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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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Mon, 07/20/2015 - 16:28 | 6333873 101 years and c...
101 years and counting's picture

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

Mon, 07/20/2015 - 16:30 | 6333877 Publicus
Publicus's picture

China and Russia no longer buy IBM.

 

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

Mon, 07/20/2015 - 16:35 | 6333913 Dame Ednas Possum
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.

Mon, 07/20/2015 - 16:37 | 6333932 Four chan
Four chan's picture

ibm is a big ass canary. 

Mon, 07/20/2015 - 16:47 | 6333981 Dame Ednas Possum
Dame Ednas Possum's picture

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

*Inspid Benghazi Matron.

Mon, 07/20/2015 - 18:00 | 6334387 kreso
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?

Mon, 07/20/2015 - 18:05 | 6334412 Groundhog Day
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

Mon, 07/20/2015 - 20:57 | 6335091 r3ct1f13r
r3ct1f13r's picture

Elections, 'Lymipcs, Leap years?

Mon, 07/20/2015 - 18:15 | 6334467 Antifaschistische
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.

Mon, 07/20/2015 - 19:35 | 6334793 sun tzu
sun tzu's picture

MSFT $95B cash vs $32B debt

ORCL $54B cash vs $42B debt

Mon, 07/20/2015 - 20:44 | 6335048 J Pancreas
J Pancreas's picture

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

Mon, 07/20/2015 - 16:46 | 6333978 B2u
B2u's picture

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

Mon, 07/20/2015 - 17:03 | 6334085 Consuelo
Consuelo's picture

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

Mon, 07/20/2015 - 20:23 | 6334980 Four chan
Four chan's picture

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

Mon, 07/20/2015 - 16:50 | 6333999 Caleb Abell
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?

Mon, 07/20/2015 - 16:32 | 6333901 ejmoosa
ejmoosa's picture

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

Mon, 07/20/2015 - 17:09 | 6334119 Jumbotron
Jumbotron's picture

SINCE LEHMAN !!!

Mon, 07/20/2015 - 16:32 | 6333895 ejmoosa
ejmoosa's picture

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

 

Mon, 07/20/2015 - 16:32 | 6333896 CrimsonAvenger
CrimsonAvenger's picture

From blue chip to cow chip.

Mon, 07/20/2015 - 16:32 | 6333897 gregga777
gregga777's picture

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

Mon, 07/20/2015 - 17:05 | 6334100 Omen IV
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 

 

Mon, 07/20/2015 - 18:19 | 6334479 g speed
g speed's picture

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

Mon, 07/20/2015 - 22:45 | 6335520 Anybody
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.

 

Mon, 07/20/2015 - 18:47 | 6334618 Ward cleaver
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

Mon, 07/20/2015 - 16:33 | 6333903 CounterPartyVice
CounterPartyVice's picture

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

Mon, 07/20/2015 - 16:40 | 6333946 silverer
silverer's picture

With negative borrowing rates subsidized by taxpayers.  How exciting!

Mon, 07/20/2015 - 16:34 | 6333912 yrad
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.

Mon, 07/20/2015 - 16:36 | 6333921 seek
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?

Mon, 07/20/2015 - 16:39 | 6333941 silverer
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.

Mon, 07/20/2015 - 16:36 | 6333923 Dixie Flatline
Dixie Flatline's picture

You're my boy Big Blueeeee.

Mon, 07/20/2015 - 16:36 | 6333925 silverer
silverer's picture

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

Mon, 07/20/2015 - 21:01 | 6335105 r3ct1f13r
r3ct1f13r's picture

Win 10.9.8.7.6...BOOM

Mon, 07/20/2015 - 16:36 | 6333926 ArtOfLife
ArtOfLife's picture

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

Mon, 07/20/2015 - 16:39 | 6333927 MASTER OF UNIVERSE
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.

 

Mon, 07/20/2015 - 16:43 | 6333962 seek
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.

 

Mon, 07/20/2015 - 17:33 | 6334239 Kprime
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.

Mon, 07/20/2015 - 17:58 | 6334379 honestann
honestann's picture

+1000000000000000000000000

Mon, 07/20/2015 - 16:37 | 6333930 Caveman93
Caveman93's picture

IBM = Dinosaur

Mon, 07/20/2015 - 16:42 | 6333960 silverer
silverer's picture

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

Mon, 07/20/2015 - 20:07 | 6334914 Amish FinEng
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!

Mon, 07/20/2015 - 16:40 | 6333938 tgatliff
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...

Mon, 07/20/2015 - 16:40 | 6333945 B2u
B2u's picture

IBM is still around?  I thought dinosaurs were extinct.

Mon, 07/20/2015 - 17:17 | 6334164 Jumbotron
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 ???

Mon, 07/20/2015 - 19:44 | 6334836 sun tzu
sun tzu's picture

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

Mon, 07/20/2015 - 20:41 | 6335037 Robert Vesco
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. 

Mon, 07/20/2015 - 22:50 | 6335544 Anybody
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.

Mon, 07/20/2015 - 16:41 | 6333947 stant
stant's picture

IBM killed by NSA spying blimp the uss Heisenberg omen

Mon, 07/20/2015 - 16:45 | 6333970 MFL8240
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.

Mon, 07/20/2015 - 16:57 | 6334052 Squid Viscous
Squid Viscous's picture

bullish! BTFD i just did

Mon, 07/20/2015 - 16:59 | 6334064 kilroy
kilroy's picture

So you mean that gutting your knowledgeable workforce and outsourcing anything that moved to the lowest labor sources on Earth didn't provide value to customers?

