IBM’s Crippled Earnings Forecast May Push CEO Ginni Rometty Out

By Douglas A. McIntyre Updated Jan 13, 2:51PM EST · Published Jan 20, 6:29AM EST

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IBM’s Crippled Earnings Forecast May Push CEO Ginni Rometty Out — © Wikimedia Commons (Asa Mathat / Fortune Live Media)

Another year, another disappointment for International Business Machines Corp. (NYSE: IBM). And, based on the company’s outlook for 2016, the period of bleeding is not over. While cloud computing revenue at IBM continues to grow, the balance of the company is very deeply troubled. Long-time CEO Ginni Rometty has run low on time to demonstrate that her turnaround plans are valid.

Revenue in the fourth quarter cratered 8.5% to $22.1 billion, and for full year 2015 to $81.7 billion, off 11.9%. The down draft in earnings accelerated. Per-share earnings from continuing operations were down by 17.4% for the quarter to $4.60, and for the full year down 12.9% to $13.66.

Rometty put her traditional spin on the results:

We continue to make significant progress in our transformation to higher value. In 2015, our strategic imperatives of cloud, analytics, mobile, social and security grew 26 percent to $29 billion and now represent 35 percent of our total revenue.

We strengthened our existing portfolio while investing aggressively in new opportunities like Watson Health, Watson Internet of Things and hybrid cloud. As we transform to a cognitive solutions and cloud platform company, we are well positioned to continue delivering greater value to our clients and returning capital to our shareholders.

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Unquestionably, cloud figures have improved impressively, but the balance of the business ruins IBM more with each quarter, and cloud computing may be the most competitive sector among large tech companies. IBM has to fight with industry leader Amazon.com Inc. (NASDAQ: AMZN) and formidable and financially healthy companies such as Microsoft Corp. (NASDAQ: MSFT) and Alphabet Inc. (NASDAQ: GOOGL).

Even IBM’s advance in cloud computing cannot fill the hole in revenue that Rometty has dug. IBM’s full-year revenue in 2012 was $106.9 billion.

The weight of a CEO change falls to Michael L. Eskew, IBM’s presiding director, and its board of directors, which has 13 members other than Rometty. With IBM’s shares at a five-year low, the board members owe Wall Street a strong message that they have taken action to turn IBM around.

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.