Revenue, with which the company has long struggled, fell again by 3% -- missing analysts' estimates for the second consecutive quarter. If you believe that I'm being too hard on this company, understand that this quarter's 3% revenue drop preceded 4% decline in the April quarter, which then preceded a 2% drop in the January quarter.
I'm sure by now you get the picture.
I believe that if this was any other company not named IBM, say,
(MSFT - Get Report), there would have been a deluge of articles proclaiming the company's death.
But not IBM. And when looking at the results on a segmental basis, there are even more reasons for concern. First, I don't like the fact that the company's usually strong service business was down 4% year over year.
Service revenue has been IBM's "offsetting strength" -- supporting the company's perpetually weak hardware business, which was down again this quarter -- this time by 12%. It's time that investors face a new reality -- this company is no longer untouchable. It's going to be hard for IBM to maintain any sort of competitive advantage over
There aren't enough data to suggest that IBM is losing share to either company. But I can tell you that neither has enjoyed the benefit of the doubt that has IBM. And nor do their stock prices presume perfect execution.
Along those lines, the fact that IBM posted a margin decline of close to 2.5%, which led to a 15% decline in operating income, suggest that IBM is seeing some pricing pressure -- likely from Oracle and Salesforce.com.
These earnings results, as lackluster as they were, didn't vary too much from IBM's first-quarter outcome, upon which I recommended selling the stock. Shares were trading at around $205 at the time. Today, investors have begun to pay a little more attention.
While, I don't believe that this quarter or even the next will be enough to define IBM's long-term outlook, it does, however, force a sort of reevaluation about how this company is judged. Even with its strong balance sheet, which included $10 billion in cash, I don't think I can force myself to buy this stock -- at least not until revenue growth returns. But should the stock fall another 5%, say, to $180, at that point I'll reconsider.
At the time of publication, the author was long AAPL
This article was written by an independent contributor, separate from TheStreet's regular news coverage.
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