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It's interesting that he claimed IBM has probably been doomed since 2010, considering that the stock price in 2010 was around $120, and it is now $187.06. I gue

It's interesting that he claimed IBM has probably been doomed since 2010, considering that the stock price in 2010 was around $120, and it is now $187.06. I guess 50% increase means the company is dying.

Afforess 12y ago
Check the revenues, the stock price is meaningless.
smackfu 12y ago
I believe his premise is that IBM will do anything to improve revenue-per-share numbers, even if that kills their future. So from his perspective, good stock performance is expected even if you agree with him that the company is doomed.
- hga 12y ago
  Exactly. Based on reading some of his previous essays, plus many other sources that are seeing the problem, "In 2010, Rometty’s predecessor, Sam Palmisano, pledged that per-share earnings would reach $20 in five years, a plan called Roadmap 2015. (http://www.businessweek.com/articles/2014-05-22/ibms-eps-target-unhelpful-amid-cloud-computing-challenges http://www.businessweek.com/articles/2014-05-22/ibms-eps-tar...). So part of this policy is an explicit pledge of the company. How it's being achieved, or attempted, is of course another story, as well as, say, whether everyone should dump their IBM stock once it reaches that goal, assuming enough greater fools can be found....
smacktoward 12y ago
At that scale, even if its fundamentals have rotted a business can coast quite well on inertia alone for years.
astrodust 12y ago
Stock price is mostly a matter of public opinion, and often diverges wildly from fact.
- batbomb 12y ago
  ...often diverges wildly from fact What is it called when somebody writes a book titled "The Decline and Fall of [company still around]"
  - astrodust 12y ago
    Blackberry is technically still around.
- Crito 12y ago
  If IBMs stock price were nothing more than uninformed public opinion, then it would have been plummeting for what, the past decade? Most non-technical people don't know IBM still exists (they nearly entirely disappeared from the general public's view when they stopped making consumer products); and most people in the trendy half of the tech industry seem to think that IBM is not long for this world.
  - VLM 12y ago
    Its a speculators market so applying logic is a fools errand. None the less, if you buy IBM you're trading a very liquid $185 cash for a very liquid share with tradition of paying a quarterly dividend around $1. Thats an equivalent interest rate "yield" of 2.40% or so. My local credit union is only paying 1.44% on a similar long term-ish investment. Its not completely worthless, but its being milked like a cash cow not treated like a tech company. The PE ratio is like "ten" compared to googles "thirty" or facebook which off the top of my head is like "a hundred". Comparing the yield of this dead horse to a company that actually matters like Caterpillar or XOM its about the same, around 2.5%. Of course .gov guarantees return of my capital from my credit union, but who knows what'll happen in the market WRT IBM, so it should return a bit more. CAT and XOM are actually worth something as a going concern. IBM, well... So.. rate of return below real world inflation rate, no prospects for growth, no one in the market expects future growth (not paying a high price now for earnings later). Doomed. Maybe google or apple will buy them for pennies on the dollar? IBM has patents...
- WalterBright 12y ago
throwawayaway 12y ago
enron looked pretty good too.
brotoss 12y ago
They've also employed a lot more "financial engineering" to make that happen too. Bloomberg Businessweek had a feature article two weeks ago and one thing it highlighted was that the use of "non-gaap" in IBM's earning release increased 10 fold or something
potatolicious 12y ago
BlackBerry sales were also up even after the iPhone came out. Even after the Android first hit the market too. Now they're pretty nearly dead - and I don't think there's any doubt that it was iPhone and Android that killed them. Sales and stock prices often lag behind a real inflection point.
throwaway5752 12y ago
No offense, do you subscribe to EMH? Because: http://en.wikipedia.org/wiki/Enron_scandal#Timeline_of_downfall http://en.wikipedia.org/wiki/Enron_scandal#Timeline_of_downf... ($90/share to bankrupt in about a year) http://en.wikipedia.org/wiki/Bear_Stearns#Fed_bailout_and_sale_to_JPMorgan_Chase http://en.wikipedia.org/wiki/Bear_Stearns#Fed_bailout_and_sa... ($140/share to $2 in less than a year) http://www.sec.gov/Archives/edgar/data/723527/000093176303001862/dex991.htm http://www.sec.gov/Archives/edgar/data/723527/00009317630300... ($90/share to bankrupt in 2 years) These are just egregious cases. The stock market as an oracle is thoroughly overrated. BlackBerry, the late 90s market bubble, the mid-00s financial products bubble... stock price movement says less than you think it does.
- missserenity 12y ago
  Each of these companies had huge scandals related to accounting fraud. Are you assuming the same is the case with IBM?
  - hga 12y ago
    Whenever you see many people (not just this author) talk about a company's "financial engineering" you should be concerned they might cross that line; couple that with an explicit pledge to double earnings/share to $20 by 2015 and the danger should be apparent.
  - jbooth 12y ago
    .. and you're talking about 2010-2014, a period when the market as a whole went up by about 50%, and pointing to IBM as a success story?