 

Who knew?

Mon, 07/20/2015 - 17:48 | 6334224 Kprime
Kprime's picture

who'd even suspect?  who dreamed it possible???  Americans don't like talking to 1-800 fuuuuck yoooo berryyyy mcuk.  Can you repeat that please?

Mon, 07/20/2015 - 17:02 | 6334081 Bill of Rights
Bill of Rights's picture

We need a everything is wonderful obama rally speech...

Mon, 07/20/2015 - 17:09 | 6334122 vq1
vq1's picture

Watson, What is IBMs future?

"99.96% - outlook not good

.04% - will innovate and survive"

Mon, 07/20/2015 - 17:10 | 6334128 Secret Weapon
Secret Weapon's picture

IBM is the tech equivalent of Sears.

Mon, 07/20/2015 - 17:18 | 6334168 BendGuyhere
BendGuyhere's picture

IBM Post Mortem:

1) Post-Snowden, say GOOD BYE to Chine, Russia, India, Brazil, GERMANY, et.al as customers.

2) IBM's crew of unskilled H1-B temps just isn't cutting it. American employees with real skills are long gone.

3) All that money WASTED on share buybacks, in the quest of mindlessly supporting the status quo, is COMPLETELY WASTED, US government-style. Will not be spent on innovative new products to please and delight customers.

The GOOD news is that monolithic american-fascist companies CAN INDEED wither and DIE, and this would be a GOOD THING for humanity.

Mon, 07/20/2015 - 17:33 | 6334248 TheRideNeverEnds
TheRideNeverEnds's picture

IBM will be fine, give it a few years and the Govt mandated 401ks will have you saddled with enough IBM shares to choke a donkey.

Mon, 07/20/2015 - 17:34 | 6334251 ZeroPoint
ZeroPoint's picture

I'll Never Do It Again - I.N.D.I.A. H1-B's are wrecking IT all over the modern world. Or more specifically, the MBAs who are stupidly hiring them to replace real talent.

Mon, 07/20/2015 - 21:40 | 6335260 jerry_theking_lawler
jerry_theking_lawler's picture

Here, Here.

I'm an MBA guy (but a smart one, Engineering 20+ years first) so I understand real business. These other twits only understand 'financials' and what is taught at books/schools. Real business acumen must be learned...and what I learned about Indian IT is it may be 1/3 cheaper than Americans but it takes 500% more Indians to do the work of one good American....so, the payback is just not there in real terms. Oh well, let's let these guys run their businesses into the ground so us little guys can get it back on track (just need to resist the .gov temptation to save these TBTF jacklegs).

Mon, 07/20/2015 - 22:54 | 6335559 Anybody
Anybody's picture

Not really. These Indian guys are pretty good and the ones that come to Canada are the best of their bunch. The IT in the Bank of Nova Scotia is run by Indians and the grunts are the Asians and the Eastern Europeans or Russians. The Indians can speak the English language well and go to meetings and tell the Asians what to do. It's very interesting to see these two classes of workers.

 

The Asians can't communicate for shit it takes a year to know what they are saying.

Mon, 07/20/2015 - 17:28 | 6334225 MauritiusGold
MauritiusGold's picture

Bellwether

Mon, 07/20/2015 - 18:02 | 6334400 honestann
honestann's picture

I read just a day or three ago (here in ZH) that IBM just decided to completely exit all product markets and only do "research".  I assume that means licensing their patents and technologies.

I don't know whether that will work, because I don't know enough about IBM.  But my impression is negative, because they seem a lot more like a massive, slowly moving beast.  To innovate successfully in the tech world requires one be lean, mean, smart, creative and QUICK.

Can they do that?  I have my doubts.

Mon, 07/20/2015 - 21:47 | 6335293 WillyGroper
WillyGroper's picture

Don't hear much from Bell Labs anymore, do ya?

Mon, 07/20/2015 - 18:03 | 6334406 Berspankme
Berspankme's picture

IBM- a company with no purpose

Mon, 07/20/2015 - 18:08 | 6334435 SmokinMonkey
SmokinMonkey's picture

Just remove them from the DJIA index and the problem goes away

Mon, 07/20/2015 - 19:03 | 6334671 khakuda
khakuda's picture

:).  Then, just replace with a few scoops of Facebook, Google, Netflix or Amazon while they have some serious MO and the economy will be fixed!

Mon, 07/20/2015 - 18:27 | 6334529 KingOfMilwaukee
KingOfMilwaukee's picture

Revenues... meh... only old people care about things like revenues... it is all about eyeballs now. Get with the program. #itsallcomingtoanend

Mon, 07/20/2015 - 18:32 | 6334556 I Write Code
I Write Code's picture

I think IBM's numbers for the past five years have been faked.  Complete this conspiracy theory your own self, if you're reading ZH I'm sure you can!  Their real business evaporated long ago, their real revenues might be a quarter of reports, and that with huge losses.

Mon, 07/20/2015 - 18:32 | 6334557 JLM
JLM's picture

Good thing they bought all that stock back so upper management could gorge on bonuses.  Management just looted the company!  Anyone working further down the food chain there better look for a better place to work, before they all get right-sized. 

Mon, 07/20/2015 - 20:47 | 6335055 Magooo
Magooo's picture

Where are the layoffs?

Mon, 07/20/2015 - 21:17 | 6335163 fowlerja
fowlerja's picture

Do I get this right... the Titantic IBM has been hit by an iceberg...or have.. I Been Mistaken..

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