This week brought us a lot of fodder for a newsletter article. We could ponder Sears spinning off a “big data ” service, Microsoft buying a stake in B&N’s Nook, or the relative success of JC Penney’s new strategy to date. But since we had a very useful briefing on the spin-off of IBM’s Retail Store Solutions (RSS) group, we thought we’d let you all know what we’ve heard. After all, many of us have an investment in some piece or part of the RSS portfolio. And just about all of us have a significant interest in continued success of the store.

The briefing was provided by Leo Suarez, current VP of Marketing for the RSS Group in Raleigh.

So let’s take a look at the deal:

1. This is not solely a hardware deal. IBM has sold an 80.1% stake in all aspects of store systems, hardware, software, and the people who create, sell, maintain and install them. IBM retains a 19.9% stake in the entity. Eventually, the company will become a wholly-owned subsidiary of Toshiba TEC, which will in turn create subsidiaries to operate the business world-wide.
2. The purchase price is approximately $850mm US, and the deal is expected to close in late June or early July 2012.
3. The new, as-yet-unnamed company will be an IBM Premier Business Partner and will have the use of complimentary IBM products like Sterling Commerce.
4. Headquarters will be in Raleigh-Durham, not Tokyo. Interestingly, even though IBM has a greater global reach (83 revenue producing countries vs. 50 for Toshiba TEC), Toshiba’s TEC pre-deal has a higher annual revenue than IBM’s RSS ($2.27 b vs. $1.15 b respectively).
5. The purchase also includes moving all maintenance contracts to the new company. Maintenance will be overseen by the new company, but initially performed by people still working for IBM. Over time, the people performing the maintenance will also move over to the new entity.
6. While there is some product overlap, overall the product suite is considered complimentary. Certainly the new company has a larger footprint in hospitality than RSS has alone, and Toshiba has apparently done more work on RFID than IBM.
7. Newco will have four areas of focus: “Smarter ” checkout, self-service, cross-channel, and Store Operations and Interactions. Of these, we are most intrigued by the promise of store operations and interactions. It’s a newer area for both companies.
8. The new company will be headed by current members of the IBM team

Okay, so those are the facts of the deal. What does it mean for retailers?

• This deal does not seem to be similar to IBM’s sale of its PC business to Lenovo. While hardware may be low-margin, Point of Sale software’s role has grown tremendously in an omni-channel world. And the development and enhancement of software to provide cross-channel inventory and customer visibility is rapidly becoming table stakes to successful retailing. While grocers may be able to avoid the cross-channel inventory conundrum, the more information on the customer ALL retailers have in the store, the better off they will be. The new company is committed to continued software development.
• For those still using it, the 4690’s future appears to be safe.
• Leadership at RSS, which has changed several times over the past few years at IBM, should stabilize, and help keep corporate strategy focused.

Users of each company’s self-checkout systems should understand migration plans going forward. That seems to be the area of greatest overlap.

So that’s what we know of the divesting of RSS, which leaves us to ponder an interesting, new IBM. IBM’s two main plays appear to be services and applications. Once avowed to avoid the applications business, IBM’s acquisitions (and executives) tell a different story today. As we pondered after the Demandtec acquisition, we just wonder “What’s next? ” on the shopping list. We also see IBM’s legendary R&D labs continuing its work into putting more and more data into smaller and smaller footprints, driving faster and faster results. What does that mean for retailers? Well, apart from oil and gas exploration companies, who’s got “bigger data ” than us? And the faster and better we can turn that big data into actionable insights, the better off we all will be. That’s part of IBM’s job.

We wish Newco all the best as it moves forward.