Warren Buffett told CNBC that he had dumped part to his International Business Machines Corp. (NYSE: IBM) holdings. Earlier in the week, Moody’s Investor Services downgraded IBM debt. CEO Ginni Rometty’s turnaround has never happened. The board needs to get a new chief executive before more of Wall Street abandons the company.
Buffett told CNBC:
I think if you look back at what they were projecting and how they thought the business would develop I would say what they’ve run into is some pretty tough competitors. IBM is a big strong company, but they’ve got big strong competitors too.
He has to be referring to Amazon.com Inc. (NASDAQ: AMZN) and Microsoft Corp. (NASDAQ: MSFT) at the very least. They have trounced IBM in the cloud computing business. IBM’s artificial intelligence business, called Watson, is barely a shadow, at least insofar as the company will not break out its revenue. IBM’s quarterly revenue continues to fall. Sales of Rometty’s products and services cannot keep up with erosion in the company’s older line operations.
If the Buffett rebuke is not enough, according to 24/7 Wall St.:
After multiple analysts chimed in after earnings, now IBM is even taking a credit rating downgrade. Moody’s Investors Service has downgraded the senior unsecured rating of IBM to A1 from Aa3. Its rating outlook has now been changed to stable after having been negative.
After multiple analysts chimed in after earnings, now IBM is even taking a credit rating downgrade. Moody’s Investors Service has downgraded the senior unsecured rating of IBM to A1 from Aa3. Its rating outlook has now been changed to stable after having been negative.
Moody’s does think IBM can grow what its calls its “strategic initiatives.” However, what the company will need to spend will weaken its financial position.
In the first quarter of this year, IBM’s revenue fell 3% to $18.2 billion. Earnings fell 11% to $1.85 per share. Rometty said:
“In the first quarter, both the IBM Cloud and our cognitive solutions again grew strongly, which fueled robust performance in our strategic imperatives,” said Ginni Rometty, IBM chairman, president and chief executive officer. “In addition, we are developing and bringing to market emerging technologies such as blockchain and quantum, revolutionizing how enterprises will tackle complex business problems in the years ahead.”
That is about what she has said for each quarter for over five years. It hasn’t helped.
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