IBM (IBM) has announced its plans to double earnings per share by 2010. Part of it is business as usual for a big US company. It hopes to double revenue in emerging markets to $9 billion.That would be about 10% of current annual revenue. It will also improve its mix of software versus hardware, which it has been doing for many years.
But, the real road to better EPS for IBM is the CFO route. And, that is too bad, because it means that the company does not think much of its current businesses. No, the key to the improvement will be cost cuts, share buy-backs,chopping retirement benefits, and making acquisitions.
Perhaps IBM should not be judged too harshly. It has underperfomed the markets for the last five years. It needs to come up with something to make Wall St. happy. But, it has no plans for an HP-stype resurrection. It wants to go the financial engineering route.
Given what IBM stood for over many decades, this is really too bad. IBM was at the heart of US technology innovation. It filed for more patents than Thomas Edison did, year in and year out.
But, IBM’s plans reveal a sort of self-loathing. The things the company cannot do with better products and services, it will do by pushing out people, cutting their benefits, and buying in shares. It is the poor man’s way to build an attractive investment.
Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.
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