On the heels of a deal with Twitter Inc. (NASDAQ: TWTR), deeply troubled tech firm International Business Machines Corp. (NYSE: IBM) has set a deal with Tencent, China’s largest Internet portal. The arrangement does not make much sense, but neither do the Twitter deal or an earlier one with Apple Inc. (NASDAQ: AAPL) to sell the consumer electronics company’s products to enterprises.
IBM and Tencent management announced:
IBM and Tencent Cloud signed a business cooperation memorandum to collaborate on providing public cloud with Software-as-a-Service solutions for industries. Both parties agreed to focus on emerging small and medium enterprises in the smarter cities and smarter healthcare industries as well as other fields. This will enable these industries to utilize mobile, cloud computing and big data tools to transform internal processes and operations, thus achieving cloud transformation in the era of mobility. As part of this milestone collaboration, Tencent Cloud and IBM will jointly promote industry innovation and gain from each company’s resources and global capacity to benefit enterprise customers.
The portion of the partnership that seems to have promise is that the target is small firms. As a portal, Tencent is unlikely to be a good marketing vehicle for China’s largest companies and state enterprises.
IBM may be acknowledging that it has no other path to reach a portion of China’s population. However, the aggressive public relations salvo is larger than the opportunity. Tencent may not be a good portal at all for selling software. If it is, Chinese tech companies that offer similar cloud services likely have offered their products to the small business sector long ago.
Once more, IBM has made something modest seem important, an effort that makes sense based on trying to distract observers from its bad earnings.