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Blood Red From Big Blue: Why IBM Is Crashing, In Charts
Remember when three short months ago we revealed what was "the scariest chart in IBM's history", namely the one, showing IBM's total debt to equity ratio, which has exploded and surpassed Lehman highs, as the company scrambled to issue more and more debt and use it to repurchase more and more stock?
With this chart, incidentally, we also explained why IBM's ridiculous stock repurchasing strategy, which had seen $37.7 billion in stock buybacks since 2012, or more than the total debt issuance of $33.6 billion during the same period...
... could not continue and why, inevitably, IBM would have a massively disappointing quarter.
Well, that quarter just hit, when moments ago in an early press release, IBM reported abysmal adjusted EPS of only $3.68, a huge miss to the
$4.32 Wall Street expected, mostly a function of one simple thing: the
buyback "strategy" finally hit a brick wall.
Incidentally, we predicted just this in "The Great Stock Buyback Craze Is Finally Ending." And sure enough, IBM's Net Debt explosion has finally started to recede as even Big Blue is suddenly worried about a very blood red downgrade by the rating agencies.
Don't worry though: there is some hope, if not much, now that the genie is out of the bottle that IBM will revert back to what it does best - financial gimmicks - quite soon:
At the end of September 2014, IBM had approximately $1.4 billion remaining from the current share repurchase authorization. The company expects to request an additional share repurchase authorization at the October 2014 board meeting.
Funny: so does everyone else.
* * *
Ok, fine, the financial engineering of IBM's EPS is finally over, right on schedule, but what about its top line?
Well, it is here that the disaster really shifted into overdrive.
As the first chart below shows, Q3 revenue of $22.4 billion, a huge miss to the consensus $23.37 billion, was the lowest quarterly revenue since... Q1 2009!.
And, just as bad, on a Y/Y revenue change basis, the 5.6% drop was the biggest annual decline in revenue since the Lehman Q3 2009 comp, when sales plunged 6.9%.
Finally, now that the financial engineering no longer fools most of the people all of the time, IBM is finally forced to admit the truth:
- IBM SAYS NO LONGER SEES DELIVERING AT LEAST $20 EPS IN 2015
- IBM SEES 2014 OPERATING EPS DOWN 2-4%
Bottom line, at last check IBM shares were down over 8% premarket, an instant loss of $15 billion in market cap, and is dragging the broader indices far lower. Surely, the GIPF will be busy doubling down on its purchases of IBM stock in today's session.
And now the time has come for companies to finally sit down and do the math on the IRR on all those hundreds of billions in stock buybacks.
And the aftermath...
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International Buying Machine
Don't those guys make typewriters?
Punch clocks
Buybacks not only reduce the share float to boost EPS, etc
They also reduce the shares available to short.
But it isn't going to work this time.
IBM makes computers? Remember when a computer was the size of a 3 1/2 appartment?
signed, "the clipboard guy"
IBM's artificial intelligence workin!!
Hong Kong protest's first casualty ... isnt IBM owned by the Chinese?
Nah its all American, you're thinking of the consumer products arm which was purchased by Lenovo.
IBM is 7% of the Dow Jones "Industrial" Average index. It's second only to Visa (another obviously "industrial" company) in the weightings. Remember the Dow is share price weighted, not market cap weighted.
Time to boot IBM out of the Dow, methinks. Maybe put Chipotle or NetFlix in there in it's place.
IBM, UBM, WEALLBM. This market is one giant turd.
gee, they better remove IBM from the DOW top 30 avg. and replace it with Google, Twitter, or Alibaba...
wouldn't want the market to "look bad" and go down again just because IBM can't fudge the numbers anymore.
IBM is #2 in the Dow average just under VISA and above Goldman fucking Sachs. LOL
Just another company, excelling in this recovery
Layoff List: http://www.dailyjobcuts.com
-
When they stop making the thinkpad was terrible error.
last generation of LENOVO thinkpads as some terrible design changes that would have not been done in IBM if there still where IBM engineers around.
but I blame mostly Halt and Catch Fire TV Show, nothing like massified bad publicity to kill the half living.
