the Dow Jones Industrial Average (DJINDICES: ^ DJI) rallied Tuesday, up 1.35% at 11:20 a.m. EDT. Optimism about the reopening of the US economy may play a role, but there are still many reasons to be pessimistic in the short term. One reason: a model often cited by the White House now predicts 134,000 deaths due to the pandemic in the United States, about double its previous estimate.
Actions of International Business Machines (NYSE: IBM) and Microsoft (NASDAQ: MSFT) rose slightly on Tuesday. IBM is about to unveil new products at its annual Think conference, while Microsoft’s gaming chief executive has warned of the pandemic affecting the company’s upcoming debut of the new game console.
IBM announces pandemic to boost hybrid cloud and AI
On Tuesday, IBM launched its annual Think conference, a fully digital event this year due to the new coronavirus pandemic. This is the first Think conference since Arvind Krishna took office as CEO, and it comes when part of IBM’s business has been disrupted by the virus.
In an interview with Wall Street newspaper Prior to the event, Krishna predicted that the pandemic would significantly accelerate the adoption of hybrid cloud and artificial intelligence, two areas in which IBM has invested heavily in recent years. The company’s $ 34 billion acquisition by open source software maker Red Hat was a big gamble on the hybrid cloud.
IBM is preparing to launch various new cloud computing and artificial intelligence products for businesses today. One product is IBM Watson AIOps, which automates detection and response to computer anomalies and integrates with products from other companies, including Box and Soft. IBM aims to become more user-friendly for partners, according to Krishna.
While much of IBM’s revenue comes from recurring sources, the pandemic has prompted some customers to delay transactions. This particularly affected the software sector, as many transactions tend to close in the last weeks of the quarter. New products could help, but it’s unclear how long the downturn will last for IBM.
IBM stock rose 1.4% Tuesday morning. Tech giant stocks are down about 22% from their 52-week high.
Pandemic Could Impact Microsoft’s New Game Console
Microsoft plans to release a new game console, the Xbox Series X, later this year. The launch is still on the right track, but the pandemic and the resulting recession have forced the company to change its promotional approach. Microsoft will host a series of monthly online storefronts instead of a large-scale event, a move that could dampen demand for the new console.
In an interview with Bloomberg, Xbox chief Phil Spencer warned that sales of the new console could be affected by the pandemic. While manufacturing the hardware in China shouldn’t be a big deal, game delays could reduce the size of the launch lineup and decrease the enthusiasm of players. Spencer said that while some work, such as programming, can easily be done from home offices, motion capture and other advanced techniques are a different story.
Another problem is the recession in which the United States has almost certainly already entered. When the holiday season arrives, the appetite for an expensive new game console can be suppressed if the economy is still weak. “Families will make different compromises around where their dollars are spent,” said Spencer.
Microsoft is increasingly focusing on subscriptions, including its existing Game Pass service and its upcoming xCloud game streaming service, which could help the gaming business become less dependent on new hardware versions. But subscription services will always require a constant stream of exciting new games.
Microsoft stocks rose 1.6% Tuesday morning. The stock is barely below its 52-week high, recently supported by a solid quarterly report.