IBM Remains Big Tech’s Disaster

By Douglas A. McIntyre Published May 25, 8:20AM EDT

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For once, International Business Machines Corp. (NYSE: IBM | IBM Price Prediction) caused a moment of joy among investors. After seemingly endless quarters of falling revenue, year over the previous year, IBM’s revenue moved higher, albeit by a tiny percentage, in the most recent period.

Revenue reached $17.7 billion in the first quarter, up from $17.6 billion the year before. However, net income fell from $1.175 billion to $955 million. IBM claimed the revenue improvement was due to a surge in cloud operations. However, its “Cloud & Cognitive Software” revenue rose less than 4%. IBM has not made a dent in the strength of cloud market leaders Amazon, Microsoft or Google.

Among the best ways to characterize IBM’s situation comes from market capitalization comparisons. Its stands at $129 billion. Amazon’s market cap is $1.6 billion and Microsoft’s is $1.8 billion.

IBM’s shares have seen a dead cat bounce this year, with the stock up by 15%. By comparison, shares in Microsoft have risen by 13%. However, for a longer period, which includes a year, two years and five years, IBM’s stock has been a terrible investment. Over five years, for example, IBM’s shares are down by 5%, while Microsoft’s are 368% higher. Given a forecast for lackluster results for the rest of 2021, there is no reason to believe IBM shares will stage an impressive recovery.
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IBM’s board decided in April 2020 to replace long-time CEO Ginni Rometty with Arvind Krishna. Rometty, more than anyone else, has been the cause of IBM’s demise. As CNBC pointed out last year:

IBM’s stock dropped 24% under Rometty’s leadership, the only U.S. tech company currently valued at $100 billion or more to lose value in that period. Shares of the other 16 most valuable tech companies gained anywhere from 64% (Qualcomm) to 3,468% (Netflix).

Krishna has done nothing to improve IBM’s situation, and he has not articulated plans that give investors reasons to believe the future will be better.

IBM will continue to perform as it has under Rometty unless it has an entirely unexpected transformation. That won’t happen.
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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.