International Business Machines Corp. (NYSE: IBM) is still facing problems after it reported earnings late Monday. One key analyst sees the issue as a question of the quality of earnings. Despite Big Blue beating estimates, the results are still somewhat weak, looking at years past, and one key analyst is taking a very negative stance on this company going forward.

Although earnings per share (EPS) topped estimates, IBM booked a $1.0 billion non-U.S. tax gain, which offset a major workforce rebalancing of $1.5 billion. Credit Suisse believes the quality of earnings was again low and the manner in which IBM has chosen to manage its business seems unsustainable.

The brokerage firm sees remaining secular and structural challenges facing IBM, and specifically it sees limited improvement in Services and Software margins.

In January, management noted that workforce rebalancing would be down slightly year over year. However, despite this, the company booked a $1.5 billion charge for this year, already materially higher than the annual charges per year for the previous five years of roughly $0.8 billion per year. It seems that the company waited for the tax gain to enact this restructuring, which Credit Suisse believes is not a sustainable way to run a business. While the company hopes to save $2 billion worth of costs from the current program, the brokerage firm notes that the previous restructurings have proven less and less effective. Indeed the firm noted $3.1 billion of charges have been taken since 2013 and pretax income is down by $7.3 billion, with revenues per employee 8% lower versus 2013.

Credit Suisse detailed that while revenues were flat year over year in constant currency, pretax income margins were down by 10.8%, or 5.8% excluding restructuring charges. Additionally, the firm noted that the lead indicators for Services seem lackluster, with Services bookings at $122 billion, down 1% year over year in constant currency, and Services signings at $8 billion, down 17% year over year in constant currency.

As a result, Credit Suisse reiterated an Underperform rating with a $110 price target, implying downside of roughly 24% from the current price level. Also the firm adjusted its fiscal 2016 and 2017 EPS estimates to $13.49 and $13.18 from $13.30 and $13.24, respectively.

Shares of Big Blue closed Friday at $148.50, with a consensus analyst price target of $142.50 and a 52-week trading range of $116.90 to $176.30.

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