Nothing Can Help IBM Dig Out of Its Problems

By Douglas A. McIntyre Published Nov 10, 9:45AM EST

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Nothing Can Help IBM Dig Out of Its Problems — © MajestiX B / Shutterstock.com

While it seemed like a benign piece of information, a recent study showed that International Business Machines Corp. (NYSE: IBM | IBM Price Prediction) had fallen behind Chinese tech firm Alibaba Group Holding Ltd. (NYSE: BABA) against the yardstick of cloud computing revenue. Cloud revenue is the measure that IBM has used for investors to gauge its progress. Based on that, IBM continues to fall further and further behind the world’s leaders, which undermines any hope that a years-long turnaround has any chance of success.

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Amazon.com Inc. (NASDAQ: AMZN) continues to be the world leader in cloud revenue, according to the study of market share by Synergy Research. Its juggernaut Amazon Web Services brought in $11.6 billion in the most recent quarter. This was followed by Microsoft Corp. (NASDAQ: MSFT) at $5.9 billion. Most of its service is sold under the Azure brand. Alphabet Inc.’s (NASDAQ: GOOGL) Google finished next with revenue for its Google Cloud operation at $2.9 billion. Alibaba’s number reached $2.2 billion, and IBM trailed well behind at $1.9 billion.

As most of the major U.S. stock indexes have moved close to or are at all-time records, IBM’s share movement marks it as one of tech’s largest failures this year. The Nasdaq has risen 31% in 2020, to IBM’s drop of almost 14%. Amazon’s shares have jumped 70%.

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IBM has not been able to emerge from the failed leadership of Virginia M. Rometty, its executive chairperson. Arvind Krishna replaced her as chief executive officer in April. He has to battle against a series of poor decisions Rometty made after she became CEO in 2012.

Even a rally in tech stocks has not pulled IBM higher. Its results from the most recent quarter have been too much of a boat anchor. Revenue fell in the third quarter from $18.0 billion to $17.6 billion. Per-share earnings ticked up from $1.98 to $1.90.

IBM’s yield is all it has left to attract investors. At 5.7%, it is probably safe from any cuts — for the time being.

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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.