There is a curious row going on over IBM.
Wall Street analysts are bemoaning the fact that company has experienced many consecutive quarters of revenue decline as it transforms itself away from more traditional markets that it has realised are in long term decline.
The stark figure is that total revenues have declined $28 billion since 2011.
That cannot be good, can it?
It has been noted that CEO Ginni Rometty took over as CEO and president in 2011, when the company had a turnover of $107 billion, while reporting an historically high operating income of some $21.6 billion.
Stellar figures, no doubt.
But having divested first the personal systems business (albeit some years earlier), and then x86 server business, as well as ditching its semiconductor business, the company was seen as ploughing ahead with a transformation towards becoming a new technology company. This was founded on a set of strategic imperatives (SI), namely cloud, big data, social, mobile and analytics.
You can add to the afore-going blockchain, artificial intelligence and machine learning.
This group of technologies has grown in revenue from some $16 billion to $37 billion in six years.
However, this growth has not pleased the analysts who say the remuneration packages of the senior leaders are not geared towards share price and growth, and hence the apparent catastrophic decline. Despite the performance of the forward looking strategic imperative technologies, the analysts are focused on the overall revenue declines and the resultant impact.
The analysts warn that a company with declining revenues may fall prey to a spiral of annual cost cutting which could be terminal, with commentators citing Sun Microsystems as an example of which we all know the ending.
But is the relentless focus on growth, even through a period of intense re-organisation and refocus, really that important? Well of course, Wall Street would say yes, but as the idea of non-growth focused economics gets floated every now and then, is IBM doing the right thing and simply riding out the change period to properly transform?
Arguably, yes. By having the ability to focus primarily on the SIs that will form the basis of future endeavours, the company has the freedom to do what is right, rather than what is safe in preparing itself. Rather like Dell’s going back into private ownership in order to transform itself without having to answer to shareholders as it did, IBM has decided to do what is necessary without having to worry too much about top line revenues and shareholder worries.
The dangers are that in a more precarious position, it has less access to capital with which to fund transformation, and also that it becomes ripe for acquisition. While the former is certainly a risk, the latter is far less likely in the current climate.
As such, it is a significant but calculated risk.
Are the analysts correct to question he packages and incentives for executives? From their perspectives, yes. They are focused on how more traditionally run companies have gone about the same efforts. Is IBM right to go its own way? As a technologist, I would say yes. It is likely to come out the other side leaner, more agile and better adapted to the fast changing reality of AI, data driven business and cloud.
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