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 Applying those precepts to IBM is proving particularly tricky as
many of the company's old-line businesses have already been shut
down or sold, while the units that are supposed to push future
growth, such as cloud and security, face stiff competition.
Earlier on Monday, IBM reported a marked slowdown in business in
September and abandoned its 2015 operating earnings target.
The company also announced it will hive off its loss-making
semiconductor unit to contract chipmaker Globalfoundries Inc.
Analysts and investors agree that relentless reinvention is
something to strive for at Big Blue, but some of the moves tried by
other old line technology companies - such as a split or a spinoff
of weaker businesses - might not be tenable for IBM, which
successfully reinvented itself into a services provider in the early
2000s.
"I don't expect to see anything of that magnitude coming from IBM in
part because they have systematically divested some of the
businesses that were a drag on earnings in the last decade," said
Charles King, principal analyst at research firm Pund-It in
California.
Rometty, who took over as CEO nearly three years ago, has
accelerated divestitures with the sale of IBM's low-end server
business to Lenovo Group Inc and its chip-making business to
Globalfoundries Inc. Those moves eliminated two areas that were a
drag on profits, but other problems remain.
Its storage and server hardware and enterprise software sectors are
slumping and the company faces growing competition in cloud
computing from companies such as Amazon.com Inc.
"They’re on the wrong side of the IT spending food chain. All the
growth is in the cloud," said Dan Ives, analyst at FBR, adding that
mature companies have struggled the most with the shift to cloud.
International Business Machines Corp's faster-growing cloud
computing, mobile, business analytics, social and security services
contribute 25 percent of its revenue
"It is not that they are making a lot of bad choices," said Scott
Kessler at S&P Capital IQ.
"It is just that they are so big and so far along one path, that
even if they make some good decisions in terms of investments and
acquisitions, it seems like it is too little too late in many
contexts."
Future spin-offs will likely be centered on its storage unit,
analysts said.
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The company is also facing criticism that it pursued buybacks at the
expense of investment in new technology. IBM spent $13.5 billion to
repurchase stock in the first nine months of the year, more than
double its net income.
"The company has been using its cash to repurchase stocks and
support its earnings per share, but that has severely weakened its
balance sheet, which used to be one of the true strengths of the
company," said Kessler.
The disappointing third-quarter results also raise questions about
investors' patience with Rometty. The CEO, who joined IBM in 1981,
recently dispensed advice such as "never define yourself as a
product" and "never protect the past" in a Fortune Magazine video
interview.
Making such ideals into reality is proving tricky at IBM.
"When you miss expectations and come in with results the market is
unhappy with, then that puts much more pressure on her, but she
bought herself more time by selling off the micro-electronics
business," said Rob Enderle, chief analyst at Enderle Group in
California.
"The market today is different than the market that existed a decade
ago. She is struggling to readjust to an ever more mobile and cloud
business, which caught most of the industry by surprise," he said.
(Reporting by Marina Lopes. Editing by Andre Grenon)
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