If my foresight were as clear as my hindsight, I should be better off by a damned sight.
If my foresight were as clear as my hindsight, I should be better off by a damned sight.
Even A Blind Squirrel Finds the Occasional Nut |
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Published July 26, 2021
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For first-quarter of 2021, IBM announced, "Revenue of $17.7 billion, up 1 percent (down 2 percent adjusting for currency). For the second quarter of 2021, IBM announced, "Revenue of $18.7 billion, up 3 percent (flat adjusting for divested businesses and currency). Of course Wall Street focuses on the "ups" and not the "downs" and "flats," and analysts have never asked IBM why it adjusts for "divested businesses" but never "acquired businesses."
Heck, even a blind squirrel finds the occasional nut. This was an old IBM sales representative saying which is so true in analyzing the revenue performance of the 21st Century IBM.
Wait for the full-year revenue results.
Even then, wait a little longer.
Heck, even a blind squirrel finds the occasional nut. This was an old IBM sales representative saying which is so true in analyzing the revenue performance of the 21st Century IBM.
Wait for the full-year revenue results.
Even then, wait a little longer.
Even a Blind Squirrel Finds the Occasional Nut
- IBM Revenues Have Dropped from $107 Billion to $74 Billion in Nine Years
- By One Measurement, IBM’s 2020 Revenues of $74 Billion Should Have Been $143 Billion or … It Could Have Produced its $74 Billion with 182,754 Fewer Employees
- IBM Is Not Maximizing Shareholder Value
- What Is Wrong?
Too Many "Years" of Declining Revenue
IBM continues to announce quarter after quarter of declining revenues with the occasional quarterly gain. Unfortunately a quarterly gain means little with the yearly revenue returns that IBM has achieved from 2011 through 2020: Revenues have declined by $33 billion.
Whenever IBM breaks its string of quarterly revenue declines, it is reminiscent of what IBM salesmen would tell a rookie after they closed their first deal and started strutting around the office like they were hot stuff. After letting the salesman or saleswoman enjoy the moment, one of the thirty-plus-year IBM reps would tap the salesperson on the shoulder and say, “Enough son, even a blind squirrel finds the occasional nut. You need to go out there and do it again and again for the next thirty years to have a career with this company.”
IBM, though, is a blind squirrel that has only been able to find the occasional year-over-year revenue nut because of two decades of misplaced investment dollars and abysmal human relations practices.
Yes, that is a picture of a squirrel over IBM's 2018 results.
A very, very small nut!
IBM, though, is a blind squirrel that has only been able to find the occasional year-over-year revenue nut because of two decades of misplaced investment dollars and abysmal human relations practices.
Yes, that is a picture of a squirrel over IBM's 2018 results.
A very, very small nut!
Sales Productivity Is Horrendous
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If IBM’s 375,300 employees produced revenue at the end of 2020 as productively as in 1999 (in inflation adjusted dollars), the corporation would have attained revenues of $143 billion instead of $74 billion.
To state it in terms (cynically) that even a twenty-first-century IBM CFO like the former Martin Schroeter can understand—a reduction in headcount rather than increased revenue—the corporation could have achieved its $74 billion in revenue with 182,754 fewer employees. |
Sales productivity is a CEO level problem
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With this realization, it doesn’t take much management intuition to realize that there is a long-term, business-execution problem at IBM, not quarterly, short-term, sales-execution issues. It is a corner-office sales leadership problem because customer revenue is really, really hard to financially engineer.
Shareholder Returns Are Suffering
To wake up the long-term shareholders, it is necessary to be brutally honest and hit them right where it hurts: in their long-term returns. It can be shown "In One Chart" that IBM is on the wrong path. IBM’s three, twenty-first century chief executive officers have invested $176 billion dollars since 1999 in their own stock (paper) and have returned less value than an equivalent investment in low-risk index funds that track either the Dow Jones Industrial Average (DJIA) or large-company stocks. [See Footnote #1]
All stakeholders should be wondering if IBM spent $176,000,000,000 of the shareholders’ money wisely. IBM’s history reflects that instead of investing in paper the corporation’s executives should have invested in business-first: making people more productive, processes for effective, and products more valuable.
What is Wrong at IBM?
How a corporation attempts to maximize shareholder value matters.
A study of IBM’s successes and failures at maximizing shareholder value reveals an almost non-intuitive truth: the path to maximize shareholder value is a two-way road that must be shared between a stakeholder community of customers, employees, and shareholders who maintain supportive economic and political societies that allow a business to maximize its profits.
In other words, it wasn’t the goal of maximizing shareholder value that was the problem at IBM, but its chosen path—best exemplified in its two, earnings-per-share roadmaps that left employees strewn along the roadside like so much roadkill.
A study of IBM’s successes and failures at maximizing shareholder value reveals an almost non-intuitive truth: the path to maximize shareholder value is a two-way road that must be shared between a stakeholder community of customers, employees, and shareholders who maintain supportive economic and political societies that allow a business to maximize its profits.
In other words, it wasn’t the goal of maximizing shareholder value that was the problem at IBM, but its chosen path—best exemplified in its two, earnings-per-share roadmaps that left employees strewn along the roadside like so much roadkill.
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Shareholder-first and -foremost and me-first and -only are not viable means to maximize profits through which an equitable distribution of profits can be made to all stakeholders
Cheers, - Peter E. |
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[Footnote #1]: Virginia M. Rometty left $2 billion dollars in approved share buybacks (repurchases) unspent. Arvind has as yet to make any statements on restarting the share buybacks, but they are already approved by the board of directors.