As it turns out, it was. IBM's stock soared to a high of around $215 from $186 on the day the piece ran, which is higher than it is today.
All investors cared about was that the company beat earnings and it that wasn't veering from its so-called 2015 "roadmap," which is supposed to deliver earnings per share of $20.
A not-so-funny-thing happened on the road to shareholder bliss: The company's sales growth didn't just stall, but for the past six quarters has shifted into reverse. (Interesting how the sales slippage almost correlates perfectly with Sam Palmisano's departure as CEO. At the time, some of us -- OK, yours truly -- wondered if he was getting out while the getting was good. But I digress...)
After quarters of pretending not to notice, with last night's sales miss, investors are finally paying attention.
To quote UBS analyst Steve Milunovich, "Credibility is at a low."
Bernstein analyst Toni Saccanoghi wonders whether IBM is "broken."
A better question: Outside of pulling levers like share buybacks and acquisitions, was it ever really fixed?
There's no question that IBM, under Palmisano and Gerstner, didn't stand still and become a template for Dell. It moved ambitiously into software and it made a bunch of acquisitions away from its legacy hardware business. The company would tell skeptics that it is now run for cash, with profits reinvested in the business.
And in a stroke of brilliance, it created a highly effective investor relations marketing strategy, creating a five-year "roadmap" to hit a specific earnings per share target. The 2015 roadmap calls for earnings per share of $20.
Not only did that give the company a long-term target to tantalize investors with, but it went so far as to say which levers it will pull to get there: Buybacks, acquisitions and "operating leverage."
I'm not a fan of long-term public stock targets, because so much can happen between here and there. And, indeed, that's what is happening with IBM. Investors have finally figured out that earnings per share growth on zero or negative sales growth can only go so far. Best case, it suggest low quality earnings; worst case, earnings growth that isn't sustainable.
09/18/14 - 09:34 AM EDT
09/16/14 - 12:22 PM EDT
09/12/14 - 12:06 PM EDT
09/09/14 - 11:27 AM EDT
09/08/14 - 01:00 PM EDT
11/25/15 - 13:09 PM EST
11/25/15 - 12:59 PM EST
11/24/15 - 08:30 AM EST
11/23/15 - 08:30 AM EST
11/23/15 - 01:00 AM EST
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
Trifecta Stocks analyzes over 4,000 equities weekly to find the elite 1% of stocks that pass rigorous quantitative, fundamental and technical tests.
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
Chris Versace, using sophisticated stock screening and fundamental research, identifies potentially explosive small and mid-cap stocks.
Master swing trader Alan Farley uses his sophisticated software screens to review thousands of stocks each day for you, to find just the handful that meet his demanding criteria.