back to article IBM still on a (downward) roll with 15th consecutive quarterly revenue drop

IBM continues to take a beating as it struggles to transition its business to a focus on cloud and analytics products. The fourth quarter of 2015 brought the following returns: Revenue was $22.1 billion, down 9 per cent from the previous year's quarter. Net income was $4.5bn on the quarter, down 19 per cent. Earnings per …

  1. Uncle Ron

    Transformation

    Just as the old "huge margin," customer raping companies like Oracle and Microsoft--and even EMC--are tanking and running for cover, IBM is steadfastly moving to re-emerge, once again, as -the- essential information technology company. Those other companies--and many more like them--in their short(er) existence--had -one- idea, bled it's customers to the maximum extent possible, and haven't had another really interesting idea. IBM has had -many- ideas, usually the right ones, really good ones, and made a lot of money that customers usually weren't reluctant (usually) to pay.

    No, I think IBM will prevail, perhaps as a lower revenue, but higher profit company, that continues to make headlines for innovation, value-add, and creating the future. If I -had- any money, I'd buy a lot of IBM.

    1. Anonymous Coward
      Anonymous Coward

      Re: Transformation

      Some parts of IBM used to be very good. Mainly around R&D, and it used to be around delivery too (many years ago).

      However, their exec team went full throttle on the "short term thinking" approach, shafting many of the better people who gave their customers what they want/need, and instead continuously getting the sales channel to ramp up their bullshit factor based sales... which without the right people involved any more, has led to repeated massive failures.

      So no, IBM doesn't have the shiny, glorious future you're attempting to paint. What it has is a bunch of sharks at the top who have picked every last one of the "low hanging fruit"... and have no real clue what to do next, since they've only ever done easy things before, and now they've painted themselves into a really challenging situation. Basically, they're fucked.

      1. Anonymous Coward
        Anonymous Coward

        Re: Transformation

        "and have no real clue what to do next, since they've only ever done easy things before, and now they've painted themselves into a really challenging situation"

        Once HP sold off the original HP, that was pretty much the case for them too.

      2. Doctor Syntax Silver badge

        Re: Transformation

        "have no real clue what to do next"

        Maybe not. Surely there are still a few techies left who can be fired to save money.

        1. Anonymous Coward
          Anonymous Coward

          Re: Transformation

          Most of us have left already. To the extent that the services organisation is now turning down work because there are no longer enough in-house skills. On IBM products.

          IBM's fundamental problem is that while it has recognised that a big transformation is needed, it is attempting to do this by moving into markets where there are already leaders far ahead of IBM. It no longer has the people to do this, so it has to acquire others. Skills are brought in-house, and as soon as they can, those skilled people leave the company and development gets shipped off somewhere cheap or the product is canned.

          Meanwhile, existing customers are no longer getting the service they once did: IBM customers always knew they spent more than the going rate but did so because they knew they would get quality and service from people who enjoyed their job and would go the extra mile to keep customers happy. No longer the case.

          Most of all, IBM is steadfastly refusing to transform itself (as opposed to the crap it sells). It's an incredibly vertically organised dinosaur, where any attempts to communicate up the chain involves browning your nose whilst simultaneously trampling on those beneath you. As a result, any real innovation from within the company is stifled. Those at the top don't see a need for it, as strategic technology decisions are based on marketing bullshit which is seen to be "trending" on whatever social network their kids are into that week.

          Watson is probably the only interesting technology which has emerged from IBM in recent years and is genuinely unique and innovative. However, if it were that good, wouldn't it be able to come up with a way to sort out the company? Or maybe it did and it advised sacking Ginny and her pals in Armonk and replace marketing with a spambot.

    2. Anonymous Coward
      Anonymous Coward

      Re: Transformation

      Just as the old "huge margin," customer raping companies like Oracle and Microsoft--and even EMC--are tanking and running for cover, IBM is steadfastly moving to re-emerge,

      Pardon?!

