IBM Tumbles After Posting Lowest Revenue In 15 Years, 20th Consecutive Quarter Of Declining Sales

Tyler Durden's picture

Last quarter, IBM almost fooled the market when it "beat" but only thanks to using the lowest effective tax rate in recent history (excluding one charge-fulled quarter when the rate was negative).

Well, fast forward one quarter when IBM has done it again, if only on a GAAP basis, because in the three months ended March 31, IBM reported GAAP pre-tax net income of $1.424BN. What was its after tax net income? Some $326 million higher, or $1.750 million to be precise. In other words, no longer bothering with flowing a positive GAAP tax rate through the P&L, IBM went negative to the tune of -23.1%.

Of course, when it comes to IBM it is all about non-GAAP results, which in Q1 were EPS of $2.38, "beating" estimates of $2.35 by a paltry 3c. Amusingly, it was its non-GAAP EPS that IBM applied a tax rate to which according to the company was 12% and 15%, on a GAAP and non-GAAP basis:

For the first quarter, IBM’s ongoing effective GAAP tax rate was approximately 12 percent. The ongoing effective operating (non-GAAP) tax rate was approximately 15 percent, which is within the expected range of 15 percent plus or minus 3 points provided earlier this year. IBM’s reported tax rates include the effect from a discrete tax benefit disclosed earlier this year

However, while IBM is truly a wizard when it comes to fudging the bottom line, there was nothing it could do about the top line, and it was here that IBM's troubles emerged, because not only did IBM not beat modest estimates of $18.4 billion, printing $18.2 billion, the lowest since Q1 2002...

... but this was also the 20th consecutive quarter of declining revenues for the company which lately can't seem to get any traction on the top line.

Away from the top and bottom line, IBM reported that in Q1 it generated net cash from operating activities of $4.0 billion, or $1.9 billion excluding Global Financing receivables. IBM’s free cash flow was $1.1 billion, down year to year consistent with the amount of the Japan tax refund received in the first quarter of 2016. IBM returned $1.3 billion in dividends and $1.3 billion of gross share repurchases to shareholders. At the end of March 2017, IBM had $3.8 billion remaining in the current share repurchase authorization.

IBM ended the first quarter of 2017 with $10.7 billion of cash on hand. Debt, including Global Financing debt of $28.5 billion, totaled $42.8 billion, up from $42.2 billion at the end of 2016.

The stock, predictably, tumbles again, down nearly 4% after hours and roundtripping the entire past quarter's gains.

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Zepper's picture

IBM is one of the worst run companies in the history of companies. These guys are #1 for patents almost every year. Their research is solid... we would not have anything we have now if it were not for the R&D that IBM has done and is doing. 

 

SO WHAT THE FUCK IS WRONG WITH MANAGEMENT!!!!!! Someone just gave you the way to stack atoms anyway you want at an industrial level and you do what with it?! Oh ya you just store it away in the fucking archives!

 

IBM.. COMPANY OF FUCKING LOSERS!

NotApplicable's picture

My employer switched out stable IBM level ERP software with buggy-ass, dotnet windows garbage.

Stability has never been worse, but hey, nobody wanted to hear the opinion of the IT shop, instead labeling us as "not team players" for telling people how they were fucking up.

Now my job is nothing more than apologizing to users, rebooting servers and wondering why the error logs never have any info when shit goes haywire.

All for a fucking GUI rather than those "old, outdated" green-screens.

Osmium's picture

If I didn't know better, I would think we worked at the same company.  They have been developing new software here for 8 YEARS.  They told management it would take 18 months to be up and running on the new software.  Now the .net they wrote is old and needs to be rewritten.  WTF?

 

Dead Canary's picture

Preaching to the Choir boys. When I quit my last job, i was the last hold out. "NOW WE CAN MOVE TO THE 21 CENTURY!" 

The company replaced me with 4 full time programmers and 4 full time consultants. They couldn't get anything to work and the company was bankrupt 1 year after I quit. HA.

All because they just HAD to get rid of green screens.

whoisjg's picture

Never diss a green screen. I remember VM had all this stuff so you could grab vertical columns from the screen. try doing that with windows!

HelluvaEngineer's picture

It's called ALT-drag.  I do it almost every day to copy indented code.

Bigly's picture

Reason: they ditched all their professional American staff and loaded up with Indian workers. They then thought they could command the same premium.  Wrong!!!!!

