IBM Announces Unrealistic Plans as Stock Suffers

As investors received forecasts about IBM’s long-term future, the stock is down 20% in the past two years. Over the same period, the S&P 500 has risen 39%. Rometty made her new forecasts at the tech firm’s annual meeting.

Among Rometty’s predictions is that a very modest investment of about $4 billion this year will help drive revenue of $40 billion in the cloud, mobile, analytics software and social communications areas by 2018. She forecast that two in five dollars of IBM revenue will come from these initiatives by then. Based on IBM’s recent track record, and the extent to which the industries in which it wants to compete are very crowded, the predictions have little chance of succeeding.

IBM rarely, if ever, discusses the hurdles in its way. Among those are the leading technology firms in the world, which have already staked large positions in the fields IBM has targeted. Many of these companies have revenue of $50 billion or more and balance sheets with billions of dollars of cash. Among the best examples is Microsoft Corp. (NASDAQ: MSFT), which has bet much of its future on the cloud, and it claims to already be wildly successful. Also, Oracle Corp. (NASDAQ: ORCL) recently announced quarterly revenue of $9.6 billion and net income of $2.5 billion. Oracle management reported:

Software and Cloud Revenues was up 5% to $7.3 billion. Cloud software-as-a-service (SaaS), platform-as-a-service (PaaS) and infrastructure-as-a-service (IaaS) revenue was up 45% to $516 million

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While Oracle on its own will not block IBM’s efforts, it is part of a group of companies that will.

Rometty continues a habit of making claims about how IBM can be turned around, while not a single one of the important claims have come through. IBM’s shareholders need to prepare for another period in the wilderness between now and 2018.