IBM Remains America’s Worst Big Tech Company

By Douglas A. McIntyre Published Sep 18, 6:30AM EDT

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IBM Remains America’s Worst Big Tech Company — © spooh / Getty Images

Some hope arose among the investors in International Business Machines Corp. (NYSE: IBM | IBM Price Prediction) when long-time, failed CEO Virginia Marie “Ginni” Rometty stepped down in January in favor of Arvind Krishna. In a previous role, he ran IBM’s critical cloud computing operations. Nothing happened. Despite the smallest of recoveries, IBM still had just gone through nearly six years of quarters in which revenue declined. Its stock price says everything about the longer-term reaction to Krishna and the belief that IBM’s prospects remain grim.

IBM’s share price is still the poorest performer among its competition, down 7% for the year. The Nasdaq has risen 21% over the same period. Amazon has surged 63%, Apple is up by 50% and Microsoft is 29% higher. IBM no longer has a place among the 50 largest American companies measure by market capitalization. Its market cap is $111 billion. Microsoft’s is $1.54 trillion.

IBM’s second-quarter earnings began another stage of a nearly decade-long line of disappointments. Revenue in the quarter a year ago was $19.2 billion. In the recent period, IBM posted revenue of $18.1 billion. Earnings a year ago hit $2.82 per share. In the recent period, that fell to $1.53 per share.

At the core of the trouble, IBM’s cloud operations barely grew. What it calls Cloud & Cognitive Software had revenue of $5.7 billion, up only 3% from the year earlier. Additionally, the number represented only 32% of IBM’s total revenue.
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IBM lacks all the critical measures of big tech success. Its cloud operation is relatively small, and cloud computing is at the core of the stock price improvement of most of its rivals. It has no highly consumer-focused products or services like Microsoft’s Windows, Apple’s iPhone or Amazon’s e-commerce products. Even Oracle is trying to edge into the consumer sector with partial ownership of TikTok. These shortcomings deprive IBM of the two major engines of big tech growth.

IBM’s two most widely known brands are its Watson artificial intelligence business and the Weather Channel. Despite a massive marketing effort, Watson’s success or lack of success is hard to measure. IBM does not release appropriate metrics. The Weather Channel’s service is a commodity-based operation, not distinct from other companies in the industry.

IBM’s problem is that it has no convincing case that it can return to the top tier of American tech companies. In fact, its chance to do that recedes with each reported quarter.
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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.