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  • medchemlead medchemlead Jun 16, 2013 11:34 PM Flag

    Forbes Aricle- Peter Cohan "As It Shrinks In A Growing Market, Does IBM Have A Strategy?"

    In January 2012, Virginia Rometty took over– and after missing its quarterly numbers for the first time in eight years, canning “at least 1,300 people,” and shrinking revenues in a corporate IT market that’s growing at 4.1% in 2013 to $3.8 trillion – I now wonder: Does IBM have a strategy? To be fair, she has only been in the job for 18 months; in that time, IBM stock has risen at a 7.1% annual rate. But in the last year, the S&P 500 has spiked 24.2% while IBM stock has eked out a mere 4.4% gain. IBM’s formula for profit growth has been to cut costs enough to offset declining sales. In the last year, its revenue fell 2.3% while its net income grew 4.7%. If IBM cut enough people, it could meet its profit numbers. But in April, IBM violated the basic tenet for those who run publicly-traded companies - when it comes to quarterly earnings reports, you must beat expectations and raise guidance. If not, the stock suffers. IBM rarely violated that principle under Palmisano. In April, Rometty announced that in her fifth quarter as CEO, IBM had missed predicted earnings by a nickel and would fire people to cut costs before the end of June.Specifically, Bloomberg reported June 12, IBM posted first quarter profit of $3 a share while analysts expected $3.05 - “the first earnings shortfall since 2005.” In April, IBM said that the job reduction “would be concentrated overseas and mostly complete by the end of June.” Laurence Balter, an analyst at Oracle Investment Research, estimated that with IBM’s $1 billion restructuring charge, IBM would cut 6,000 to 8,000 jobs globally– at most 1.8% of IBM’s total workforce of 434,246 .IBM’s statement was short on details and long on how layoffs are a natural response to industry change and IBM’s business strategy. IBM said “Change is constant in the technology industry and transformation is an essential feature our business model. Since Rometty took over, IBM’s rate of growth in restructuring charges has nearly doubled as revenue shrank

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    • Restructuring charges doubled over the past year. So it's a big fat gamble - like everything else. We'll find out soon enough. Investing is always a gamble.

    • "Does IBM Have A Strategy?" YES, they have a always. " Restructuring " is only one of their ongoing STRATEGIES that has been taking place for the last 20 years. This Forbes guy is obviously "new to the game". Probably 25years old. Has no experience and is "cutting his teeth" with his article. IBM is continuously adjusting to the market and they will forever do so in order to gain market share and cut expenses.

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