And now that these companies have bought so much of their own stock with money that they didn't have, they'll have to suffer all the losses when the price of the stock declines. That means that as equities decline, earnings will necessarily decline too, and that the ultimate bottom will be that much further down. Way to go CEOs. Big Blue BLEW CHUNKS in their boardroom all over the company some time ago, all just to quickly line the pockets of the board members, and at the ultimate cost of company profitability. They should all be jailed for what is going to happen.
Just as a point of information, that isn't actually correct. Bought back shares are taken into the Balance Sheet as "Treasury Stock", which can be held or re-issued later. But there is no PNL impact. But, yes, it is a one-way, one-time piece of financial engineering. As with all else these days. Because it does, of course, have the intended effect of increasing EPS with earnings spread over a smaller number of shares. And, of course, nobody these days pays any attention to GAAP earnings.
"gee, they better remove IBM from the DOW top 30 avg. and replace it with Google, Twitter, or Alibaba..."
If you like your DOW 17,000, you can keep your DOW 17,000.
IBM is symptomatic of US problems in general. It doesn't actually MAKE anything any longer. Consulting, financialisation, share buybacks, all of which can only continue for so long? Now coming to an end. Another dead American icon. Big Blue, Big Mac, Big Nothing...
Yup. Do they even make a machine anymore?
IBM = International Business Moneyshufflers?
And right on cue, IBM's CEO Ginni Rometty called the corporate brothel CNBC and requested a prostitute, er...presstitute.
David Faber dutifully goes to IBM's corporate headquarters to assist in damage control and help IBM "get their message out" via an "exclusive" one-on-one interview.
Cunnilingus ensues...
No fellatio? On second thoughts, neither would be very appealing....
Like I said before, GS and JPM manufacture fraud, and VISA manufactures human misery, ergo, they are "industries".
Rent farming boiling frogs for profit has been a growth industry for decades.
Maybe they could just re introduce the ibm 5150!
Could only help at this point!
Man you're taking me back...
PC XT
PC AT
anyone anyone?
Mmmm 360/65, those were the days. Real money in the commision scheme.
"Don't those guys make typewriters?"
The MBAs took over. Now it's all financial engineering and book cooking for IBM and other companies.
Financialization Nation.
The financial "Selectric", from 1961. When financial shit made sense.
International biryani machine
The good news is all the bad news is out now so the stock is a screaming buy here
goldman analyst
Selectric. Learned how to type on one in high school. It weighed about 25 pounds.
Time to remove them from the Dow and refreshen the ponzi.
@SilverIsKing "International Buying Machine"
So what you're saying is that the Fed uses IBM?
Totally understand the need for ad revenue but mid story and constant popup over the chart was a bit annoying.
There's an app for that.
Adblock plus, and Ghostery plugins for your browser = ads you'll hear about, but never see.
And all the missed jokes, gossips and the pics of paintbrushed women in hot pants.
Is it worth it?
Breaking news- IBM wants to acquire Sperry Univac!
what's that gross looking thing that looks like a miniature breast implant? I'm not clicking on that link.
miniature breast implant
Kind of fails the pupose, no?
Surfing ZH at work risks people taking you as a pervert.
Mr. Croesus
Honest question! Is there something for a tablet? If so Mongo is just stoopid enough to NOT find it.
You can try turning off Java, or javascrip you might even want to turn off pictures as what you want is text. That might help. I dont know what browser your useing so you have to play around with the settings, tools and such. Remember you cant break it and have fun turning things on and off.
Mr bbq! Thank you sir! Java did it! Just a simple fukin button. See why Mongo is only a pawn in the game of life?
You sure you dont want to meet the Travel Girls? Or the Refined women of Anastasia.com?
They just laugh at Mongo!
Mongo needs some juicy mango ;)
Refined like the child pickpockets in Rio de Janeiro?
Mongo eat beans and install Netscape Firefox browser on you tablet. Use Netscape to browse the internet. In Netscape open bookmarks. There is an installed bookmark for add ons. Click on that. Search add ons for Ghostery. Install, enjoy. Browser runs faster w/o profiling software trying to serve you a custom flavored ad. In Ghostery options, there's a way to dissmiss the screen hogging icon.
