IBM Revenue Collapse Is Now Worse Than During Peak Of The Financial Crisis

Tyler Durden's picture

Moments ago IBM reported that EPS beat consensus expectations of $3.78 modestly, printing Q2 EPS at $3.84, which however was still a 13% drop from the $4.43 EPS in Q2 2014. However, it was not the EPS so much as the ongoing trouble at the topline which has hit IBM stock after hours and why at last check IBM was down 4% and dragging the entire Dow Jones futures lower of which it is its second largest member.

The reason is that with Q2 revenues of $20.8 billion, this not only missed expectations, but was a plunge of 13.4% from a year ago: a drop that surpasses the biggest revenue drop recorded during the peak of the financial crisis! This is also 13 consecutive quarter of declining Y/Y revenues.

 

The trend is clearly not IBM's friend:

 

What about IBM's old faithful bag of tricks: stock buybacks? Alas, as we explained over a year ago, with IBM's net debt rising to levels that threaten its investment grade rating, the company could no longer afford to splurge, and spent a modest by its own standards $1.1 billion to repurchase its stock in Q2, fractionally lower than the amount spent in Q1 and 70% less than the $3.7 billion repurchased a year ago when as we noted, the great buyback scramble (if only for IBM) was coming to an end:

 

And with buybacks unchanged, so was CapEx, which has flatlined at just under $1 billion per quarter in the past several years.

 

But while IBM's income statement problems are now well-known, it is its balance sheet that investors should be paying attention to: with net debt once again slowly rising (from $30 billion to $30.3 billion in Q2), anyone hoping for a return of debt-funded stock buybacks will be sorely disappointed.

 

For now, whether algos are focused on the income statement or balance sheet, they don't like what they are seeing and the stock is down $7 as of this moment, dragging the entire DJIA future with it.

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101 years and counting's picture

revenues were bad because it snowed in april in north dakota.  

Publicus's picture

China and Russia no longer buy IBM.

 

PS: the trend is not gold nor silver's friend.

Dame Ednas Possum's picture

Wow. If I had a dog that ugly...I'd shave it's arse and teach it to walk backwards.

Either that or ... tribal Chelsea and I would support it's cankles and their run for office.

Dame Ednas Possum's picture

Yep...matches IBM's* big arse cankles.

*Inspid Benghazi Matron.

kreso's picture

Dear Gentlemen,

Every forth year has substantially higher revenue. With a certainty of a midnight heavy freighter... What's the story behind it?

Groundhog Day's picture

If the stock drops only a few points after 13 consecutive quarter s it's gonna double when they finally flatline revenues.  Buy buy buy

r3ct1f13r's picture

Elections, 'Lymipcs, Leap years?

Antifaschistische's picture

IBM, Microsoft, Oracle......all these mega companies with mega debt that have been ona decade + long gobble up competitors, gobble up verticle's, gobble up horizontals, etc...all enabled by artificially depressed interest rates (thanks FED).

have you ever spoken with someone who worked for one of the companies that got swallowed by IBM?   The story is almost always the same (except for the golden boys).   Most people says the Big Boys cannibalize the shit out of their company to squeeze out earnings.

As for me!   I dream of the day these mega-corps have to start spinning off the companies they gobbled up to raise money to pay off their Mount St. Helen's size debt before they get forcefully liquidated.

sun tzu's picture

MSFT $95B cash vs $32B debt

ORCL $54B cash vs $42B debt

J Pancreas's picture

MSFT is one of three AAA rated companies left in America. Try again.

B2u's picture

I am waiting to hear about  Chelsea's dad...Web Hubbell.

Consuelo's picture

I sorta wondered about that too cause she don't look a thing like 'ole Billy Jeff...

Four chan's picture

i dont know, i think she carries the worst of both their features.

Caleb Abell's picture

Lets see, IBM puts NSA backdoors in all its equipment, and now Russia & China won't buy it anymore.  I wonder why?

ejmoosa's picture

...on a Thursday between 2 and 4 pm.

ejmoosa's picture

That would be because this downturn IS worse than the "financial crisis".

 

CrimsonAvenger's picture

From blue chip to cow chip.

gregga777's picture

Serves them right for being a tool of the criminals at the NSA.

Omen IV's picture

The trend looks like CAT - more than just NSA relationship - US management is being diverted to pure "rents" - they dont have the innovation that built AT & T and IBM -

focus of management with hedge funds calling the shots and next option price determining their  actions is long term deadly 

 

g speed's picture

Bingo--the market has changed and they have not--or can't-- +1

Anybody's picture

I remember attending a Guide session where Bill Gates was speaking. All he did was market his own products instead of talking about OS/2 (which is what the session was supposed to be about). After his speech I went over and talked to him and asked him about OS/2. He said "Forget about OS/2. You gotta try my product. Give me your business card and I will send you free copies." Well 9 months later, I received a copy of Windows 3.0, Word, Excel and the predecessor of Powerpoint.

