This Big IBM Bet Doesn't Deserve a Pass

NEW YORK (TheStreet) -- Despite persistent revenue declines over the past couple of years, the Street has always had a love-affair with IBM (IBM). Even though management has wasted well over $16 billion in acquisitions the past couple of year in search of growth, none has been found.

Although IBM produces strong cash flow and above-average return on equity, the stock has lost roughly 20% of its value in the past nine months. Investors have demanded better. Recently, CEO Ginni Rometty insisted that the company is not exiting hardware. Yet this affirmation comes on the heels of IBM's decision to sell the x86 computer server business to Lenovo (LNVGY).

Sure, IBM did well in the deal, which secured $2.3 billion. I will credit Rometty for successfully monetizing a business the company no longer cared to pursue. But cash has never been the issue for this company. The problem has been growth. And the server business was a strong profit producer.

The Street has applauded the decision. But that's only because it comes with 25% reduction in IBM's workforce, most of which will be shed from the company's hardware division. When has that ever been good news? The company called it "rebalancing its workforce" so that it can better focus on its new priorities including analytics, cloud and cognitive computing.

All of that sounds good. But what does it actually mean? With shares up 9% since the announcement, investors seemed content with Rometty's remarks, even though details were lacking. What will be the new growth targets for these new "priorities"? We can't assume a clear and credible plan is in place.

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