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IBM Plunges as CEO Abandons 2015 Earnings Forecast
- vo1aQXJ3 12y agowhat a surprise... the question was not if... but when. and the answer might well be: today.
- adwf 12y agoYep, they've been steadily ditching parts of their business for years now. This is just the short-sighted thinking coming home to roost. IBM R&D just isn't what it used to be and a company that isn't making new things, isn't going anywhere.
- mmastrac 12y agoFinancial headlines have been really clickbait-y forever. Would anyone click if the headline was "IBM loses two months of gains" rather than "plunges"?.
- tinkerrr 12y agoNot true. IBM was trading at ~ $190/share two months ago, it's down to ~$169/share today.
- mmastrac 12y agoFair enough. Let's say "February" levels instead, which were $172ish at the low.
- forgotpasswd3x 12y agoCall it what you want, but it doesn't change the numbers.
- j_s 12y ago(Slightly related) Losses as percentages always annoy me - a 2% loss is not made up by a subsequent 2% gain.
- cpwright 12y agoThe only meaningful numbers are market cap changes or percentage changes. The numbers for the market cap are much bigger than most people can think of, and you need to know what the absolute value is to know how big of a relative change it is. What bothers me are per share prices. I don't remember the precise value of any particular stock, so IBM drops $13 means nothing to me. Also that a stock is $500 a share, so it must be good is another thing you see a bunch, so it must be great is another fallacy I see all the time; when really all that matters is the market cap not how many pieces it is divided into.
- justincormack 12y agoIBM just abandoned its $20 share price target so there was a bit of meaning in the price. But no there usually isn't. Edit I think it was $200. See numbers matter.
- big_co_ 12y agoShare prices have a strong psychological affect on many investors. This is why you will see increased buying and selling around certain price points and not market cap.
- simplemath 12y agoWhich just reinforces what a shell game all of it really is.
- mason55 12y agoThis is why you shouldn't hold leveraged ETFs for more than a day or two. They end up decaying quite quickly as the bounce around.
- throwaway5752 12y agoIt looks like a 3 year low to me (as IBM has been trading sideways for years) personally I think the headline is accurate (down 7% for a stock with a float, institutional base, and capitalization of IBM is a huge amount of paper losses). Abandoning the 2015 forecast is probably the bigger news vs any kind of daily price fluctuations, but the stock fluctuation underscores that this is somewhat big deal. Sorry if you hold IBM. Oil stocks have been painful for me, I wish I was doing as well as IBM is doing.
- smackfu 12y agoYeah, financial reporting tends to focus on "effect" (stock price) rather than "cause" (earnings/projections), but there is still usually a cause worth paying attentions.
- brudgers 12y agoStatistically, every three year period contains a three year low.
- gjm11 12y agoNope. Every three year period contains a low-within-that-period but that's not what "three-year low" means. Consider, e.g., an asset whose price is just going steadily upwards. Every 3-year period has a low point -- the start of the period -- but there is no point at which you can say "The price of this asset is now at a 3-year low".
- brudgers 12y agoBy that reasoning, IBM is not at a 3 year low since it is up from earlier today. The concept remains meaningless. That's why it is used by those speaking to dumb money.
- throwaway5752 12y agoCan I ask if you consider yourself smart money, then? Because in almost 15 years of investing, fundamental research, and technical analysis [edit: and associated community participation, consumption of research products, and reading investment literature and publications] I have not seen anyone take issue with calling a 3-year low on a stock on the basis of an intraday low. It's a 3 year low. I didn't say that was particularly important, but it's true by any reasonable definition of the term (which is a common one). It might be important on the basis of the volume, as it crossed a technical level that it's held for quite a while and may be forming a downtrend, which is frequently interpreted as a sign of institutional selling. edit: FYI, IBM hasn't traded below 170 since Oct 4, 2011. It hasn't closed below 170 since Sep 23, 2011.
- devonkim 12y agoWe're forgetting that the DJI itself has had some turbulence, too. IBM is not particularly out of step with the market itself... until just recently, which I believe lends some measure of credibility to the original headline because if you view stock behavior as something to be benchmarked with the greater market, it did certainly plunge beyond what most other stocks would have. See: http://goo.gl/fJkfpA http://goo.gl/fJkfpA
- pcurve 12y agoRobert Cringely is busy writing is follow up article now.
- krschultz 12y agoI read Cringely's recent book about IBM and it sure makes the case that IBM is in a world of trouble. I can't say whether or not he's right, but what good software has come out of IBM recently? Eventually a tech company needs to be good at tech, no matter how great your sales guys and brand reputation.
- AznHisoka 12y agoOne word: consulting.
- vo1aQXJ3 12y agoand are these the same consultants that suggested the EPS target was a good idea?
- fennecfoxen 12y agoNot as a rule, no -- I believe IBM does offer business consultants, but most of their consulting business (by revenue) is technical consulting - you know, "charge us a lot of money for some medium-low-quality tech infrastructure".
- vo1aQXJ3 12y agoyou are assuming here that IBM is a tech company. It isn't. It is a financial engineering company. And the problem is that there is only so much you can do in this space (otherwise you become like Enron).
- curiousDog 12y agoIs the cloud a low margin business in general? Looks like very few companies are prepped to handle that (read AMZN/GOOG). I'm not sure if I should be holding onto my MSFT stock anymore though :). Seems like just a matter of time.
- sz4kerto 12y agoMSFT is currently way bigger in the cloud business than GOOG (it's a lot behind AMZN though), so I'm not sure why you think that AMZN/GOOG is going to handle this better. Azure has a very strong momentum now and looking at how quickly that department of MSFT adapts, this is going to continue I think (they are really trying to accomodate all platforms, etc.)
