Lou Gerstner wrote, "People truly do what you inspect, not what you expect." … Lest we forget, these "inspection pages" exist because chief executives are "people" too.
Arvind Krishna's 2020-24 IBM Market Value Performance
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Date Published: April 11, 2022
Date Modified: September 18, 2025 |
Arvind Krishna: IBM's 2020-24 Market Value Performance
- The Importance of Market Value
- Krishna: IBM's 2020-24 Market Value
- Krishna and Rometty: IBM's 2011-24 Market Value
- Krishna, Rometty, Palmisano, and Gerstner: IBM's 1999-2024 Market Value
The Importance of Market Value
Why should long-term stakeholders keep IBM's market value "top of mind"
IBM’s market value is calculated by multiplying the corporation’s outstanding shares by those shares’ current market price; therefore, there is a direct correlation between share price and market value. Lou Gerstner often used market value as a key business metric to evaluate his business success. He wrote to his shareholders about the significance of market value in IBM’s 1998 and 1999 annual reports. He called it “the most important measure of progress to investors.”
Sam Palmisano, following Louis V. Gerstner's example, wrote the following in the IBM 2003 Annual Report:
Sam Palmisano, following Louis V. Gerstner's example, wrote the following in the IBM 2003 Annual Report:
The board of directors approved sweeping changes in executive compensation. … IBM’s market value would have to increase by $17 billion [reaching $174 billion] before executives saw any benefit from this year’s option awards.
The last chart in this series of three charts documents why Sam Palmisano abandoned this market-value measurement of success for executive compensation and implemented earnings-per-share roadmaps. A market-value measurement would have yielded only pennies, if that, in executive compensation. In fact, IBM executives' under a market-value compensation system would not have seen "any benefit from their option awards" for seven years: IBM did not surpass $174 billion in market value until 2010! So, rather than keep the measurement the executive team changed the rules of their compensation game!
Krishna: IBM's 2020-24 Market Value
How did Arvind Krishna's leadership affect IBM's 2020-24 market value in his five years as CEO?
In what would seem a bright star for IBM's short-term stakeholders, IBM's market value increased 17.4% in 2023 but failed to improve in 2024. Over the five years since Krishna took over control of the corner office from Virginia (Ginni) M. Rometty at the end of 2019, IBM's market value has improved 27.5%. The surge in IBM's market value in 2023, though, has enabled it to outperform inflation which was up almost 22.7% during the same five years.
In what would seem a bright star for IBM's short-term stakeholders, IBM's market value increased 17.4% in 2023 but failed to improve in 2024. Over the five years since Krishna took over control of the corner office from Virginia (Ginni) M. Rometty at the end of 2019, IBM's market value has improved 27.5%. The surge in IBM's market value in 2023, though, has enabled it to outperform inflation which was up almost 22.7% during the same five years.
- Arvind Krishna: IBM's 2020-24 IBM Market Value Performance
- IBM Market Value was up with an overall 27.5% increase over Arvind Krishna's five years: including a market value increase of 17.4% in 2023. Unfortunately, IBM's market value was flat in 2024, with only 1% growth. It is important to note that this five-year uplift in market share was accomplished after ending two and one-half decades of share repurchases in 2019. The total cost of these share repurchases from 1995 to 2019 was $201 billion dollars. Arvind Krishna has left $2.0 billion in share buybacks unspent since 2019—but the money is still approved to be spent.
This chart depicts the inflation rate over this four year period but does not include its impact.
Over the five years, market value was up 27.5% while inflation was up 22.7%.
Most analysts would consider this "a wash."
- IBM Market Value was up with an overall 27.5% increase over Arvind Krishna's five years: including a market value increase of 17.4% in 2023. Unfortunately, IBM's market value was flat in 2024, with only 1% growth. It is important to note that this five-year uplift in market share was accomplished after ending two and one-half decades of share repurchases in 2019. The total cost of these share repurchases from 1995 to 2019 was $201 billion dollars. Arvind Krishna has left $2.0 billion in share buybacks unspent since 2019—but the money is still approved to be spent.
Krishna and Rometty: IBM's 2011-24 Market Value
- Krishna & Rometty: IBM's 2011–24 IBM Market Value Performance
- IBM Market Value over the last decade was down 29.1%—losing an overall $62 billion, which included several major events intended to move market value by either selling or divesting supposedly poorly performing internal divisions and acquiring new technologies: (1) selling the x86-Server Division, (2) abandoning the 2015 Roadmap, (3) acquiring Red Hat and 102 other organizations, and (4) divesting Kyndryl.
To make this performance even more painful: inflation was up 39.5% over this thirteen-year period.
- IBM Market Value over the last decade was down 29.1%—losing an overall $62 billion, which included several major events intended to move market value by either selling or divesting supposedly poorly performing internal divisions and acquiring new technologies: (1) selling the x86-Server Division, (2) abandoning the 2015 Roadmap, (3) acquiring Red Hat and 102 other organizations, and (4) divesting Kyndryl.
Krishna, Rometty, Palmisano, and Gerstner: IBM's 1999-2024 Market Value
- Krishna, Rometty, Palmisano, & Gerstner 1999–2024 IBM Market Value Performance
- IBM Market Value over the last two decades has lost 21.2% of its value—an overall $40.8 billion.
If the $176 billion in share buybacks since 1999 had accomplished one thing—kept IBM market value in line with inflation, IBM’s share price would have been $362 a share instead of $152 at the end of 2024—138% higher! Does it matter if IBM is considered a Dividend Aristocrat stock for paying dividends reliably if it is continually paying dividends on a stock price that is not only falling in value but not keeping its market value high enough to ensure its stock price outpaces inflation?
If a long-term shareholder had to sell most anytime during this period, maybe certificates of deposits would have been a better investment or found a way to increase their return with less risk through technology and large company index funds.
IBM is a case study in the weakness of adhering myopically to a dividend aristocrat investment philosophy.
- IBM Market Value over the last two decades has lost 21.2% of its value—an overall $40.8 billion.
