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: 2020-24 Shareholder Returns and Risk
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Date Published: April 11, 2022
Date Modified: September 18, 2025 |
Evaluating Arvind Krishna's IBM Shareholder Returns from 2020-24
- Arvind Krishna: IBM's 2020-24 Shareholder Returns
- Krishna & Rometty: IBM's 2011-24 Shareholder Returns
- Krishna, Rometty, Palmisano & Gerstner: IBM's Shareholder Returns
- Arvind Krishna: 2020-24 IBM Shareholder Risk
- Rometty & Krishna: 2011-24 IBM Shareholder Risk
- Gerstner, Palmisano, Rometty & Krishna: 2001-24 IBM Shareholder Risk
Evaluating Arvind Krishna's IBM Shareholder Returns from 2020-2024
What were Arvind Krishna's five-year shareholder total returns from 2020 to 2024—including dividends? IBM stock—including dividends—was up 11.25% over the four-years while the Dow Jones Industrial Average (DJIA) was up 9.45%, an investment in a large company stock index fund was up 12.04%, and the same investment in the Dow Jones Technology Index would have yielded 21.58%. Stock investors could have received higher and at times, almost spectacular returns with less risk in indexed mutual funds.
Unfortunately, to discover this information, an IBM shareholder still has to turn to the very last few pages of IBM's 124-page Annual Report--a tradition started by the Samuel J. Palmisano's team in his 2006 Annual Report. Although, the government requires this comparison chart, there must be no legal requirements on how "visible" this information must be for an investor.
Unfortunately, to discover this information, an IBM shareholder still has to turn to the very last few pages of IBM's 124-page Annual Report--a tradition started by the Samuel J. Palmisano's team in his 2006 Annual Report. Although, the government requires this comparison chart, there must be no legal requirements on how "visible" this information must be for an investor.
- Arvind Krishna: IBM's 2020-24 Shareholder Returns
- Arvind Krishna: 2020-24 IBM Shareholder Returns: Compound Annual Growth Rate (CAGR)
- A $1,000 investment in IBM over the five years (2019 to 2024) yielded a 16.24% CAGR.
- A similar investment in a Dow Jones Technology Stock Index fund yielded a 24.74% CAGR.
- A similar investment in a Large Company Index fund yielded a 14.52% CAGR.
- A similar investment in the Dow Jones Industrial Average yielded a 10.55% CAGR.
This information is graphically presented in the following chart.
- Krishna and Rometty: IBM's 2011-24 Shareholder Returns
- Krishna & Rometty: 2011–24 IBM Shareholder Returns
- A $1,000 investment in IBM over the thirteen years (2011 to 2024) yielded a 5.56% CAGR.
- A similar investment in a Large Company Index fund yielded a 14.75% CAGR.
- A similar investment in the Dow Jones Industrial average yielded a 12.64% CAGR.
This information is graphically presented in the following chart.
- Krishna, Rometty, Palmisano & Gerstner: IBM's Shareholder Returns
- Krishna, Rometty, Palmisano & Gerstner: 1999–2024 IBM Shareholder Returns:
- A $1,000 investment in IBM over twenty-six years (1998 to 2024) yielded a 6.10% CAGR.
- A similar investment in the Dow Jones Industrial average yielded a 8.53% CAGR.
- A similar investment in a Large Company Index fund yielded a 8.18% CAGR.
Generally speaking, in the first decade of the 21st Century IBM underperformed index funds but at least achieved positive returns until Virginia (Ginni) M. Rometty took charge in 2012, then IBM stock consistently underperformed lower-risk, index investments such as Large Company Stocks and the Dow Jones Industrial Average which rose as IBM turned downward.
This information is graphically presented in the following chart.
A One-Hundred Year Perspective on IBM's Goodwill and Shareholder Risk
An intangible asset is something that, if dropped on your toe, doesn’t leave a mark. It is ethereal, and its value is open to personal interpretation, imagination, and creative thinking. For the purposes of this article, intangible assets are presented in two ways: first, the goodwill that arises directly from an acquisition; and second, all other intangible assets—patents, brand image, customer relations, non-binding contracts, strategic alliances, or others (as identified from IBM's Annual Reports).
