{"id":65457,"date":"2020-04-21T14:48:19","date_gmt":"2020-04-21T14:48:19","guid":{"rendered":"https:\/\/www.biphoo.com\/bipnews\/?p=65457"},"modified":"2025-02-03T07:57:58","modified_gmt":"2025-02-03T07:57:58","slug":"new-ibm-ceo-emphasizes-growth-not-just-eps-in-first-earnings-call-with-analysts","status":"publish","type":"post","link":"https:\/\/www.biphoo.com\/bipnews\/technology\/new-ibm-ceo-emphasizes-growth-not-just-eps-in-first-earnings-call-with-analysts.html","title":{"rendered":"New IBM CEO emphasizes growth, not just EPS, in first earnings call with analysts"},"content":{"rendered":"\n
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\nMonday was a big day for IBM.<\/span><\/div>\n
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\nIt was the first time Arvind Krishna, the company\u2019s newly appointed CEO, spoke to analysts, telling them directly about how the company has been faring in the age of coronavirus (hint: not perfectly). And it was the first time an IBM CEO had joined an earnings call since 2014.<\/span><\/div>\n
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\nBeyond that, though, Krishna delivered a bold proclamation. He said he wants the company to grow, and not just on the bottom line.<\/span><\/div>\n
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\n\u201cWe can talk about which is important, is it growth, or is it only EPS [earnings per share,or is it only liquidity,\u201d Krishna said on Monday\u2019s call.<\/span><\/div>\n
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\n\u201cLiquidity is essential, and without that, no company is going to survive through the next period. I don\u2019t know how long that period is going to be, so I think our obsession with that is going to serve us well in this period, but what you\u2019re hearing me say is that growth has to be an equal obsession to other metrics that are there if we\u2019re going to go do that.\u201d<\/span><\/div>\n
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\nThe remarks are notable given the way IBM performed under his predecessor, without an economic crisis. In the past five years, according to FactSet, IBM produced adjusted earnings that beat analysts\u2019 estimates every single quarter. But revenue came in ahead of expectations only about half the time. <\/span><\/div>\n
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\nMoreover, IBM had a streak of more than five years, from June 2012 through September 2017, where revenue declined on an annualized basis every single quarter. <\/span><\/div>\n
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\nAlong the way, IBM\u2019s company\u2019s stock price fell 42% under Rometty\u2019s tenure going back to January 2012.<\/span><\/div>\n
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\nNow Krishna appears to be taking a different view. If things work out as he\u2019d like them to, the company could improve its position in the technology industry, where it has struggled to compete against tech powerhouses like Amazon, Microsoft and Google in cutting-edge areas like cloud computing and artificial intelligence.<\/span><\/div>\n
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\nRevenue growth could come in part through dealmaking, just as it has at Salesforce and other enterprise technology companies. <\/span><\/div>\n
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\nAcquisitions certainly happened in the Rometty years, including Red Hat, which Krishna engineered alongside Rometty. In the first quarter while IBM revenue overall declined 3.4%, Red Hat revenue rose 18% on a normalized basis. Krishna sees IBM continuing to buy companies. It\u2019s just that he might be more willing to buy companies for growth rather than immediate earnings injections.<\/span><\/div>\n
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\n\u201cIt doesn\u2019t have to be accretive on month one, or day one,\u201d he told analysts.  \u201cAs long as it\u2019s a healthy business, provides us a growth profile and provides us the ability to get sufficient synergy both for IBM and for the property itself, both have to be winners. It cannot just be one otherwise it\u2019s not that attractive.\u201d<\/span><\/div>\n
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\nIt\u2019s not clear how much revenue growth IBM will be able to yield from products its engineers build internally. But it\u2019s cler where he\u2019s trying to focus growth: Krishna repeatedly said on Monday\u2019s call that the most important areas are hybrid cloud (the Red Hat deal will help there) and artificial intelligence. <\/span><\/div>\n
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\nThe company\u2019s shares dipped about 3% after hours following its earnings report. <\/span><\/div>\n
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