IBM Continues Sharp Spin Downward

By Douglas A. McIntyre Published Apr 21, 6:45AM EDT

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International Business Machines Corp. (NYSE: IBM) shares did not rally on its first-quarter results. They were far too poor and offered no proof that the company has begun to recover. As it moves into one business it claims has promise, another disintegrates.

IBM’s shares trade at $166, well down from a 52-week high of $196.86. The S&P 500 has outperformed IBM’s shares so far in 2015. The stock is down over the past year and two years. It has sharply underperformed that S&P over a period of five years. An investment over any of those periods would have cost money, compared to a simple S&P index fund. That is particularly difficult to do, since most of America’s big tech public corporations have done so much better

First-quarter revenue dropped 11.9% to $19.6 billion. Net income was off 2.4% to $2.3 billion. Despite improvements in its cloud and mainframe businesses, revenue dropped at every one of IBM’s operating divisions, although some of the figures received asterisks for changes in composition. Among its largest divisions, the problems became particularly severe. Global Technology Services revenue fell 10.9% to $7.9 billion. Business Services revenue dropped 13.0% to $4.3 billion. Software dropped 8.2% to $5.2 billion. While some of these changes represented IBM’s decision to alter the composition of its revenue, based on bottom line results, those efforts have failed.

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In almost all cases, when a CEO’s company posts poor results, there is, in his or her opinion, a silver lining. IBM is no exception:

“In the first quarter we had a strong start to the year. Our strategic imperatives growth rate accelerated, demonstrating the power of our offerings in these new opportunities and contributing to improved revenue performance. Our focus on higher value through portfolio transformation and investment in key areas of the business drove continued margin expansion,” said Ginni Rometty, IBM chairman, president and chief executive officer.

Among the disasters, finding those “strategic imperatives” is hard to do, perhaps because there are none. At least that is the case based on first-quarter numbers.

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.