IBM: Unrest from Stakeholders

April 6, 2015

I supposed IBM’s senior management is consulting Watson for answers to its stakeholders’ rising impatience with the $100 billion technology services company.

I read “Exclusive: IBM Hires Advisers to Deal with Restless Investors.” IBM has been touting its billion dollar investments in initiatives that are supposed to get the company back on a growth track. Layoffs, stock buy backs, and missed financial targets have not had the desired effect, if the Reuters write up is on the money.

The article reports:

International Business Machines Corp is concerned about a possible attack by prominent activist hedge funds, and is working with two investment banks to formulate a defense plan, according to the people, who declined to be identified.

IBM has some significant problems. I want to point my aged finger at the crazy assertions made for Watson, but I shall sidestep that new product Zircon.

The write up highlights a deeper, far more significant problem:

Part of the activist funds’ concern was that IBM, whose stock is trading at around $159, is too expensive and the company’s structural problems could not be fixed easily, according to several sources.

Structural problems. No kidding.

My hunch is that stakeholders, employees, partners, and retirees are going to become increasingly agitated.

What I find interesting is that there are no easy answers from Watson or any other source. My question is, “Why has it taken so long for activists to tackle their IBM problem head on?”

Perhaps these folks did ask Watson and did not like the answer they received. What works for a TV game show does not seem to work in the non TV world.

Stephen E Arnold, April 6, 2015

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