Computerworld — To read the headlines in the business and technical press during the last several years, you'd think that the once world-beating IBM had fallen off the face of the earth. Google, YouTube, Twitter, Facebook, Apple, Microsoft -- those seem to be the names that garner all the publicity. IBM comes off at best as an afterthought, and at worst as a company slipping into dotage, about to fade into oblivion along with other brands that were once well known, such as PanAm airlines and Woolworth's department stores.

You might be surprised, then, to learn that IBM is flying high these days, a success as much driven by its forward-thinking services and software businesses as by its ability at the same time to milk its old cash cow, the mainframe line. Even as the rest of the economy tanked, IBM's second-quarter net income in 2009 was $3.1 billion, up 12% from a year earlier . And it's as well positioned as any technology company for reaping benefits from big changes in technology in the next decade.

The company's recent launch of LotusLive iNotes, a cloud-based e-mail, calendaring and contact management system , shows why IBM still matters. IBM recognizes that for businesses of all sizes, cloud computing is the future, and it plans to be there in a very big way. LotusLive iNotes aims at taking away business from Microsoft's Exchange as well as users of Google Apps Premier Edition. In years past, IBM would have sold the hardware that runs a system like LotusLive iNotes, rather than selling it as a service. But the company realized a decade ago that its future was in software and services rather than hardware, and it began selling off much of its lower-margin hardware businesses, while retaining mainframes. Those moves have paid off handsomely and could be even more profitable if companies do indeed opt for a cloud-based future.

IBM s success has clearly gotten under the skin of its competitors, notably Microsoft, whose CEO, Steve Ballmer, went so far as to criticize IBM's move away from hardware. He told The New York Times that "I.B.M.'s footprint is more narrow today than it was when I started. I am not sure that has been to the long-term benefit of their shareholders."

As I point out in my blog posts, "Ballmer: IBM should ignore profits, get back into the hardware business" and "Here's why Ballmer has been badmouthing IBM," that's wishful thinking on Ballmer's part, because he's worried about the IBM's competition in cloud-based computing.

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