International Business Machines Corp. (NYSE: IBM) posted mediocre figures for the latest quarter, as it has for over a decade. It cannot find the growth path its larger rivals have. Revenue dropped 0.4% to $15.5 billion. Net income rose 8.0% to a paltry $1.5 billion, which some large tech companies make in less than a month. (These companies have the worst reputations.)
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Arvind Krishna, IBM board chair and chief executive officer, “Organizations are using our hybrid cloud and AI technology, and our consulting capabilities, to transform their operations.” Unfortunately, the number of customers who are doing this is relatively small.
“Hybrid platforms and solutions” rose 7% in the quarter, but to what? That matches what IBM calls “software” in its financials. If so, this number was $6.6 billion. By contrast, industry leader Amazon had $21.3 in revenue from Amazon Web Services last quarter. Its profits were $5.1 billion. AWS may not be in exactly the same business as “hybrid platforms and solutions,” but it is close enough. IBM also trails Microsoft, which had “server products and cloud services” revenue of $22.1 billion
Krishna has been unable to revive IBM from years of underperformance by his predecessor Ginni Rometty. Much of the blame for this sits with IBM’s long-time directors. This includes David N. Farr (retired chair and CEO of Emerson Electric), who joined in 2012, and Andrew N. Liveris (retired chair and CEO of Dow), who joined in 2010.
Over the past year, IBM’s shares are up 4%, against the overall market’s 16% gain. Over five years, IBM’s shares are down 3%, while the broader market is 63% higher.
IBM has a market cap of $123 billion. Amazon’s is $1.4 trillion, and Microsoft’s is $2.8 trillion. The market does not believe in any IBM turnaround at all.
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