Investors Reject IBM Quarterly Earnings, Putting Pressure on CEO Rometty

Technology

Published: April 18, 2018 7:10 am

Last Updated: January 12, 2020 12:51 am

International Business Machines Corp. (NYSE: IBM) earnings looked good on paper. However, one thing was missing. The company’s revenue growth looks nothing like that of a tech company. The promise by CEO Ginni Rometty would become a real tech corporation continue to languish.

IBM shares sold off more than 5% after it posted its first-quarter numbers. Some analysts believe that IBM’s falling margins are the problem. Others think it did not sell enough of its new hardware. Others think its cloud computing and artificial intelligence sales, the core of its turnaround, are not growing fast enough. Still, others believe that investors did not think its full-year forecast was good enough.

None of this matters as much as another quarter of revenue problems that undercut Rometty’s claims about IBM’s present and its future. Revenue for the quarter was up 5% to $19.1 billion. Compare that to the improvements of companies that IBM would like to call its rivals. The numbers for Amazon Web Services and Microsoft make the IBM figure pale.

Earnings fell from $1.85 per share to $1.81. It is another sign that IBM has not gained any “traction” in its ability to create a better bottom line.

Rometty’s comments about IBM’s performance are usually sly. In this case:

In the first quarter we maintained momentum in our business, with reported revenue growth in total and across our major segments. These results reinforce that our clients value our innovative technologies, our industry expertise and our commitment and actions for the responsible stewardship of their privacy and data. This is also reflected in our leadership positions in enterprise cloud, AI and security.

In reality, “strategic imperatives” revenue was up only 15% to $9 billion. Once again, compared to IBM’s successful rivals, this growth rate is embarrassing.

Where is IBM’s growth, the key to prove it is really doing better? It is not anywhere.