Selly2k's picture

After all these years in business since Jesus was born, THEY still have more debt than cash in hand. AMAZING.

Raffie's picture

I think HP is worse then IBM.

1980XLS's picture

Both have stupid Cunts for CEOs.

So they have something in common

Boomberg's picture

I've been in IT 30 years. Not once have I seen a competent female at any level...administrative assistants that know a few commands is best you can hope for.

seek's picture

They stopped making things and concentrated on services. So yeah, they have R&D but no longer have the vast hardware business to deploy it on.

Software and services have a low barrier to entry, and the lock-in that they had with their own hardware is basically gone. Not surprisingly they're seeing their business fade due to attrition.

Oh, add on the fact that they did wave after wave of layoffs on the most expensive employees (e.g. the older ones with experience) and you're left with a bunch of new kids, contractors, cheap foreign labor (e.g. India) without the same commitment to excellence as they people they replaced and while the accountants are happy, the customers aren't. IBM is just another example of a strong US manufacturing company being convered into brand name, and then the brand equity being bled out of it until it's an empy husk,

emersonreturn's picture

does IBM have a lot of military contracts? like so many other tech companies are the defense contracts helping them in a similar way to chinese money flowing into real estate? 

Bigly's picture

Sorry i did not read down to your comment before i posted.  You are spot on...

Stanley Kubrick's picture

What's wrong with IBM management?

Nuthin'.

Jenny's just knitting her golden paracute, see?  Everybody's doin' it.  

Goldman underwrites the bonds, Jenny uses the money to buy back her stock to prop the prices up.  Then, when she's ready, eshe'll eject with a couple hundred million.

The stockholders get fucked, but hey - there's no free lunch, eh?

It's like watchin' a re-run.  

Yawn.

Peacefulwarrior's picture

Maybe IBM needs to switch their business model to real economic growth drivers like VR Helmets and more APPS for idiots to chase Alternate Reality Pokemon around the neighborhood

Boomberg's picture

Take a closer look at those patents. IBM requires employees at some levels to get patents to continue their career. Most are rubbish and have no commercial or scientific value. IBM is a patent mill.

Bludklot's picture

Xerox gave Steve Jobs all the significant attributes he needed to build Apple when he stole Xerox/PARC technology, things like the mouse.

Singelguy's picture

IBM is the poster child of financialization. Instead of investing in the future through R&D, they use their cash and borrow more cash at zero percent interest to buy back their stock, which saves money on dividend payments and artificially inflates their EPS. Over $35 billion borrowed so far. If interest rates ever rise to historic norms, the interest expense will wipe out any profit they have left, and IBM will be toast.

Squid Viscous's picture

i thought they were moving seamlessy from legacy businesses to the new and amazing cloud, Watson, IT consulting etc.

that's what Cramer said at $180, oops

Boomberg's picture

A f**king online bookstore, Amazon, beat them to the Cloud, just like nerdy Bill beat them on the desktop. That should tell you all you need to know.

biker's picture
biker (not verified) Apr 18, 2017 4:35 PM

They should be back the mandatory buttonup-dress-shirt and tie

the6thBook's picture

Time to hire more H1B's who can't type and fire more Americans...

GRDguy's picture

It sure worked for CAT, didn't it.

johnconnor's picture

IBM = Indians Badly Managed ...  when did IBM started replacing US workers by hordes of Indians? early 2000s

canisdirus's picture

It is interesting that this chart mirrors the exact moment that IBM switched over to using primarily Indian labor.

profitleads's picture

Yes, it does. I have (had) a couple of customers who produced commercial software products used with an internet service that they offer. Both of them decided to get rid of over 3/4ths of their programming staff and, as a cost-saving measure, contracted with India-based personnel companies who promised that the desired software fixes and enhancements could be delivered faster and at a cost savings of greater than 40%. After about 16 and 19 months, with nothing being produced, both companies finally dropped the foreign software development efforts in India. One eventually went bankrupt and the other was bought out by a foreign (Chinese) operation. There was a time when IBM had the manpower and talent to do just about anything they wanted, but that talent suffocated under the IBM corporate culture for so long, that others were able to move in and take pieces of IBM's business away from them. There's a book, written many years ago, called: "Big Blues - The Unmaking of IBM", which details the IBM management foolishness that brought on their demise.

silverer's picture

So in other words, they're doing well and still a solid investment. Well, that's what your broker says.

zzzz88's picture
buyback via debt issuance
cheech_wizard's picture

Cognitive Solutions?

https://www.linkedin.com/pulse/cognitive-solutions-dummies-10-questions-...