In the 20th Century, great chief executive officers like Thomas J. Watson Sr., the traditional founder of IBM, believed that goodwill was a terrible asset to carry on a corporation's books because essentially, if/when a company failed there were really no tangible assets behind this intangible asset and the dollars that represented it on the books.
In the 21st Century, goodwill is the difference between the full amount paid for an acquisition less all other tangible and intangible assets. As a real-time example from IBM's Annual Reports, IBM documented in its 2003 Annual Report the 2002 acquisition of PricewaterhouseCoopers Consulting (PwCC) for $3.89 billion. Of the purchase price, IBM estimated that PwCC had $.32 billion in tangible assets (current and fixed assets of value such as chairs, desks, computers, buildings, etc. less current and non-current liabilities), and $.41 billion in “other” intangible assets (strategic alliances, client relationships, and customer contracts). The remaining $3.16 billion—81% of the purchase price—was listed as goodwill: specifically, what IBM wrote in its annual report was the value to be acquired from "the assembled workforce, synergies gained from combining PwCC and IBM, and the premium paid to gain control" of the company.
In the 20th Century, great chief executive officers like Thomas J. Watson Sr., the traditional founder of IBM, believed that goodwill was a terrible asset to carry on a corporation's books because essentially, if/when a company failed there were really no tangible assets behind this intangible asset and the dollars that represented it on the books.
In the 21st Century, goodwill is the difference between the full amount paid for an acquisition less all other tangible and intangible assets. As a real-time example from IBM's Annual Reports, IBM documented in its 2003 Annual Report the 2002 acquisition of PricewaterhouseCoopers Consulting (PwCC) for $3.89 billion. Of the purchase price, IBM estimated that PwCC had $.32 billion in tangible assets (current and fixed assets of value such as chairs, desks, computers, buildings, etc. less current and non-current liabilities), and $.41 billion in “other” intangible assets (strategic alliances, client relationships, and customer contracts). The remaining $3.16 billion—81% of the purchase price—was listed as goodwill: specifically, what IBM wrote in its annual report was the value to be acquired from "the assembled workforce, synergies gained from combining PwCC and IBM, and the premium paid to gain control" of the company.
Goodwill is a hidden risk that most shareholders fail to understand—unless a company files for bankruptcy.
It took Thomas J. Watson Sr. his entire forty-two year career at IBM (1914 through 1956) to decrease the amount of goodwill to zero that Charles Randall Flint's "creative thinking" assigned to the corporation when he merged several companies together to form the C-T-R Company in 1911. A lessor chief executive would have probably just ignored the valueless asset, but not Tom Watson Sr. He immediately went to work to get it off the books—even reducing it during The Great Depression.
As the chart below shows, it took forty-two years to reduce this worthless asset to its true book value—zero.
It took Thomas J. Watson Sr. his entire forty-two year career at IBM (1914 through 1956) to decrease the amount of goodwill to zero that Charles Randall Flint's "creative thinking" assigned to the corporation when he merged several companies together to form the C-T-R Company in 1911. A lessor chief executive would have probably just ignored the valueless asset, but not Tom Watson Sr. He immediately went to work to get it off the books—even reducing it during The Great Depression.
As the chart below shows, it took forty-two years to reduce this worthless asset to its true book value—zero.
The line graph above displays how far back into the past (1925) a researcher must dig to find a point in time when the corporation held a similar percentage of goodwill on its books as it did in 2024. This was around the time that the C-T-R Company was renamed International Business Machines. In the 20th Century, it took Tom Watson Sr. forty-two years to drive goodwill to zero, but the successor chief executive officers kept it at zero until 2001.
Of the $99.2 billion paid for its 224 acquisitions since 2001 and the resulting goodwill of $70.3 billion, $60.2 billion is still carried today (end of 2024) as goodwill. This goodwill carries no inherent value and, in a worst-case scenario such as bankruptcy, it would have little or no monetary value for shareholders. Therefore, an increasing percentage of goodwill increases shareholder risk.