Thank you kindly Mr. Conscious! Although you just made Mongo's hungover mind spin He will muster through with a fine attempt at this! Thought tablets would be like running water ....turn it on. do my thing...turn it off.....close but no cigar! Thanks again
I just don't browse ZH on a tablet anymore. Waste of time.
I could post a screenshot where 90% of the ZH front page is ads with that stupid pop-up in front. We may have reached peak tablet unless Firefox or someone can block this crap on tablets.
Cant see banzai...fully.....all vids are half screen covered bythe big ass grey banner on the right....oh well at least the content is free, and helps to keep Mongo the cynical bastard he is!
Mongo,
Double click on the Banzai photo or video. It should open in a new full screen window.
Thanks Mr Trooper!:-)
check if there is any apps for adblock .
I think that's a condition for being allowed in the Google Play store...no ads shall be blocked by any app.
What exactly is the IBM does again? Oh yeah, they act as agent for the NSA.
They also sell production divisions to the Chinese.
I think they sold the laptop division just slightly before the laptop business crash, dont think that was a bad decision....
If you are right we are all good and well fucked since they just sold Lenovo their x86 server business too.
Oh yeah, they act as agent for the NSA.
Exactly why they will be "saved"
Some day, the days of getting saved is going to end.
The NSA/CIA has its own printing press. The least they can do for IBM is to print a few billion to support the stock:
The American secret service, the CIA, could be responsible for manufacturing the nearly-perfect counterfeit 50 and 100-dollar-notes that Washington pins on the terror regime of North Korea. The charge comes after an extensive investigation in Europe and Asia by the Sunday edition of the Frankfurter Allgemeinen Sonntagszeitung of Frankfurt, and after interviews with counterfeit money experts and leading representatives of the high-security publishing industry.
The U.S.-dollar forgeries designated "Supernotes," which are so good that even specialists are unable to distinguish them from genuine notes, have circulated for almost two decades without a reliable identification of the culprits. Because of their extraordinary quality, experts assume that some country must be behind the enterprise.
http://www.watchingamerica.com/frankfurterallgemeine000008.shtml
"The least they can do for IBM is to print a few billion to support the stock:"
Didn't they already try that? I thought thats what momo, I mean pomo days were for.
Great link. US counterfitting dollars. Isn't that The Fed's job?
If yer gonna be a bagholder, might as well be with your own stock lulz
We're building a smarter planet!
With Common Core....cause 2 + 2 does not equal 4.
You need the math to support the money laundering.
You need the math to hide it.
I hope that tech keeps the wheels on long enough to let me cash out my options. Please make it to 2016. Please make it to 2016. Please make it to 2016.....
i'm sorry how is this any different than any other large corporation in the US? BTFponzischeme
This one is bled dry, time to move on to the next...
Yellen's team thinks their so clever bringing a 10% correction so we can only go up right?
Wrong how's about a 50% to 70% correction on top of what we guts.
Observe "stop losses".
Another 50% from here? Back up the truck, toss in whatver powder you get can your hands on, put on your yellen t-shirt and cheerlead the indices up to election time. We won't hold it against you
I am sure they will find another 10,000+ 'unnessary' employees to lay off. Bonuses on!
IBM recruited a lot of staff during the boom time for SAP implementation. That business is slowing down, which had kept them afloat for past 10 years.
The company expects to request an additional share repurchase authorization at the October 2014 board meeting.
We want our money back!
Once upon a time, IBM stock was for widows and orphans.
Then it announced the IBM Personal Computer which was miles too successful.
The rest is history.
Bill Gates quits college.
Bill buys DOS for 50K.
Bill leases DOS to IBM.
Bill gets rich.....and now wants to run everyones life.
"Bill Rips Off Steve and Steve and creates "windows."
"Hey, Gates, that is our shit."
"No, it's different. Really."
Did Bill really pay 50k for DOS? Methinks it was far more dirty than that.
Either way, he ratted on IBM many times and they eventually fell out.
As one IBMer said about him: "Whatever he agrees to do, get in down in writing."
I've seen Microsoft rip off small startups for the sake of a million or two. Nothing at all to them but survival itself for small outfit but they didn't care. Gates' personality seeped all the way down.
