International Business Machines (IBM) (NYSE: IBM) has not only disappointed investors with its lackluster performance, but CEO Virginia Rometty has admitted that she is less than impressed. She spoke about the need to focus on the hardware endeavors in the coming months in a letter to employees. Market experts believe that the company is in trouble because of its inability to switch to the new age cloud computing trend.
Only stock to decline in Dow Jones
Last year, IBM earned the dubious distinction of being the only stock among the Dow Jones Industrial average to decline. Sales dropped by five percent during this phase and prompted a belt- cinching of sorts within the company. Top management agreed to give up their yearly bonus, and lay- offs were also part of the plan to shore up the business’s profitability. However, if the company has truly benefited by these moves, it is yet to become fully evident as revenues continue to leave much to be desired. Operating income (pre- tax) dipped by eight percent over the year 2013 and the company’s reported revenue dropped to 99.8 billion, a fall of five percent.
Focus on expanding Cloud initiatives
Understanding the need of the day, CEO Rometty has made it clear that IBM will be focusing on its cloud based initiatives, going forward. She acknowledged that while 2013 has been a transformative one for the company, expectations had not been matched. Rometty went on to outline future plans, saying that the current ideology of switching to higher value deliverables will still be a goal post to work towards, but attention will be given to sprucing up those areas where IBM is lagging behind significantly.
Readers will remember that, in January, IBM announced a deal with Lenovo to sell to the latter a good part of its low- end server segment. It appears that this is a bid to prune unprofitable sections of the business to make it more agile in the marketplace.
Moving onto the Cloud with SoftLayer
The company showed that it is serious about upgrading its cloud capabilities with its acquisition of cloud provider SoftLayer last year. Right now IBM is busy integrating its data analytics and hardware business with its services. The company’s Power Systems will support delivery of the Watson tool via cloud soon, marking a significant improvement in IBM’s readiness to adapt to new age delivery technologies. There is also talk of further investment in SoftLayer’s cloud products to enhance its range of offerings.