      IBM's results are running pretty much in parallel with those companies, down in traditional software/services, up in cloud as 'X'aaS offerings. Nothing surprising there, it's how the market is going, and IBM is going with it. Unlike some companies, though, its share price is taking more of a hammering. It has fallen steadily over the last few years, unlike MSFT which has climbed, and ORCL & EMC which have bounced up & down.

    3. Anonymous Coward
      Anonymous Coward

      Re: Transformation

      No, I think IBM will prevail,

      Bollocks. No, they will not.

      The IBM of old continuously produced ideas, including fundamental science, engineered them into products and produced products. They held the IPR on these and this is exactly what allowed them to:

      1. Charge an obscene rate for some of their products.

      2. Invest into more R&D and as a consequence more products.

      3. They were pretty much unique in this - most of their competitors failed to produce in-house innovation and "innovated" through acquisition.

      4. While there was lots and lots of waste and dross produced as a part of this cycle, as any engineer and scientist will tell you having failed experiments is key to advancement. You cannot succeed if you do not fail.

      This cycle was broken by their previous CEO who started trimming all parts of IBM which showed failures from time to time just because beancounters do not like failures on the balance sheet. Jinny despite her engineering background is continuing exactly on the same trajectory - cut R&D some more where it has failed, cut a few more branches here and there where there is a failure at present. And another one withers... and another one... and another. Until a death of a thousand cuts.

      So any ideas that IBM will become great are delusional. It is slowly overtime narrowing itself into a set of services industries +/- some support for them as product. That is a race to the bottom competing against Logicalis, Accenture, Atos, HP, etc - you name it. When you have 4 of these competing for a contract any ideas that the winner of the contract will command a premium comparable to a high tech system for which you hold the unique IPR is utterly delusional and exists only in beancounter's wet dreams. It is not founded in reality.

      1. Anonymous Coward
        Anonymous Coward

        Re: Transformation

        My former boss and R&D director (not IBM) went back to academia when the bean counter told him not to do feasibility studies unless there was an 80% chance of success. I remember just before he resigned we were walking through downtown St Louis when he suddenly remarked "When did you last hear of a great world manager?"!

      2. chris 17 Silver badge

        Re: Transformation

        @AC

        "as any engineer and scientist will tell you having failed experiments is key to advancement. You cannot succeed if you do not fail."

        this is what customers pay for, they pay for the experience learnt for from all those failures so their projects do not fail. you can't explain that to someone that looks at the quote and says company x is cheaper than IBM so i'll go with them. They do not understand they'll pay the difference and more later when their projects don't proceed according to plan and have to put in extra funds.

        IBM are also guilty of playing the quote cheap and make up the differences in out of contract charges game but i suspect that is a symptom of playing the game & being relevant than standing on principles and dying due to lack of customers.

  2. Bbbbit

    I am not a business type...

    ...but if you look at it from an absolute rather than a relative perspective, they are still making a quarterly net profit of $4.5 BEEEELLLLIIIION (did I spell that right) in 3 months. It is not really that bad is it? I ran my own business for a bit and let me tell you, just the word "net profit" would have had me dancing round the room singing hallelujah. I am chronically sleep-deprived so perhaps that explains my uncharacteristic optimism.

    1. Anonymous Coward
      Anonymous Coward

      Re: I am not a business type...

      I agree. $4 billion or 49% profit margin is hardly reflected by the line "Full-year numbers, of course, also showed a loss".

      A decline on vast profits from previous years, yes, but not a loss.

      1. seven of five

        Re: I am not a business type...

        Still more income (and certainly more profitable) than most countries on this planet.

    2. Anonymous Coward
      Anonymous Coward

      Re: I am not a business type...

      You are correct, they made $4.5bn net in the quarter and yes, this 'is not really that bad'.

      However...simply making a profit is not sufficient for Wall Street or for investors - you have to grow revenue, and there's the problem for IBM and other 'traditional' IT suppliers. HP are in a similar situation...