I used to root for Bill Gates - but not for long. What a pathetic pile of crap his MS-DOS turned out to be, code literally cobbled together from pieces stolen from rivals' wate bins. And his Windows was even worse! No amount of reengineering it coud fix anything! And IBM in its arrogance just gave it away.
The most serious challenge to MS Windows operating system and its domination of the PC software world was IBM's OS2. It was launched to good reviews, and being solid and stable it seemed to have a bright future. But when Bill threatened the profits of IBM's PC division by blocking the sale of *any* IBM PC's loaded with MS Windows if they sold *any* with OS2, IBM folded and walked away from its creation.
What a bunch of pathetic losers! They had the know-how and muscle to change the game, but no principles, no guts! Big Blue, IBM, Men In Black, if you worked for them you had to wear a dark plain suit, a white shirt and a dull necktie. Back in the day, you could always spot an FBI agent because they looked like they worked for IBM! Big Blue - Powerful, responsible, rock solid - like J. Edgar Hoover!
What Gates did was not break IBM's monopoly, but hijack it, milk it to the max and use it to destroy the commpetition in the PC software world - much as IBM would have no doubt done. He gave us the ultimate demonstration of the powerlessness of consumers, of the marketplace, to promote the good and drive out the bad in the face of monopoly power! And now he has the gall to pose as some kind of benevolent genius who has the right to tell us how we should run our world!
Now that IBM's masters have plundered it, sucked it dry and are pushing its carapace over the cliff - what will the consequences be for its customers or the national economy? Will anyone be able to pick up the pieces?
By the way, how's Microsoft doing?
In my experience the dark suit and white shirt wasn't mandatory - especially across Europe, but it was widely followed.
An often seen plaque hanging on office walls was
Think this is just the first of many pieces of bad news for US IT--until very recently a strong sector that still was hiring in our current downturn/recession/depression. Didn't SAP just release disappointing numbers as well? After elections in Nov., I expect a full-on bust for these companies--the world economy is no-growth without all the number fudging, and I really think the Snowden revelations of how the NSA has penetrated all the US tech companies has hurt sales overseas. Why would anyone overseas hire an expensive US firm that serves as a backdoor for plunder by the USG? Already the Chinese gov't have said they will no longer be using Windows and businesses overseas are following suit.
Seems like the only thing keeping our economy from bursting at the seams is wealth extracted from outside the system; either from the ground like shale oil (good luck with that @ $80/barrel), from the Fed as QE, or from Chinese buying up real estate (hence all the cash sales of homes). Not much "value addition" going here in the good ol' USA anymore. The ship will run aground before the end of the year, maybe before the elections.
Not helped by US Gov assisted falling Russian and Chinese sales. Cisco next perhaps?
OS2 was a better OS than WIndows (not saying much admittedly) but it was very resource heavy at a time when hardware was VERY expensive.
Any former male employees who retired and held it may soon be leaving it to widows and orphans.
Those idiots bleed blue like Procter and Gamble employees.
I know from the inside, kind of cult-like, but not in a child sacrifice sort of way.
"No one ever got fired for buying Big Blue"
...except the folks in their Treasury Stock department
IBM: It's Buybacks, Moron
Who is this IBM you speak of ???
Awwww. I feel so bad that they are being impacted by both Russian sanctions, and foreign governments distrust of IBM to keep their data encrypted. *sad trombone*
Foreign govts as well as any foreign countries and even American companies. Why buy any of their hardware or software when the data is not secure.
The En Ess Ay is known to resell secrets to competitors.
"The En Ess Ay is known to resell secrets to competitors."
Good point Freddie. Therein lies the deep belly of the "En Ess Ay" criminality carried out under fake cover of national security and anti-terrorism.
It's industrial and hi-tech espionage all the way.
In a buyback strategy, there are always two sides ... the buyers and the sellers.
An interesting question might be "who has been selling into the IBM (and other company) buybacks and why?". Is there collusion involved or at least a banker-lead strategy to allow some to exist and make others bagholders?
As was shown with NFLX (and IBM), there will be cracks in the damn before the flood... and when the lake above the damn empties ... it should be obvious "who is swimming naked" ... my guess is that retirement accounts will intentionally be hit the hardest (since there are virtually no small private investors in this sham market), which is designed to increase dependency on government and banks, once again.