Afforess 12y ago

Check the revenues, the stock price is meaningless.

smackfu 12y ago

I believe his premise is that IBM will do anything to improve revenue-per-share numbers, even if that kills their future. So from his perspective, good stock performance is expected even if you agree with him that the company is doomed.

hga 12y ago
Exactly. Based on reading some of his previous essays, plus many other sources that are seeing the problem, "In 2010, Rometty’s predecessor, Sam Palmisano, pledged that per-share earnings would reach $20 in five years, a plan called Roadmap 2015. (http://www.businessweek.com/articles/2014-05-22/ibms-eps-target-unhelpful-amid-cloud-computing-challenges http://www.businessweek.com/articles/2014-05-22/ibms-eps-tar...). So part of this policy is an explicit pledge of the company. How it's being achieved, or attempted, is of course another story, as well as, say, whether everyone should dump their IBM stock once it reaches that goal, assuming enough greater fools can be found....

smacktoward 12y ago

At that scale, even if its fundamentals have rotted a business can coast quite well on inertia alone for years.

astrodust 12y ago

Stock price is mostly a matter of public opinion, and often diverges wildly from fact.

batbomb 12y ago
...often diverges wildly from fact What is it called when somebody writes a book titled "The Decline and Fall of [company still around]"
- astrodust 12y ago
  Blackberry is technically still around.
Crito 12y ago
If IBMs stock price were nothing more than uninformed public opinion, then it would have been plummeting for what, the past decade? Most non-technical people don't know IBM still exists (they nearly entirely disappeared from the general public's view when they stopped making consumer products); and most people in the trendy half of the tech industry seem to think that IBM is not long for this world.
- VLM 12y ago
  Its a speculators market so applying logic is a fools errand. None the less, if you buy IBM you're trading a very liquid $185 cash for a very liquid share with tradition of paying a quarterly dividend around $1. Thats an equivalent interest rate "yield" of 2.40% or so. My local credit union is only paying 1.44% on a similar long term-ish investment. Its not completely worthless, but its being milked like a cash cow not treated like a tech company. The PE ratio is like "ten" compared to googles "thirty" or facebook which off the top of my head is like "a hundred". Comparing the yield of this dead horse to a company that actually matters like Caterpillar or XOM its about the same, around 2.5%. Of course .gov guarantees return of my capital from my credit union, but who knows what'll happen in the market WRT IBM, so it should return a bit more. CAT and XOM are actually worth something as a going concern. IBM, well... So.. rate of return below real world inflation rate, no prospects for growth, no one in the market expects future growth (not paying a high price now for earnings later). Doomed. Maybe google or apple will buy them for pennies on the dollar? IBM has patents...
WalterBright 12y ago

throwawayaway 12y ago

enron looked pretty good too.

brotoss 12y ago

They've also employed a lot more "financial engineering" to make that happen too. Bloomberg Businessweek had a feature article two weeks ago and one thing it highlighted was that the use of "non-gaap" in IBM's earning release increased 10 fold or something

potatolicious 12y ago

BlackBerry sales were also up even after the iPhone came out. Even after the Android first hit the market too. Now they're pretty nearly dead - and I don't think there's any doubt that it was iPhone and Android that killed them. Sales and stock prices often lag behind a real inflection point.

throwaway5752 12y ago

No offense, do you subscribe to EMH? Because: http://en.wikipedia.org/wiki/Enron_scandal#Timeline_of_downfall http://en.wikipedia.org/wiki/Enron_scandal#Timeline_of_downf... ($90/share to bankrupt in about a year) http://en.wikipedia.org/wiki/Bear_Stearns#Fed_bailout_and_sale_to_JPMorgan_Chase http://en.wikipedia.org/wiki/Bear_Stearns#Fed_bailout_and_sa... ($140/share to $2 in less than a year) http://www.sec.gov/Archives/edgar/data/723527/000093176303001862/dex991.htm http://www.sec.gov/Archives/edgar/data/723527/00009317630300... ($90/share to bankrupt in 2 years) These are just egregious cases. The stock market as an oracle is thoroughly overrated. BlackBerry, the late 90s market bubble, the mid-00s financial products bubble... stock price movement says less than you think it does.

missserenity 12y ago
Each of these companies had huge scandals related to accounting fraud. Are you assuming the same is the case with IBM?
- hga 12y ago
  Whenever you see many people (not just this author) talk about a company's "financial engineering" you should be concerned they might cross that line; couple that with an explicit pledge to double earnings/share to $20 by 2015 and the danger should be apparent.
- jbooth 12y ago
  .. and you're talking about 2010-2014, a period when the market as a whole went up by about 50%, and pointing to IBM as a success story?