IBM: I Be Movin’ or Interminably Bad Management?

IBM, one of the most storied companies on the planet, just had its first quarter of year-over-year growth in 23 quarters! Market cap, as I write this, is about $134 billion, so still a significant organization, but down from $210 billion in 2006.

Many investors have bailed on IBM, growing impatient as Big Blue gives up revenue from traditional sources. Even Warren Buffett, “Mr. Long Term” has shed much of his holdings. And the recent quarter’s billion-dollar loss compared with the previous year’s profit of $4.5 billion most likely spooked numerous investors.

I’m not a shareholder so have experienced no pain. I think, however, that the view of a shareholder looking for a positive return over a several year period is probably much different from that of the CEO and her board, who are amid a complete strategy overhaul.

IBM CEO Ginni Rometty has undertaken (and not yet completed) what few leaders have accomplished. IBM is 100 years old and could’ve died several times. The M stands for “machines,” but it’s been a long time since the largest revenue line on the P&L was “typewriters” or, even earlier, “punch card readers.”

But IBM has had several “bet the company” moments, starting in the depression (the real one in the 1930s). At one point during World War II, the business even built rifles! Most recently, in the 1990s, CEO Lou Gerstner pulled a rabbit out of the hat and crafted a completely new business strategy that saved the company from looming death.

I don’t know if Rometty’s bet on the cloud, artificial intelligence and blockchain will pay off, but I’m impressed that 50 percent of the revenue now comes from “nontraditional” services. I’m also impressed that the board has allowed her (at least as I write this!) the time to turn around a giant organization — understanding that current growth and earnings would have to suffer for the near term to change course. I can only imagine the internal battles that are probably still raging around reallocated budgets and scrambled organization charts.

Few businesses can make the kind of transformation that IBM is attempting. It makes you wonder, is there still DNA from Tom Watson in the culture that allows for patience, persistence and a long-term view?

Past success isn’t often a predictor of future success, but in this case, genetic material combined with some luck and hard work may make the difference.

Will anything in your company carry it forward 100 years?

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