IBM executives sell their stock options into the company buy backs. Take a look at Virginia Rometty's big hall. She sold a bunch inAug 2014. The writing was on the wall for this pig.
Www.secform4.com/insider-trading/1333712.htm
This is more proof and a byproduct of the negative and toxic consequences of QE. Money has become so cheap to borrow that many people are now arguing that you must take it even if you don't know what to do with it. It is hard to imagine how much this is distorting the economy, markets, and reality in general.
A total disconnect between life on main street and the financial world is occurring and it is putting the economy in a very dangerous place. It is often hard to determine what is true, but a report on Bloomberg that 32 Trillion dollars in funds were held in offshore accounts around the world made me shutter. How safe is this money, and what exactly is it doing? Can you say Cyprus? More on this subject in the article below.
http://brucewilds.blogspot.com/2013/05/cheap-money-more-and-more-and-more.html
Perhaps they turned over financial management to their supercomupter Watson and this engineering was his idea as he is born from HFT algos...
Don't worry - the earnings are all in the cloud! You just can't see them until it rains!
Time for a debt offering to repurchase some stock. Or has that train left the station too? #LookOutBelow
B-b-b-b-but, IBM has a partnership with crApple now!!!
Amazing how every 4th quarter there's a spike in earnings. That couldn't have anything to do with massive layoffs just before the end of the year, could it? Executives wouldn't sacrifice their beloved and brainwashed employees just for their own financial gain via the stock options they're given, now could it?
Clients wait until EOY to buy, because IBM gives the best discounts to make the year look good. This typical for most large companies. I time auto purchases based on a manufactuers EOY incentives. Not all companies run on a calendar year.
That may be but having worked for them several years I can personally atest to the practice of mass layoffs to make numbers look good so their EOY bonuses are larger. Sacrificing the livelihood of many for the benefit of the few. Fuck management of that dump!
True that. However, layoffs usually come in Q1. They wouldn't do anything to negatively impact IBM revenue in Q4.
Everything I saw began around October as was completed just before Christmas before EOY.
Remember, Remember, the 5th of November, Gunpowder , Treason and Lost the PLOT.
I just shorted the S&P with the ES contract @1887; because the DAX is having a bad day and the S&Pfutures are negative. I only put on a small position; 100$/pt. New Your opening in about a half hour. The Marketwatch front page doesn't look so cheerful either with its anouncement of Buffet's losing a billion dollars on IBM. maybe the earnings reports will put a dent in the eurphoria today.
Just over state earnings and fess up next quarter. Tried and true that works every time.
Time for IBM to do what it REALLY does best.....which is "offshore" more labor. IBM has killed more American jobs than all the viruses combined.
"International" Business Machines.
Suckerz.
Idiots Become Managers
Income Before Morals
I've Been Manhandled
Incineration Before Mortality - reference for doing their part of the holocaust
Income Before Manpower
Income Bullshit Manufacturing
There are hundreds more which still describe Big Blue screw job.
the whole stock buy back tangent corps have been on for the last year.. is almost evidence to me.. just like all the insider selling...
take the money and run now.. becasue tomorrow may be very bad...
IBM used to produce, now they have become another staffing firms, like many other American companies. Out to utilize H1Bs.
Indian Business Machines
Listen bear.
You need to "LISTEN" to Bill Gates. He knows a lot more than you.
You couldnt have said it better..
http://www.cringely.com/2012/04/18/not-your-fathers-ibm/
The mother of layoffs is going to go down at big blue in the next 12-24 months.
It's been on the cards for some time.
That's right. I remember now. As part of the cult-like quality they don't fear layoffs.
I DO NOT understand the negative sentiment on IBM ----- why can't the Federal Reserve just send some fiat printed out of thin air dollars IBM's way? Has IBM not been a good corporate citizen, providing the processor power the crime syndicate needs to keep the ponzi scheme going? Think about it----the analysis in this report would be good in a capitalistic, free-market society, but since we live in a fascist kleptocracy, why the negativity towards IBM? The crime syndicate needs them----so all you need to do is follow Jim Cramer and "BUY, BUY, BUY" and stop wasting valuable time on stupid things like debt-to-equity---that only applies to us "little" people!
