IBM is the new benchmark in bad

Poor execution and slow growth lead to a poor quarter for Big Blue.

By Jim Cramer Oct 17, 2013 9:57AM

IBM sign (© Mark Lennihan/AP Photo)We've got it -- the new benchmark in bad: IBM (IBM).

 

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I don't know if you could have blown a quarter as badly as IBM did if you tried. This is not the first time this has happened -- or the second, or the third. In fact, as the always-rigorous Tony Saconaghi -- one of my favorite tech analysts -- pointed this out as part of the open rebellion on the conference call: "You've missed consensus revenue expectations for seven quarters."

 

This most recent one was by far the worse miss of them all. As Tony pointed out on the call: "If it weren't for a huge tax benefit this quarter, it would have been a very significant earnings-per-share miss." He then added that something very different is occurring at the company from what has been the case in the last seven to eight years.

 

All true.

 

Here's the problem: I felt IBM had no answer to Tony's inquiry, or to any of the others on the call. The company admitted to poor execution and a slowing in all growth markets and miserable hardware sales, but we don't know why. It is entirely possible that cloud computing is just killing these guys. They attempted to make the cloud into a positive for them by saying that the company's doing $1 billion in cloud revenue.

 

That's pretty laughable, as it's the same amount little Salesforce.com (CRM) is doing -- except that IBM is a company with $100 billion in revenue. The drop-off here was shocking. Sales generated in China were down 22 percent, and hardware revenue was down 40 percent in the fastest-growing market. That's a true indictment of the enterprise.

 

In fact, the only division I felt was positive at all was security.

 

That's very discouraging. This company's not even doing as well as Hewlett-Packard (HPQ).

 

I hesitate to regard this company as a bellwether of anything, although I am sure that will occur Thursday. If anything, I think it is carrion for other, more aggressive companies. While there were currency issues that were endlessly discussed by management, I am calling this one a disaster.

 

I know Warren Buffett bought big into IBM, although he sure didn't have anything all that positive to say about it in his Wednesday interview with CNBC's Becky Quick. Regardless, when I look at his Berkshire-Hathaway (BRK.A) portfolio, I think this one is by far the weakest holding. I'll be shocked if he sticks with it.

 

As with HP, the declines here are both cyclical and secular. Unlike HP, the company seems oblivious to exactly how bad things are.

 

Again, just a breathtakingly bad quarter. Not much else to say.

 

Random musings: If you want a terrific contrast between two commerce companies, listen to American Express (AXP) vs. eBay (EBAY). American Express had a terrific quarter with good business throughout, particularly in America. Meanwhile, eBay saw a "dramatic deceleration" in its American business, worse by the week, going right into the fourth quarter. Buy AmEx, sell eBay.

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At the time of publication, Action Alerts PLUS, which Cramer co-manages as a charitable trust, had no positions in the securities mentioned.




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354Comments
Oct 17, 2013 10:10AM
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IBM is a dinosaur.
In other news no default = good times..... for about 3 months.  Time for a real, long lasting deficit deal, could even make changes to Obama care that both sides are happy with.  Won't hold my breath.  
Also, don't care which side looks worse right now.
Oct 17, 2013 10:32AM
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When do we finally recognize that Ivy League universities produce detached dysfunctional people who have no commonsense? IBM was started by high intelligence and American Ingenuity. All of them were terminated so it could become a global business platform without substance. That's not rocket science... it's ignorance. 
Oct 17, 2013 10:56AM
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Personally I'm NOT THANKING WASHINGTON particularly Congress, for ANYTHING....

They have not done their JOB, they have not finished their BUSINESS...

Anyone else can do what they want, but I think they need their azz kicked; And kicked hard..!!

Oct 17, 2013 11:24AM
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I believe the furloughed Fed workers, should all work 1-2 hours of overtime (OT) per day until they pay off the VACATION monies they are going to get....(for being off)

Otherwise other fellow taxpayers, and all other Americans are just getting screwed..

Oct 17, 2013 10:20AM
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what has IBM actually done or created in the past decade?  in the office environment, i haven't SEEN an IBM product in a long long long time
Oct 17, 2013 11:59AM
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After this totally useless and absurd budget excercise we have been subjected to I offer one conclusion.  We need to direct all of our energy to unwinding this attitude that debt is a good thing.  Debt is an insideus cancer that one should never relax around.  So many Americans have accepted debt as just a part of their lives.  Debt is a drain on emotional and economic energy. Debt when used as a tool and kept under control is an asset.  But I contend debt needs to be perhaps seen like pain killers, a temporary tool to deal with a temporary condition, not a long term part of ones life.  You have to admit these pain pill takers in DC can become very aggresive and sound so convincing when they want their pills.  They throw their weight around and disrupt the entire family and neighborhood when they miss their fix. Lets get them off the dope.
Oct 17, 2013 10:11AM
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IBM has $100 billion in revenue and yet if you ask people to list their top 50 tech companies, IBM might not even make the list.
Oct 17, 2013 10:20AM
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Does this also mean the next step in computing will be HAL 9000?
Now I know what its like to fear the future.