  3. Anonymous Coward
    Anonymous Coward

    Large growth in a new business unit isn't as telling as market penetration. Growing 59% year on year when you have just had a product for 2 year and only have 3% of the market is not so impressive. Still, promising and heading in the right direction no doubt.

    Now please stop burning all your outsourcing customers by pulling all the staff and resources out, ladling further onerous bureaucracy onto everything and suffocating us with process. These are the same enterprise customers you'll want to sell cloud to next.

  4. a_yank_lurker

    Besides Buzzwords

    I've Been Moved is in transition again and are trying to find markets where customers would want their products. The key is declining sales and profitability for nearly 4 years. Sounds like they were late again.

  5. Anonymous Coward
    Anonymous Coward

    I think they're the only ones who get it right

    It will take some time for the market to catch up but it seems that IBM has the will and the means to stay the course. Compare and contrast:

    1. Traditional IT vendors - e.g. - Dell, HP, etc. - sell iron for on premise computing.

    2. Cloud vendors: AWS, Azure, GCP, etc. - sell IaaS (mostly), PaaS (sometimes)

    3. IBM - sell PaaS, along with services that are difficult to replicate (e.g. text analysis, voice analysis, pic analysis) and are callable from applications on mobile devices (e.g. IoT) and IaaS (sometimes). IBMs cloud is ideal for mobile backends, and when I say backends I don't mean silly shit like app servers, but hard shit like distributed AI.

    Of the 3, I think IBM's approach will prevail in the 3-10 year timespan. It's easy for businesses/developers to transition from 1 to 2, but 2 to 3 requires a paradigmatical shift that hasn't yet occured - but it will and when it does I think IBM will be positioned to take a serious leadership position in it.

    And no, I am not an IBMer.

  6. Anonymous Coward
    Anonymous Coward

    The great mystery...

    The great mystery is why IBM continues to disperse billions of dollars to stockholders in the form of dividends and share buybacks. It could be using that money for raises or bonuses for increasingly-demoralized employees; or at least to invest in capital-intensive businesses like Cloud that desperately need to scale faster.

    The only people who benefit from the share buybacks in particular are people sitting on huge piles of stock options, like the senior execs... oh...

    Never mind.

  7. Howard Hanek
    Happy

    Things Could Be Worse

    They could have Marisa Mayer as CEO.......

  8. Anonymous Coward
    Anonymous Coward

    Surely Microsoft must be next

    All their products have either failed, are or irrelevant these days

  9. Anonymous Coward
    Anonymous Coward

    Transformation at IBM is simply musical chairs for both executives and the buckets where the money is allocated. All declare victory! Read MY Blog!

  10. Anonymous Coward
    Anonymous Coward

    Core businesses didn't vanish; they were euthanized!

    Yes, IBM needs to undergo a transformation, blah, blah, blah, yadda, yadda, yadda.

    The key point that is not explicitly noted in the discussion of the stewardship of the company is that the decline in revenue in existing core businesses is only partly due to the changing market. Look at the numbers. Businesses are not departing on-prem for the Cloud at the rate that IBM revenues in non-Cloud products is falling. IBM made a "strategic" decision to move resources away from non-Cloud products. That resource re-balancing might take the form of firing the geezers and hiring millennials, selling business units and products, or just flat out moving people into a Cloud or Watson organization and leaving a staffing gap in the old organization. The end result is that customer responsiveness suffers in IBM's non-Cloud products, rendering them less attractive to customers.

    Anyone who has ever walked on unstable terrain knows that you make sure your leading foot has a good, solid purchase before taking all your weight off your back foot. IBM took its weight off the back foot too early.

  11. John Geek
    Facepalm

    the main IBM Services folks were interested in were SERVICES surrounding IBM's once excellent HARDWARE PRODUCTS. Get rid of the hardware, and noone wants those services any more.

    DUH!

  12. Anonymous Coward
    Anonymous Coward

    Pundits have been predicting the end of IBM for my entire IT career (since 1979).

    And here is it - still here with revenues of $87 BILLION

    Surely the profits (sic) of doom must be right sometime?

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