Also, consider that IBM is probably providing much of the processing power for the geoengineering that they are using to spray us with toxic chemicals everyday. IBM has a long history of helping evil regimes (e.g. HITLER), so I don't think the Federal Reserve wants to piss them off----all they have to do is PRINT, PRINT PRINT and all worries go bye, bye!
Already doing it. Been doing it for quite a while. See Tyler's chart corelating the S&P and Fed printing. IBM is included in the S&P, no?
IBM - Impending Bowel Movement - as in about to shit all over itself....
I was an IBM dealer for point of sale systems in the early 2000's, but got out of it by 2005, too expensive for my clients and quality going down.
A shame isnt it? Their quality is shit now...
GROWTH is dead, it’s over. The Fed’s $5 TRILLION dollars failed to produce any growth. It only led to the rich getting richer, corporations using the cheap $$ to engineer earnings through stock buybacks, and pushing broke consumers’ demand forward with even more debt. It allowed for hiding massive bad bank loans on the Fed’s books, etc, etc. Total failure. When the lemmings lose faith in the Fed, the party ends fast and ugly.
Up until now, lousy “earnings” were fantastic news, meant more Fed intervention and the markets pushed ever higher. Fed failure leaves no other game in town. Even more massive government deficit spending won’t be enough, or more wars. “Grow or die”, and we are slowly going to die. The welfare state will expand further and the standard of living will drop dramatically. It may be a good thing, with no more wasteful McMansions and oversized SUVs. Small apartments and no more suburban sprawl. Time will tell.
It sure seems like your right..... However, I dont think a high standard of living is a bad thing. It seems like your rooting for everyones quality of life to go down..
If they had orhanic growth to support their buyback business they'd be just fine. But thanks to the nsa that went poof.
Yea but Putin be in a sub near Stockholm! ZHers be droppin' their panties for some shirtless Putin!
That story's easier to fake than all the hard work that went into the Malay Airlines disappearing. Are you a shill? Why are you against sorting out the oligarchs?
Because his daddy will lose a lot of money.
go suck a dick... honkadoo
what do ibm, yhoo, and hpq all have in common?
Splitarses for CEO's who have no business running technology firms.
Amen brother! Leave them in HR and the Diversty Office.
on friday, cramer ripped druck's seekingalpha presentation as being completely upside-down & wrong.
druck said IBM was the poster-child for the fed's experiment.
this quarter, IBM thesis came home to roost - stock getting pelted down 7%
cramer issued a BS, left-handed apology when asked about it this morning
dude is pathetic - even when he is 100% WRONG about RIPPING a guy who was RIGHT he still can't be humble
I'm sure that the food (con) man, Buffett, blew out his load at the high!
IBM needs a clipboard guy. You know, a clear unambiguous signal that the whole fuckin thing is another hoax.
It's been all downhill for IBM since they gave the store away to Gates & Co., but I'm having a little trouble working up any sympathy for them.
Due to the compensation coming from options, many companies besides IBM have engaged in massive stock buybacks.
Too bad a chart was not included showing how much stock was acquired vis cheap options and then sold by the mgmt and directors duirng this run up of debt to finance it.
Long long ago Big Blue used to be a really great company. Then over time the finance and sales guys - and girls - took over from the engineers. Just like DEC and HP. Symptomatic of the whole Anglo American business model I guess.
Yeah but IBM was always sort of scummy. The people were creepy. HP and DEC seemed to be more humane corporations at least when Ken was running DEC and Billa nd Dave ran HP.
Maybe they can get a bailout from India. Bwahahaha
Let them all load up on debt, the more the better. Then, when deflation takes hold, let them all fall. Liquidate, go out of business, bye bye international behemoths!
Then someone else can set up companies to do what they used to do...smaller, local companies who aren't beholden to shareholders all over the globe, but to their customers and employees.
The golfball electric typewriter was the last decent invention from IBM -and it probably wasn't even their idea.
I don't see the mention of the strange deal IBM made with Global Foundries where it will hand over all of its chip manufacturing business to GloFo and PAY them for it.
http://anandtech.com/show/8631/globalfoundries-acquires-ibms-semiconduct...