By now most people have given up on IBM. I don’t mean that they have dismissed the company as a dinosaur on its way to extinction but rather it has been pulled down from the Pantheon of bellwethers, no longer important in helping us determine the actual state of the US and global economy derived from actual results (rather than stochastic calculations of survey results). Revenue and profits have been sinking for so long now that it is easy to just see cloud computing and move on to something seemingly more relevant.
There is, of course, a great deal of truth in the accusation. The computing world has shifted and IBM was caught far out of alignment. The scale of that drift is simply astonishing; though the company reported revenue declined ‘only’ 4.6% in Q1 2016, which was actually the best topline result in a year and a half, it doesn’t actually do the descent justice. Revenue in Q1 was 5% lower than Q1 2015, which was 13% below Q1 2014, which was 4% less than Q1 2013, which was 5% lower than Q1 2012. Sales have been contracting for a solid 16 straight quarters, four full years, which leaves the $18.7 billion in Q1 revenue as just about 25% less than Q1 2012. The firm has lost a quarter of its revenue.
Everyone will claim in 2016 that it was easy to see the cloud and software-as-a-service (SaaS) coming, but IBM’s posture in the middle of the recovery (so-called) in 2010 and 2011 belies that post hoc revision. In July 2011, reporting on a quarter in which IBM delivered 12% sales growth (with a good part of it due to the ‘falling dollar’), CFO Mark Loughridge confidently declared that there was only good fortune ahead – good fortune being delivered mainly through its traditional business lines (hardware/mainframes) as if the post-crisis era would be largely the same as the pre-crisis.
This post was published at David Stockmans Contra Corner on April 22, 2016.
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