IBM Is America’s Worst Tech Company

By Douglas A. McIntyre Published Oct 23, 9:15AM EDT

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International Business Machines Corp. (NYSE: IBM) announced terrible quarterly results, and its stock promptly dropped sharply.
It is too small to be a significant player in the new AI landscape.

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International Business Machines Corp. (NYSE: IBM | IBM Price Prediction) announced terrible quarterly results. Revenue rose only 9% to $16.3 billion. Earnings did rise to $1.87 from ($0.36), but it took a charge in the year-ago quarter that affected earnings. A better way to look at the numbers is operating (non-GAAP) pretax income from continuing operations, which was $3.0 billion, up from $2.5 billion in the same period of last year.

After the report, IBM’s stock promptly dropped almost 7%.

There was some brief optimism about the company when it cut an artificial intelligence (AI) deal on October 7. This was a less-than-modest arrangement with Anthropic. That deal allows business customers access to Anthropic’s Claude AI model, enabling IBM software to access an advanced AI tool. Many of IBM’s customers are large companies, and the deal has little value to them.

The Anthropic deal stands out as less than modest when large tech companies and larger AI companies are cutting deals worth hundreds of billions of dollars. The size of these larger company deals is staggering. The private market value of AI leader OpenAI is $500 billion. IBM’s market cap is $267 billion. Among larger public companies at the top of the AI food chain, Nvidia Corp. (NASDAQ: NVDA) has a market cap of $4.4 trillion, and that of Microsoft Corp. (NASDAQ: MSFT) is $3.7 trillion.

IBM is still, and has been for years, too small to matter as a partner. The company lost whatever clout it had decades ago. In 1980, IBM ranked ninth on the Fortune 500, America’s largest companies based on revenue. Since then, it has missed the opportunity to lead in personal computers, PC operating systems, e-commerce, tech operating systems, search, and, more recently, AI. It is hard to find a tech company that lost that many chances to be a leader.

The size of its earnings is also dwarfed by market leadership. AI sector heavyweight Microsoft had revenue of $76.6 billion and net income of $27.2 billion in its most recently reported quarter.

IBM is too small to play an important role in the future of AI.

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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.