International Business Machines Corp. (NYSE: IBM) stock sold off 5% on mediocre earnings. Some of its quarterly figures missed the Wall Street consensus.
IBM was one of America’s greatest, if not its greatest, tech companies. Founded in 1911, it has had among the most outstanding CEOs in tech history, having been led by Thomas J. Watson and Louis V. Gerstner, Jr. In 1980, it ranked number four on the Fortune 500. Now, a shadow of what it was, IBM is among the worst tech tragedies over the past several decades. The last decade is proof that IBM has undergone significant decline.
During the most recent quarter, revenue increased 8% to $17 billion, compared to the same quarter of the previous year. Per-share earnings rose 18% to $2.31. Each is a rounding error for America’s big tech companies. Much of the advance, IBM management said, was due to “AI adoption and investments.”
IBM’s market cap is $262 billion. The market caps of Apple, Amazon.com Inc. (NASDAQ: AMZN), and Nvidia are over 10 times that of IBM. Alphabet Inc. (NASDAQ: GOOGL) is close to that multiple. There is a reason for this. For example, Microsoft Corp. (NASDAQ: MSFT) revenue in the most recent quarter was $70.1 billion, up 13% from the same quarter the year before. Earnings rose 18% to $3.46 per share. Microsoft’s net income for the period was $25.8 billion. Microsoft has a smaller revenue than Apple, Amazon, and Alphabet.
IBM missed out on several major technological advances, including search, cloud computing, computer operating systems, e-commerce, and artificial intelligence (AI) chips. The companies that now lead in these areas started small, at a time when IBM was much larger.
If cloud computing is among the key metrics for the success of big tech, Amazon’s AWS has a 30% global market share, Microsoft’s share is 21%, and Google’s is 12%. IBM’s is 2%.
If AI is the future of global technology, the country’s largest tech companies and OpenAI are the leaders, and IBM does not appear on anyone’s list. Meta management says it will invest hundreds of billions of dollars in AI data centers. Amazon says it will invest $100 billion in the next decade. Microsoft’s investment is expected to be $80 billion this year.
IBM CEO Arvind Krishna continues to discuss his company’s AI successes. However, there is nothing to support that.
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