Another earnings disaster pushed International Business Machines Corp.’s (NYSE: IBM) market capitalization to $117 billion. To show how little faith investors have in the company, note that Apple Inc. (NASDAQ: AAPL), the world’s market cap leader, has a valuation of $2.3 trillion, about 20 times IBM’s.
IBM ranked seventh among all Fortune 500 companies in 1976, the year Apple was founded. It fell to 38th place on the 2019 list. Apple has moved into fourth place. IBM’s revenue last year was $76.3 billion, on which it had net income of $9.4 billion. Apple’s revenue was $274.5 billion last year. Its net income was $57.4 billion.
The stock prices of the two companies tell an equally grim story for IBM. Its shares are up 7% in the past five years. Apple stock is 401% higher.
IBM announced a 6% plunge in revenue to $20.4 billion in the fourth quarter. That missed Wall Street expectations. Earnings dropped 66% to $1.41 per share. CEO Arvind Krishna almost unbelievably commented, “We made progress in 2020 growing our hybrid cloud platform as the foundation for our clients’ digital transformations while dealing with the broader uncertainty of the macro environment.” Rivals, other than Apple, which include Google, Amazon and Microsoft, have had no such problems. IBM has floundered in an improving market. As proof of that, note that its Cloud & Cognitive Software unit posted a revenue dip of 4.5% to $6.8 billion.
MarketWatch commented, “IBM revenue has fallen year-over-year in all but four of the past 34 quarters.” Krishna pitched the fact that would change. “The actions we are taking to focus on hybrid cloud and AI will take hold, giving us confidence we can achieve revenue growth in 2021,” he said.
If IBM does not look outside the company to find a new chief executive, its board continues to be irresponsible. This is particularly true of Michael L. Eskew and Sidney Taurel, who have been on the board long enough to see the disaster unfold year after year.
IBM has fallen from a position that once made it the envy of the tech world, which was a very, very long time ago.