Tech Giant IBM Needs Giant Turn Around

Tech Giant IBM Needs Giant Turn Around

This month’s quarterly financial results reveal the slow decline of IBM under current CEO Ginni Rometti. What was once one of America’s leading companies and most powerful corporations, is now seeing a flatlining failed attempt to increase revenue since peaking in 2011 at £107bn.

The good news is that revenues grew for the second quarter in a row after a five year decline, however, only by 5 percent thanks to the 10 percent depreciation of the trade-weighted US dollar over the past year.

In comparison to other companies such as Microsoft and Google, who’s revenues increased by 16 percent and 26 percent in the same quarter respectively, IBM is slowly being left behind. Facebook increased revenues by 50 percent and profits by 63 percent. These current growth rates suggest Facebook will soon surpass IBM, with Facebook making more money than IBM – $5bn vs $2.3bn – in the latest quarter.

A new strategic shift in IBM’s strategy from traditional low-margin business to cloud services, blockchain, Al, security and quantum computing is visible.

Financial officer Jim Kavanaugh expressed enthusiasm for results in a recent conference call, saying, “Our cloud revenue is now $17.7 billion over the last year, which is up 22 percent.”

However, the dynamic trend in corporate IT to move towards the cloud could be recognised as nothing more than that of a trend. One that did not exist a decade ago and has the potential not to exist a decade into the future.

These grim figures come at a hard time for IBM as the stock market mirrors the company’s decline, driving the price down from $160.91 on April 17 to $145.86 on April 20 and since recovering slightly to $146.48.

If IBM continues on this downward slope it could see major losses to long-term business, leaving a lot riding on their current strategic move towards the corporate cloud.