What am I missing?
A "software centric world". So what does the software run on, a real cloud? All cloud means is hardware is somewhere else, maybe many places for resilency. But it uses hardware. And people consuming "cloud software" still need a hardware device. Regardless of hype, businesses are not running from their iPhone consuming cloud software.
In my opinion, this about the commoditization of hardware. There are no margins in that anymore. IBM recognized that a decade ago when they sold their PC business to Lenovo. But they still make servers, they are bright enough to know that is never going away. And I don't mean hardware for servers like HP, they also have some of the finest o/s in world running on them. HP never had that, they have to compete on bare metal alone.
Somebody has to be willing to make and sell hardware even with thin margins. It's like HP doesn't think they can rule that market, so they separate the part where they are dealing in services so they don't drag that down also. That business is a sort of "hedge fund" for them, even though they have a long way to go to compete in that market with the IBM's of the world.