In 2001, an accounting change was made that allows a 21st Century corporation to carry goodwill … effectively forever.
It doesn't appear that any of IBM's Chief Executive Officers want to address this shareholder risk.
They prefer to keep "passing the bucks ... risk."
Of the $99.2 billion paid for its 224 acquisitions since 2001 and the resulting goodwill of $70.3 billion, $60.2 billion is still carried today (end of 2024) as goodwill. This goodwill carries no inherent value and, in a worst-case scenario such as bankruptcy, it would have little or no monetary value for shareholders. Therefore, an increasing percentage of goodwill increases shareholder risk.
In 2001, an accounting change was made that allows a 21st Century corporation to carry goodwill … effectively forever.
It doesn't appear that any of IBM's Chief Executive Officers want to address this shareholder risk.
They prefer to keep "passing the bucks ... risk."
- Arvind Krishna: 2020-24 IBM Shareholder Risk
- Arvind Krishna: IBM's 2020-24 Shareholder Risk
- Arvind Krishna inherited a high degree of shareholder risk from his 21st Century predecessors.
Shareholder Risk increased in 2021 as intangible assets surpassed a benchmark 50% of total assets because of the Kyndryl divestiture—52% in the charts below reflects the appropriate percentage. Since then, the percentage of intangible assets has remained in the 52-53% range.
There appears to be no activity or expressed concerns to address this risk to IBM's shareholders.
This information is graphically reflected in the charts below.
- Arvind Krishna inherited a high degree of shareholder risk from his 21st Century predecessors.
- Rometty & Krishna: 2011-24 IBM Shareholder Risk
- Krishna & Rometty: IBM 2011–24 Shareholder Risk
- From 2011 through 2024, the percentage of goodwill + other intangible assets rose from 25% to 52%, The Red Hat acquisition resulted in a large increase not only in goodwill but in all other intangible assets which grew from its decade-long $3 billion to over $15 billion.
This information is graphically reflected in the charts below.
- From 2011 through 2024, the percentage of goodwill + other intangible assets rose from 25% to 52%, The Red Hat acquisition resulted in a large increase not only in goodwill but in all other intangible assets which grew from its decade-long $3 billion to over $15 billion.
- Gerstner, Palmisano, Rometty & Krishna: 2001-24 IBM Shareholder Risk
- Krishna, Rometty, Palmisano, & Gerstner: 2001–24 IBM Shareholder Risk: (Goodwill)
- The following chart documents the continuous growth of goodwill (blue bar chart) since 2001 and goodwill's percentage of total assets (red line graph) which has now reached 44% of total assets.
This information is graphically reflected in the chart immediately below.
- The following chart documents the continuous growth of goodwill (blue bar chart) since 2001 and goodwill's percentage of total assets (red line graph) which has now reached 44% of total assets.
- Krishna, Rometty, Palmisano & Gerstner: 2001–24 IBM Shareholder Risk: (Goodwill + Intangible Assets)
- The following chart documents the continuous growth of goodwill + intangible assets (blue bar chart) since 2001 and maps goodwill + intangible assets percentage of total assets (red line graph) which, by itself, has reached 52% in 2024.
This information is graphically reflected in the chart immediately below.
- The following chart documents the continuous growth of goodwill + intangible assets (blue bar chart) since 2001 and maps goodwill + intangible assets percentage of total assets (red line graph) which, by itself, has reached 52% in 2024.
- Krishna, Rometty, Palmisano & Gerstner: 2001–24 IBM Shareholder Risk: (Goodwill + Intangible Assets)
- Goodwill accumulated through 224 acquisitions at a total cost of $99.2 billion drove shareholder equity less goodwill into the red in 2008 by constantly increasing goodwill and other intangible assets. Since goodwill and other intangible assets peaked at $53 billion in 2019, it has dropped to $44 billion.
This information is graphically reflected in the chart immediately below.
- Goodwill accumulated through 224 acquisitions at a total cost of $99.2 billion drove shareholder equity less goodwill into the red in 2008 by constantly increasing goodwill and other intangible assets. Since goodwill and other intangible assets peaked at $53 billion in 2019, it has dropped to $44 billion.