 

So what's the point? IBM never gave any free copies of OS/2. It was buggy as shit and they were still demanding $125 a copy. IBM couldn't market it's way out of a paper bag. Bill Gates gave out millions of copies of his software for free and flooded the market. IBM could have done the same thing, but they were too stupid.

 

I should have listened to him.

 

Ward cleaver's picture

Omen, they will stick to the script. In order to create more "shareholder value" fire people, replacing with the Visa staff, consultants and temps but continue share buy backs. The days of hiring people for full time employment are now gone so as to avoid expenses for healthcare, 401K etc. brave new world

CounterPartyVice's picture

BS, nothing that can't be resolved with a fresh line of credit and an accelerated stock buy back program.

silverer's picture

With negative borrowing rates subsidized by taxpayers.  How exciting!

yrad's picture

If the IBM revenue chart is right, then IBM will have one more low Q and then BOOM! The pattern is there.

seek's picture

Apple's results tomorrow will be interesting to say the least.

All the data is saying collapse. Who's the Lehman now?

silverer's picture

Steve Jobs wouldn't let most of the recent stuff out the door.  I knew that was it for Apple when he was gone.  Like the hourglass of the wicked witch.  Now they're just pumping the company for revenue, using tried and true Microsoft techniques.  Linux may be the only thing that survives it all without making knowledgeable users puke.

Dixie Flatline's picture
Dixie Flatline (not verified) Jul 20, 2015 3:36 PM

You're my boy Big Blueeeee.

silverer's picture

That's OK.  We don't need IBM.  Just Lenovo and Windows 10.1.2.3.4.5.

ArtOfLife's picture

Ofcourse revenue is going to decline when they are divesting like crazy.

MASTER OF UNIVERSE's picture

How can I make money off of IBM going into Chapter 11 if that's where they are heading in short order? IBM does not see the trend towards bankruptcy just as Walmart can't see it either. CAT can't see the writing on the wall ,and neither can General Electric, or other blue chip behemoths.

 

seek's picture

To be honest -- if you haven't already -- I'd stop thinking about making money off this shit and focus on getting as far away from the debris cloud that's going to come when it all comes falling down.

 

Kprime's picture

I'd be constructing an underground shelter for the 2nd coming of the late great heavy bombardment.

HINT: this one aint coming from outerspace.

honestann's picture

+1000000000000000000000000

silverer's picture

IBM are problem solvers in an era where nobody understands the question.

Amish FinEng's picture

Trust me. IBM are a bunch of Indians who 'say' that they graduated top of their class at Some Indian University.

The Indian diploma and backstory was manufactured by a diploma mill.

That's what IBM is today except maybe Watson Research Center and a couple other specialty departments.

Fuck IBM. I'd much prefer Pioneer Farm Equipment.
http://www.pioneerfarmequipment.com
At least they make something in the USA!

tgatliff's picture

China knows how to handle a stock like IBM... Just halt the stock and ban any investor from selling it.  Problem solved!!   Happy days are here again!  Golidlocks in Zombieland economy...

B2u's picture

IBM is still around?  I thought dinosaurs were extinct.

Jumbotron's picture

IBM's problem is that the MBA's are ruling the roost.  Look at how they have sold EVERY piece of hardware they invented off. 

1: Hard Drive Division - Hitachi

2: Printer Division - Lexmark

3: Consumer PC Division - Lenovo

4: X-86 Server Division - Lenovo

All they make now in terms of hardware are the PowerPC chips for their Mainframes and Supers. 

The problem is they charged WAAAAAaaay too much money for their patent and I.P. portfolio and for their uber-proprietary hardware.  The world has gone roll your own white box hardware and open source software.  The Watson Thinking software is good.....REALLY good.  But WAAAAaayyy overpriced and other machine learning software is fast approaching the computer that won Jeopardy.

Plus.....IBM treats their customers like SHIT....utter pieces of SHIT !!  And THAT's why IBM is doomed if they don't fix that quick.  But...as most American companies are concerned with nowadays is the next quarter.  Let's just get through the next quarter. 

Stock buy backs and layoffs anyone ???

sun tzu's picture

They are more concerned about EPS than silly things like revenue growth and customer service. 

Robert Vesco's picture

They don't make PowerPC chips anymore.  "Sold" the semiconductor business and $1.5 Billion in cash over the next three years to General Foundries for a dollar. 

Anybody's picture

I can't remember if it was 20 or 30 years ago they hired an accountant to run the company. It's been downhill ever since. This asshole killed the company. Instead of innovating he was doing everything to make the stock prices go up. Now you have shit.

stant's picture

IBM killed by NSA spying blimp the uss Heisenberg omen

MFL8240's picture

So what do revenues have to do with anything. The other day Googles revenues missed and the stock was up $93 in a day. We are living the lie of the century.

Squid Viscous's picture

bullish! BTFD i just did