deliver the benefits of blockchain to a growing list of commercial clients, it’s capturing seat and cloud revenues.
- However, from its financial reporting, it’s impossible to determine how much of Big Blue’s top line is attributable to its blockchain activities.
- “Show me” investors are left to speculate and I am supplementing our full position in IBM with short-dated calls expiring just after successive earnings releases.
Over a year and a half ago, I wrote my first article about blockchain and Big Blue (IBM) entitled, “Could This Be IBM’s Revenue Catalyst?” In it, I mentioned a few such initiatives including an international container shippingblockchain led by Maersk (OTCPK:AMKBY), a fruit and vegetable consortiumled by Walmart (WMT), and a trade finance blockchain involving various international banks, HSBC (HSBC) among them. These programs stand to deliver spectacular – “faster, better, cheaper” – results for their participants:
- Faster time-to-market from continuous straight-through-processing while reducing/eliminating barriers and red tape associated with business-as-usual.
- Better quality resulting from less contamination and spoilage of perishable products.
- Cheaper as in lower operations and administrative costs when manual, non-standard, paper-based bureaucracy is replaced with uniform, technology-triggered, interactions.
In that first article, I postulated that IBM would monetize blockchain from seat licenses not dissimilar to Bloomberg’s very successful model. In a follow-up piece, I linked to an IBM page that confirmed the validity of this notion with fees correlating to the size of the blockchain participant; larger companies paying more, dinky ones gaining free access to the platform. Critical mass and wide participation are essential to multilateral processing represented by blockchain.
