“With a competitive labor market, this is putting some pressure on our labor costs,
including higher acquisition and retention costs, which is not yet reflected in our
current pricing,” said Jim Kavanaugh, IBM’s finance chief. “We expect to capture this
value in future engagements, but it will take time to appear in our margin profile.”
The company did not provide guidance.
Prepare for the bloodbath. . .
https://www.cnbc.com/2021/10/20/ibm-earnings-q3-2021.html
Add back dividends paid since 1999
Inflation pretty much cancels these out.
Add back dividends paid since 1999
Drop? They're tanking!
I believe todays action is certainly a reaction to stagnant revenue, but also a reaction to folks trying to exit before the spin-off Who wants to own A shrinking Kyndryl? They will have an even worse situation once they are a stand along company. Shrinking revenues, cut throat competition, and squeezed margins. Welcome to commodity services
Let's go Arvind
$129, same price as in June 1999.
"Next quarter will be the last "Covid-compare" quarter. Also the last quarter where they can blame GTS. Will be interesting to see what kind of (if any) growth gets posted for Q1."
True, but we will have another year of being unable to compare the "full" IBM to the "split" IBM, whose dust won't settle until 2022Q1.
There is little doubt that by the time 2023Q2 happens -- the first quarter with the possibility of an apples-to-apples comparison with its year-prior 2022Q2 quarter -- Kavenaugh will have cooked up something new to disrupt the ability for analysts to do this.
Brilliant!
IBM would rather partner with someone leveraging what IBM does best (research)
IBM Research is not what it used to be. Not even close. Not even a tenth of what we used to be. Like the rest of IBM, all of our best researchers left long ago and are making at least 2x more at other company's research departments.
Nevertheless, it may still be a true statement that research is what IBM does best, given the decline in the rest of the company as well.
"Ibm will have to pay someone like GF deal to take power off of them. But they already sued those guys too."
So now we will have to pay the buyer more and the buyer will probably require some ironclad "you will never sue us" clause to which IBM will never agree.
So IBM will keep Power, and it will weigh on our financials.
Next quarter will be the last "Covid-compare" quarter. Also the last quarter where they can blame GTS. Will be interesting to see what kind of (if any) growth gets posted for Q1.
IBM wants out of the HW business. Not because it doesn’t make money, but because it’s too much investment overhead without being able to leverage its size. (system Z = monopoly and you have pricing power, Power = in double digit decline, storage = commodity so margins get squeezed) IBM can’t get deals on components anymore because they don’t move the metal. IBM will cut a deal with a company/investment firm who will be able to leverage bigger component buys, and concentrate on the profitable pieces of Systems (SW) Also note when IBM exits HW (power and storage), they will also exit TSS on those products too. IBM would rather partner with someone leveraging what IBM does best (research) They will leave the HW and some SW to the other company to do sales and marketing. Please note IBM will most likely be that investment companies best customer because IBM will ride that IP return right into the ground leveraging their labs for the development cycle. The 1 billion restructuring charge scheduled for 2022 implementation, will have to include some streamlining of “infrastructure” as it’s the millstone around New IBM’s neck
Trust me guys IBM has bent over backwards to sell power off.
Almost all worthy engineers, architects etc. Have now left power so there's no way any sane company is buying power.
Adding storage to it complicates the deal because most companies can't deal with hardware. (That's why they can sell off notes but not hardware)
They could have shoved it in kyndryl (bec it's a declining business) but guess what, even they won't buy power for aforementioned reasons!
Ibm will have to pay someone like GF deal to take power off of them. But they already sued those guys too.
"Systems/infrastructure (-12%) is cyclic according to IBM, BUT power shrinking at 24% is a freeking disaster (That is definitely not cyclic) Don’t be surprised when IBM exits Power for a partnership IBM will have to throw in Storage to generate interest"
True this. You have to factor out the Z lifecycle to understand how Systems is really doing. Power is definitely in secular decline with no obvious floor.
HOWEVER - I don't see an exit strategy. Who would buy Power, other than maybe a bottom-feeding investment fund that wants to ride the maintenance stream all the way down to the ground? Including Storage hardware won't help IMO: there's nothing in there that's particularly valuable, and it just makes it hardware to find a buyer that wants both.
It's also IMPORTANT to remember that Storage includes some software, some of which is actually growing, profitable, and well-regarded. The strong parts of the storage software are already externally reported through Cloud, not Systems; and they might well be retained and moved to Cloud if IBM can somehow shuck off the hw side of Systems.
All in all the earnings report was same ole same ole. GBS and SW grew which is where “new” IBM wants to play, and system/Infrastructure and GTS shrank. We already know what IBM intends to do with GTS, and systems will only shrink more when they absorb TSS. The bad parts have almost zero future outlook (eg as goes revenue so goes head count GTS/Kyndryl You are shrinking at 5% so that means you have not reached bottom). Systems/infrastructure (-12%) is cyclic according to IBM, BUT power shrinking at 24% is a freeking disaster (That is definitely not cyclic) Don’t be surprised when IBM exits Power for a partnership IBM will have to throw in Storage to generate interest
Here comes the RA Hatchet. Just in time for the holidays. Happy Holidays IBMers
The company did not provide guidance.
That is a capital offense on Wall Street.
Absolutely true, I got a $20K retention bonus after I submitted my resignation about 3 weeks ago. I still left since I got a $20K hiring bonus and a better paycheck with the new company I went to. IBM was definitely not willing to up the retention bonus, and no pay increase was offered. Bye IBM!
The buybacks will continue until morale improves.
More limp di-k excuses from Kavanaugh. Maybe if IBM Management hadn't treated one of the most loyal workforces on the planet like absolute garbage for the past few decades, they wouldn't be having this issue now. Clueless Management, blind arrogance, no respect for employees, constant layoffs, unbelievably bad decisions, and squandered opportunities ... just to mention a few of the reasons why IBM is fading into oblivion. One day in the future, Business Schools will include IBM's fall from grace in their curriculums, and describe how a company that was once so powerful the Federal Government had to rein it in, became completely irrelevant because of incompetent, corrupt, and duplicitous Management.
WOW giving some retention $$ lowers their revenue by so much that they have to cite that as a reason.
Probably All the ELTs themselves took retention money even though they can't get another job.
Bs all I see are people leaving with no attempt to retain anyone.