IBM Announces Unrealistic Plans as Stock Suffers

By Douglas A. McIntyre Published Feb 27, 7:00AM EST

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International Business Machines Corp. (NYSE: IBM) CEO Ginni Rometty announced new goals for the company that have only a long shot of working, as the company’s shares hover near a multiyear low.

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.

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.