Number One, Worst Ever

Lee and I keep a list of companies we love to hate, and IBM (NYSE: IBM) is a prime example. Once a premier tech company, IBM has been outpaced by competitors like Microsoft (NASDAQ: MSFT) and Google (NASDAQ: GOOG), failing to capitalize on new technologies like search engines, cloud computing, and AI. Despite brief successes in areas like supercomputing, IBM’s inability to innovate and poor management decisions have led to its decline.

Move On to Something Better

IBM has been a disappointment for decades. The company got lazy, and missed many of the profits from trends they themselves created. It’s time for investors to move on.

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Transcript:

Lee and I have a list of companies we love to hate.

And the company I’ve hated the longest since I became a financial journalist is IBM.

And this is why.

For decades, IBM was the premier tech company in the world.

And it was number in the top 10 of the Fortune 500.

There was nothing like it.

And it got flanked by Microsoft and Google and everybody who’s come into this business and become a tech giant, all of them.

Basically had to step over the body of IBM.

And that really means for decades that it’s been a crummy company run by crummy CEOs since Lou Gerstner left around 2002, 2003 after saving it from literally going out of business.

What is wrong?

It’s like they can never do.

Now they’re like, well, we’re in AI.

Sure, you’re in AI along with a thousand other people.

And you probably got 2% of the market.

Microsoft got 18% and Google’s got 40.

What happened?

Well, for years…

A, the competition was not there.

And we can concede that.

But once the competition did show up, like the American car companies facing the Japanese car companies, they almost chose to ignore it, thinking like, meh, we’re IBM.

People always buy our gear, whether it’s on a big corporate basis or on a personal PC basis.

And then they lost everybody.

I mean, they lost a share to gateway and gateway went out of business.

So when you start losing share on every single product line, there’s no way to continue to be a leader.

One of the reasons I hate IBM is every time a new idea came along, that was going to be a great idea.

They didn’t even try.

You know what I’m saying?

It’s like it’s not like search was a secret.

You know, search engines existed since well before the turn of the century.

Yahoo, Bing, Google comes in.

You don’t have to like look for this stuff.

It’s not like it’s being somehow hidden operating systems.

Cloud computing.

I mean, if you were in the mainframe business, how is it that you didn’t understand the idea that you could literally serve a lot of data out of a central area and make it fractional?

I mean, Jeff Bezos came up with that idea because he wanted to use his servers on days that weren’t Christmas, you know.

Server use peaked sometime around Christmas, and he brought all his executives in and said, hang on a second.

I’ve got all this spare server capacity.

And what are we going to do with it?

What do we do with it?

They started to market it to the people who were their third-party vendors, and then they started to market it to everybody, and it was much cheaper than local storage.

They could buy storage in bulk.

And now if you took the market cap of Amazon, I would say that Amazon Web Services is two-thirds of it and e-commerce is one-third, even though e-commerce is a much bigger business, but it’s not as good.

So, you know, iPhone, what’s the deal?

It’s everything.

Yeah, and the ironic thing is in places where they did kind of overachieve, like supercomputing, I mean, they had Watson and all that in the 90s.

You know, they were beating Kasparov in chess and things like that.

And it never went any further.

I mean, that was the pinnacle for them back then.

And of course, now they’re pitching it as their AI product and their supercomputing AI product.

But they could have had that lead a long time ago.

And for whatever reason, they just didn’t pursue it.

This is what, there’s another reason I hate them.

They would make a piece of great technology.

Must’ve cost them tens of millions of dollars.

Supercomputer.

They use it to play chess.

I mean, what is it about?

It’s like, I wouldn’t have it play chess with anybody and draw attention to the fact that nobody will buy the thing.

And then they bought the weather channel, not the TV part, but the online part.

And it’s like, oh, so you’re going to demonstrate to us how great your enterprise computing is by running a weather site.

It’s like, oh, yeah, it’s very complicated.

We need a lot of computing power, AI and everything.

A typical person looks at a weather site.

They don’t think about that.

They say, you know, is it 79 or 78?

They’ve always made this PR promotional mistake of pushing this stuff in a weird, like sort of, you know, glitchy way.

And then nothing happens to it other than it was on TV for two days.

Yeah, and they’ll always continue to be a mediocre player, but in a fast-growing world, they have no upside.

They have zero upside.

Now, I think they did get a nice run to the stock this year simply because it got so cheap and they still pay out.

At one point, the dividend was over 4%, and that’s one of the dividends they have to maintain to keep people involved.

But yeah, it’s a nowhere stock.

No, it isn’t.

IBM?

IBM down.

Down.

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