Nothing Can Help IBM Dig Out of Its Problems

While it seemed like a benign piece of information, a recent study showed that International Business Machines Corp. (NYSE: IBM) had fallen behind Chinese tech firm Alibaba Group Holding Ltd. (NYSE: BABA) against the yardstick of cloud computing revenue. Cloud revenue is the measure that IBM has used for investors to gauge its progress. Based on that, IBM continues to fall further and further behind the world’s leaders, which undermines any hope that a years-long turnaround has any chance of success.

Amazon.com Inc. (NASDAQ: AMZN) continues to be the world leader in cloud revenue, according to the study of market share by Synergy Research. Its juggernaut Amazon Web Services brought in $11.6 billion in the most recent quarter. This was followed by Microsoft Corp. (NASDAQ: MSFT) at $5.9 billion. Most of its service is sold under the Azure brand. Alphabet Inc.’s (NASDAQ: GOOGL) Google finished next with revenue for its Google Cloud operation at $2.9 billion. Alibaba’s number reached $2.2 billion, and IBM trailed well behind at $1.9 billion.

As most of the major U.S. stock indexes have moved close to or are at all-time records, IBM’s share movement marks it as one of tech’s largest failures this year. The Nasdaq has risen 31% in 2020, to IBM’s drop of almost 14%. Amazon’s shares have jumped 70%.

IBM has not been able to emerge from the failed leadership of Virginia M. Rometty, its executive chairperson. Arvind Krishna replaced her as chief executive officer in April. He has to battle against a series of poor decisions Rometty made after she became CEO in 2012.

Even a rally in tech stocks has not pulled IBM higher. Its results from the most recent quarter have been too much of a boat anchor. Revenue fell in the third quarter from $18.0 billion to $17.6 billion. Per-share earnings ticked up from $1.98 to $1.90.

IBM’s yield is all it has left to attract investors. At 5.7%, it is probably safe from any cuts — for the time being.

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