Investors were besotted with the most recent earnings from IBM, but it did not last for long. This has been the case for over a decade. IBM rarely has good news. When it does, awful management and a poor board of directors overwhelm it.
There is no other big tech company that could please investors with a 7% increase in revenue year over year. However, that was what happened when IBM released its most recent numbers. Revenue hit $16.7 billion. This only looks good because IBM has had years of down quarters. Net income rose from $1.356 billion to $2.332 billion. The increase was impressive, but the profit margin was 14%. By contrast, Apple had a net income margin of 28%. Revenue was $123.9 billion and net income was $34.6 billion.
IBM’s primary argument to Wall Street is that it has an attractive cloud business. IBM’s hybrid cloud revenue rose 16% to $6.2 billion. In the most recently reported quarter, cloud leader Amazon posted AWS revenue of $17.78 billion, up 40%. AWS made $5.3 billion. IBM also trails Microsoft and Google in cloud market share.
IBM’s stock took a healthy move up in January but then fell back. Over the past year, its shares are up 3%, compared to the Nasdaq’s 12% gain. Over a five-year period, IBM is down 21%, compared to a Nasdaq gain of 147%.
IBM’s current board chair and chief executive, Arvind 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 chairperson and CEO of Emerson Electric), who joined in 2012, and Andrew N. Liveris (retired chairperson and CEO of Dow Chemical), who joined in 2010.
Can IBM’s performance improve? Not a single piece of evidence says that it can.
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