The Argument for IBM Firing Ginni Rometty

By Douglas A. McIntyre Published Oct 20, 10:20AM EDT

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Ginni Rometty, the CEO of International Business Machines Corp. (NYSE: IBM), had little to say as the tech company produced horrible earnings:

We are disappointed in our performance. We saw a marked slowdown in September in client buying behavior, and our results also point to the unprecedented pace of change in our industry. While we did not produce the results we expected to achieve, we again performed well in our strategic growth areas — cloud, data and analytics, security, social and mobile — where we continue to shift our business. We will accelerate this transformation.

She was given the CEO job at the start of January 2012, and IBM has deteriorated since then.

The most recent quarter figures proved that the decline has not ended:

Total revenues from continuing operations for the third-quarter of 2014 of $22.4 billion were down 4 percent (down 2 percent, adjusting for the impact of the divested customer care outsourcing business and for currency) from the third-quarter of 2013.

… diluted earnings from continuing operations of $3.46 per share, compared with diluted earnings of $3.77 per share in the third-quarter of 2013, a decrease of 8 percent. Operating (non-GAAP) diluted earnings from continuing operations were $3.68 per share compared with operating diluted earnings of $4.08 per share in the third-quarter of 2013, a decrease of 10 percent.

Third-quarter net income from continuing operations was $3.5 billion compared with $4.1 billion in the third-quarter of 2013, a decrease of 17 percent. Operating (non-GAAP) net income from continuing operations was $3.7 billion, as compared with $4.5 billion in the third-quarter of 2013, a decrease of 18 percent.

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Revenue at all major IBM divisions — Global Technology Services, Global Business Services, Software, Systems and Technology, and Global Financing — declined.

Hardware, and particularly mainframe sales, plunged:

Revenues from continuing operations from the Systems and Technology segment totaled $2.4 billion for the quarter, down 15 percent (down 15 percent, adjusting for currency) from the third-quarter of 2013. Systems and Technology pre-tax loss increased $91 million to a loss of $99 million.

Revenues from Power Systems were down 12 percent compared with the 2013 period. Revenues from System x were down 10 percent. Revenues from System z mainframe server products decreased 35 percent compared with the year-ago period. Revenues from System Storage decreased 6 percent.

IBM’s board need to reconsider the choice of Rometty as CEO. Since she took up the reins, shares are down more than 8%, compared to the rise in the S&P 500 of more than 49%.

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.