- xorcist 12y agoThere is some truth to that Microsoft is less prepared for the slimmer margins than Google and Amazon is, who are veterans of this space. Their cloud services has higher overhead simply because they stick with Microsoft tech for obvious reasons. Microsoft also has more focus on their sales force which may not be such a good idea when/if Office dies. Time will tell.
- smackfu 12y agoA cloud service where you just spin up your own server instances is a commodity service which will have low margins. In contrast, a cloud service where you use an API to have the cloud do something for you instead of running your own servers will have much better margins. An examples of this would be Azure Mobile Services.
- mnglkhn2 12y agoIn your assessment I would switch out GOOG with MSFT. To me Microsoft is the better one at doing retail cloud than Google. Even Apple is using MSFT for their cloud backbone. Apple is not selling cloud directly to consumers, but every app/device sold has iCloud backing, which developers can use for their apps for a ton of services.
- wmf 12y ago
- pjc50 12y agoSee also http://ftalphaville.ft.com/2014/10/20/2013702/the-sage-gets-what-he-wants-at-ibm/ http://ftalphaville.ft.com/2014/10/20/2013702/the-sage-gets-... Claiming that IBM is planning more stock buyback in the future, and is therefore not unhappy about the lowered price.
- vo1aQXJ3 12y agoand that is why Warren Buffet is not too worried either. because the share price has come down IBM will buy more of its own shares. Therefore Buffet will own a bigger part of the company with out actually buying more shares. almost a win-win!!! (except for the people who are going to loose their jobs as a result of this, but who cares about them?)
- dynsrv 12y agoIBM is financial engineering company. Ginni visited my country twice because she considered important market here. But as you can see, IBM is on the path of declining. I think Apple or Amazon will help IBM in the future.
- brudgers 12y agoIBM is dead! Again. Again? Again. Last time was a bit over two decades ago. They dumped their PC business. They mostly abandoned OS/2 development. Because they were unprofitable. Wall street freaked out. Linkbait headlines sell newspapers and stock picking advice. Look who IBM linked up with: A sovereign investment fund backed by petroleum reserves. If you can't spot the bumpkin at the table...
- andy_ppp 12y agoI would be wary of posting what I think of IBMs business model here for fear of being sued...
- autism_hurts 12y agoIBM is a professional services/consulting company. Not software or hardware or technology.
- ChuckMcM 12y agoI find it kind of odd, but IBM pretty much wrote the book on building reliable data center services. I've met the CEO/GM of SoftLayer (Lance Crosby) and he is a smart guy so I'm guessing he will have a lot to add to the bottom line going forward. But it did not seem like Lance was working with IBM so much as he was working for IBM, and that strikes me as something that will be corrected once the integration is better. VPS hosting is a commodity business, and Digital Ocean is driving every penny out of it (they are sort of the Dell of VPS it seems). But the "cloud" is a services and consulting play I believe. A couple of the things I learned at Google was that uniform server design didn't work well, but integrated compute and services did. A Gmail cluster was a thing to behold. The challenge is that if you're building petabyte and exabyte scale infrastructure you can't have your "storage cluster" over here, and your "compute cluster" over there, ever move a petabyte of data over a 10GB link? It takes forever. So your goal has to be to build an API/Services rich environment in a high bandwidth fabric but to ruthlessly use locality as a "feature" in your scheduling. With Softlayer's gear, and IBMs resources that is really doable. Remember that IBM is still going to have 12 - 13 billion in free cash flow. So they have the horses to build infrastructure just as fast as Google does (which calls out that expense in their quarterly reports), but IBM also needs the services infrastructure play which is something they are really really good at. I'm not counting them out until the decide to divest themselves of SoftLayer :-)
- MichaelGG 12y agoWhat do you mean by uniform server design not working out? You mean without locality planning?
- ChuckMcM 12y agoThe big challenge is storage. If you don't treat storage as a first class service and instead make it part of the standard 'atom' your storage requirements grow faster than your compute requirements. And while you get some relief by replacing the storage component with denser ones, you always seem to end up with high priced and under employed compute capabilities going to waste while it provides access to data on some spinning rust. I was an advocate of variation in the form of 'storage focused' and 'compute focused' atoms but at the time the mantra was 'identical blocks.' Never got much traction on that. The trick is of course mixing nodes the the mesh of services, that aspect of it really benefits from a colloidal solution of resource nodes :-)
- gress 12y agoApple can eventually just buy them and rename them, Apple Enterprise Services.
- thegenius 12y agoIn an interview today, Ginni Rometty sounded like a TechCrunch Disrupt participant on HBO's Silicon Valley. "We are reorganizing this company around analytics, around cloud, around social, local, mobile" I can't believe she actually said SoLoMo. Then later in the same interview: "Clients asking for more flexibility in our software to deploy for new workloads — social, local, mobile." If anyone else caught her in Fortune's Most Powerful Women Summit just a few weeks ago (available on youtube), she appears anxious as hell with Warren Buffett in the crowd watching her. No wonder with a 0.02 EPS to report and a last minute ditching of the 2015 roadmap. http://blogs.barrons.com/techtraderdaily/2014/10/20/ibm-ceo-rometty-hints-to-cnbc-about-layoffs-we-are-playing-to-win/ http://blogs.barrons.com/techtraderdaily/2014/10/20/ibm-ceo-... https://www.youtube.com/watch?v=9bixGVxcTLc https://www.youtube.com/watch?v=9bixGVxcTLc