The IBM unbeat goes on. Its sales plunged again for the 14th straight quarter while its net income was down by 14% from last year. Even management’s dodgy ex-items earnings guidance for 2015 was lowered by 6% with only one quarter to go.
Nor is this a passing swoon. IBM’s Q3 revenues were actually back to 2002levels. As the Zero Hedge chart demonstrates, it is hard to find a worse trend in revenue since Bethlehem Steel disappeared a few decades ago:
But the ugly sales charts above aren’t the half of it. The real story is that IBM’s relentless decline is proof positive that financial engineering is a destructive toxin that is leeching the lifeblood of the nation’s business enterprises.
Indeed, IBM is a Big Blue Canary. The abysmal facts of its self-destruction over the last decades should be a wake-up call to the bubble-blind Keynesians who run the Fed.
But these academic theoreticians and power-obsessed apparatchiks haven’t noticed – – even as they continue to jabber about the sheer noise emitted by the BLS. When it comes to what is actually important – – like the health and stability of the financial system – – they have no clue about the manner in which their so-called ‘extraordinary’ policies of ZIRP and QE have actually booby-trapped the financial system with explosive time-bombs.
Thus, IBM’s share price plunge of 35% since its peak valuation of $215 two years ago is a hint of things to come – -a warning that even the casino gamblers will dump and run when the destructive and unsustainable effects of financial engineering become sufficiently evident.
Stated differently, IBM has lost $100 billion of market cap since its 2013 peak. But that wasn’t due to a fundamental deterioration in its business model or a quantum change in the competitive environment in which it operates.
This post was published at David Stockmans Contra Corner on October 22, 2015.
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