International Business Machines Corp. (NYSE: IBM) is still deemed one of the most important technology stocks for investors because of its size and dominance in the Dow Jones Industrial Average. The new reality is that IBM is far less important on a relative basis than it used to be when you consider the number of other technology companies competing against it each day. Now Barron’s has featured it as a CEO Spotlight and cover story with a hope and a prayer that IBM’s turnaround may work.

What investors need to consider is that the IBM of today just cannot dominate its customers like it used to. The real issue for investors to have to swallow is that the only growth the company has is on earnings but not in sales. You can attribute all that growth in the quest for earnings of $20.00 per share to buybacks and cost cuts. Tax management has been another source of that earnings growth.

Barron’s said, “Naysayers are ganging up on IBM CEO Ginni Rometty. But her plan to turn around the 103-year-old company just might work.” The key word in here is most likely “might.”

Rometty has been CEO since January of 2012, and many of the policies that she has used were in place before she took the helm. The problem is that it may start to get harder to keep cutting costs. After changes to benefit packages, and what we have been told about replacing departing personnel, IBM is just a different company today than it used to be.

Barron’s is correct that IBM is still very profitable — about $18 billion in profits on $100 billion in revenue.

The external focus has been on the cloud, but Rometty wants to dig deeper into big data and analytics. The article put cloud revenue at $4.4 billion for IBM last year, growing to $7.0 billion in 2015. Rometty signaled that data and analytics, which was $16 billion in 2013, will grow up to $20 billion in 2015.

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The article does bring hope. After all, Warren Buffett has bought in big time, and he professed for most of his career to avoid technology. Rometty is sticking to the $20 per share figure for earnings in 2015. 24/7 Wall St. will just assume that the company is right about making $20 per share in 2015. Our question then is “OK, so now what?”

Thomson Reuters has estimates of $17.89 in earnings per share in 2014 (up from $16.28 in 2013) and estimates of $19.81 per share in 2015. Again, we will give Rometty the benefit of the doubt here about $20 per share. The issue we see is that the $97.4 billion in revenues expected by Thomson Reuters for 2015 is down 2.4% from 2013. And the consensus estimate of $98.4 billion for 2015 is only 1% higher than this year. Now consider that sales were $104.5 billion in 2012 and $106.9 billion in 2011.

There is a story of big data, analytics and the cloud here. Then there is a story of “everything else” inside Big Blue. And that everything else is where the devil is in the details. The old IBM still looks and feels like a company in contraction rather than growth.

IBM’s latest earnings report in April showed that its services backlog was $138 billion. This figure is massive, but it also has not changed in any meaningful way over the years. This was up 1% from a year ago, if you adjust for currency. Go back to 2012 and it was $139 billion. In the April earnings report of 2010, that backlog was $134 billion, down from $137 billion a year earlier. Again, no core growth. You hear the term peak oil a lot, but IBM feels like “peak backlog” is in store.

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IBM does sound cheap on the surface, at only about 10 times expected earnings, if you blend 2014 and 2015 estimates. It is also less than two times revenues. But now you have to consider that returning so much cash in buybacks is gutting the balance sheet’s strength that could be used for growth. IBM trades at about 11 times book value, but its net tangible assets figure is actually negative.

The fund managers at the short-only exchange traded fund the Range Bear Equity ETF (NYSEMKT: HDGE) remain bearish on IBM too. They once told us about expensive acquisitions, no real growth and other concerns. Their top concern was that the financial engineering accounts for all the earnings growth. We have not heard their take on the Barron’s article, but IBM appears as number two of their top short positions in the short-only portfolio.

For IBM’s engineered turnaround to work, the company will have to get on a solid path to growth in each of its core businesses, as well as in its newer initiatives. Until then, IBM remains a value stock that could quite simply be a value trap for its investors.

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