Off Topic....lets all gather and thank the Congress for finally
breaking the stalemate that could have been broken several
weeks (or even months) ago.  What a fine bunch of workers
they are, and all about the "American People".  After intense
audit as to the number of hours worked, they certainly proved
they are worth at least minimum wage at best.

Have a great day with Fed workers (the real ones, that is)
'back on line'....

Oct 17, 2013 10:38AM
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Can we be any more stupid than to sit passively as Washington positions us for 3 more months of ridiculous financial drama without EVER resolving anything? Did the last minute temporary patch legislation bring the Gramm Leach Bliley Act up? The Tea Party whined about ACA to the point of hinging our nation's activity to dashing it or else. ACA is about healthcare. GLBA is false legislation legalizing collusion in the financial sector. It's blatant-- TREASON. Why hasn't it EVER been a topic of address? In THREE more months... the Federal Reserve will give Wall Street MORE billions to keep our economy and lives suppressed and in stagnation. 100% of it goes to wealth.

WHAT is WRONG with US? 
Oct 17, 2013 11:02AM
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The USA lives far, far beyond its means. What is thought of a person or business that continually spends more than it earns? I say not much. In 1992 Ross Perot was alarmed when the debt was $5 trillion. At the time he said with $5 trillion you could buy everyone west of the Mississippi a $100, 000 house. From here, there's nothing to stop the official national debt from climbing to $20 trillion, then $25 trillion, and on and on. If interest rates are even a normal 5% on $20 trillion, that's $1 trillion per year the government will pay in interest. They only take in $2.4 trillion per year.
Oct 17, 2013 10:09AM
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Much like stress causes a human to reevaluate their abilities in a compressing economy Companies undoubtedly are required to do the same.   Big Blue is getting along in years and probably some complacency in their management performance and plans.  As humans we always look for comfort, security, and stability and folks working in an organization do the same.  Big Blue is big, old, and slow to change.  Change is necessary and will be difficult.  Probably no different than you or I changing lifelong habits.  Much like Sears, JCPenneys, and Radio Shack who are also long in the tooth, Big Blue's day most probably has come and gone.
Oct 17, 2013 10:58AM
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For years IBM has lived off Government contracts.  They are unable to make it with out them,  As are many large companies in the country. I wonder what would happen to all those companies if they stopped raising the debt ceiling?  
Oct 17, 2013 11:35AM
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Wow, $100b in sales with $16b net profit and investors are throwing a growth tantrum.  Sure there are many more options for building enterprise IT these days and IBM has no stake in mobility. So you're going to have to lower your growth expectations and realize that IBM is an enterprise IT utility. Sell IBM and buy Apple and watch what happens when all smart phones and tablets are selling for $100-200 in the next 2-3 years without any carrier subsidy.
Oct 17, 2013 10:30AM
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IBM failed years ago. It was an advocate of global for all the wrong reasons. Talking about it like it is still a legitimate stock is stupidity. The Thinkpad was genius. The Lenovo TP is crap. Forfeit all the good stuff so tech junkies can live in the virtual world of networking. What did we get for it? Big Brother.  
Oct 17, 2013 11:08AM
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You can sit around and piss and moan about IBM....

If you are one of their investors, you might have a little reason to, because they are dragging the DOW down today....If any of you have invested in Blue in the past, you probably have been handsomely rewarded.

IBM is like AT&T, GE and other stalwart companies that time and time again, manage to muddle or come through the worst of times, the best of times...I wouldn't be counting them out; Because they aren't even laying on the mat yet...

Most of these Companies, deserve much praise for what they have accomplished over the decades, they have changed the World....And they have made America and Americans what they are today.

And they are NOT going to fold and go away anytime soon.

Oct 17, 2013 1:34PM
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LOST         YOUR BACK  !!!!!!!!!      Do they know you're using the computer at the insane asylum?


Oct 17, 2013 1:49PM
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Wow...... they must have slapped LOE right back in solitary when they saw him/her on the computer.
Oct 17, 2013 11:18AM
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CGT11.....Why don't you STFU and go awayyyyy.
Oct 17, 2013 2:04PM
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Amongst other things or issues...

 

Someone mentioned about McCain being a traitor to his Country....

I really wish I could sit down and talk to you man to man or man to woman...

Whoever you were...

Oct 17, 2013 11:52AM
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off the subject  but who ate the bullet  on the wall mart  food stamp  deal. or did oboma pick up the tab with our tax money.  the state should of picked up the tab  or wall mart for honoring cards have not seen much on this  i wonder  why
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