Standard Disclaimer: There is one born every minute. 

tropicthunder's picture

The whole H1-B thing is a complete fucking joke. Now the big IT shops will just open more sweatshops in BobbleHead Land instead of importing them in.

Dilluminati's picture

Service delivery center where talent is homogenized, no do not want, will not accept

buzzsaw99's picture

it would suck to be their accountant. you just know if anyone is going to jail it's not going to be the cfo who told you to fake that shit.

btw - suckit buffett

sevensixtwo's picture

This doesn't bother me at all

Lizardking's picture

If you can buy IBM at depressed prices and collect the divy every year over a 10 year period you will be a winner. As they continue to buy back more shares and expand their cloud/cyber security offerings they will continue to grow. As we westernize more undeveloped countries there will be continued demand for years to come. Also factor in a possible tax break in 2018 and you have reason to push it over 200 a share. Buuuuyyyyy.

tropicthunder's picture

Great Idea! Except 1.5 years of divys just got vaporized in 2 seconds..

Dilluminati's picture

You never learned lesson one from mexico, why buy catepillar when there are so so many cheap shovels.. 

Everybody getting rich somewhere else is the story, buy the rumor and then sell that news.

Why buy anything when I can run it at compute cost on Ubuntu?

If I'm genuinely succesful and global I'll hire them, but in preliminary proof of concept and entry to market.. nope do not need

 

 

 

whoisjg's picture

IBM went with the strategy of replacing its bright american engineers with dull lazy fake degreed Indians in 2000. 

They were riding on the vapors of their name as quality that americans built over 60 years. That is now gone, the jig is up, and companies dont want to pay 150 an hour for Indians with fake degrees who only get paid 20 an hour. 

The H-1B is a genocide program for american software engineers, depressing wages and making it hard for americans to find work. Its kicking americas' best and brightest to the streets then kicking them in the teeth over and over. And no one gives a fuck.

Dilluminati's picture

Ohhh fock dat.  Bottom line is that you have to get out to a conference "something meaninful" even if you have to pay for it yourself.  One great idea, one powerful idea and it was worth it.  Take at least one industry recognized training exam a year, maybe two, and keep doing it.  Again if you have to pony up the money, take vacation time, etc.. do what you have to.  But the days of IT training are over and have been over since 2000 to 2003 along with all the radio commercials and tv ads about IT schools that get you hired.  Again you need to pick up that book for 30 --> 50 dollars and read it twice and then get it established you know the material.  Daddy IT and Daddy government can't do it for you, simply can't.  The indians are a mixed bunch like Americans however what galls me is the costs in software and training in India and the US.  What really pissed me off was MSFT giving free exams to South America and charging North Americans!  Just make it a even playing field and if you toss me in a pit of alligators I'll eat them for luch, they don't know the word or meaning of tough.

What is galling is that the Indians don't eat their own dogfood, they don't believe in the stuff.  You would think with their engineers they would lead the world in it.. no idea of quality and their outlook on commerce not optomistic as a generalization in their own country.  US companies bought the wall street touting of these emerging markets and all it was in the long run was a capital drain.  Innovation isn't happening in caste burdened India, how dare you innovate??  

hobo with a shotgun's picture

Where's all the anti-Semitites to BTFD? Couldn't have done the Holocaust without them. #nazicomputersfuckoff

orangegeek's picture

nigga left the white house, so markets may fall now - but not too much until that fucking cunt leaves the Fed in Feb 2018

Straw Dog's picture

Is it just a coincidence that this is another failing/fading company run by a woman, Ginni Romity, Chairwoman President and CEO.
Think:
Carly Fiorina at HP
Meg Whitman President and Chief Executive Officer of HP.

tropicthunder's picture

No coincidence.. My fund specializes in shorting Fortune 500 companies that are run by woman, especially those over the age of 50 with short hair and a stiff upper lip.

Barney08's picture

Best post I've seen in weeks! Bravo!

chosen's picture

Notice all companies hire women CEO's before they go bankrupt.  Even the Democratic party did it with Hillary.