IBM Cloud Computing era response capacity to suspect new CEO pressure surge

IBM CEO Rometty (Virginia Rometty)

Beijing time April 20, according to foreign media reports, IBM released a disappointing 2013 first-quarter earnings, after the earnings, the company's shares in the U.S. stock market in Friday, the regular trading day fell 8%, hit a 8-year maximum decline in share prices. Many industry analysts have argued that IBM's performance in recent years has been largely due to the company's inability to cope with the advent of the cloud computing era. However, IBM management seems to be beginning to recognise the problem, and says it will make changes in the second quarter.

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IBM local time Thursday reported the first quarter of the company's 2013 financial year earnings, the results show that IBM's profits fell 1% year-on-year, revenue fell 5%. IBM's shares fell more than 8% per cent in the regular trading day of Friday after the earnings were released, the biggest drop in the company's share price in 8 years.

For IBM's first female CEO Rometty, Virginia Rometty, who took office earlier last year, the company's reporting report was a failure. IBM said the company's poor performance in the first quarter was mainly due to poor execution of the sales team, which was usually led directly by the CEO.

"During the earnings period, we did not achieve all of our goals," Rometty said in a statement released in Thursday local time. ”

In fact, IBM is not the only technology company that has underperformed recently. One months ago, Oracle's earnings also showed the company's recent quarterly revenue growth was weak and blamed the sales team for its poor performance. But IBM and Oracle's rivals, SAP, reported a rather satisfactory Friday earnings increase of 17% per cent over the year and managed to snatch some market share from rivals.

In the past, by virtue of the diversity of its business and the excellent executive power of its management, IBM has always found a unique way to solve the problem, and finally saved it. IBM's stable market performance has also helped it attract a number of well-known investors, and Warren Buffett is one of them, buffet, a Berkshire Hathaway company (Berkshire Hathaway Inc. announced an investment in more than 10 billion dollars to IBM stocks in November 2011.

Cloud computing has hit

However, the poor performance of the earnings data has caused many analysts to question IBM's ability to respond to cloud computing. IBM still maintains a good relationship with many of the world's largest companies and governments, but some analysts believe IBM is now unable to fully meet these customers ' demand for new technology.

As a result, some companies are starting to use salesforce.com Internet software leasing and Amazon's cloud computing services. It should be noted that Amazon's cloud computing business is growing far faster than the traditional IT companies such as IBM and HP.

"Since the end of last year, the outlook for the industry has been Nomura," said Rick Sherlund, an analyst at Nomura and Cherinde, a longtime technology observer. At the same time, the rise of cloud services providers, including Salesforce.com and Amazon, has also begun to pose a huge challenge to traditional it giants such as IBM. ”

Previously, IBM often made profits by selling expensive software to big clients or by outsourcing certain parts of a large enterprise directly. But Cherende says many companies now want to get rid of the so-called "business-building" (construction business) model of developing and promoting expensive hardware and software systems. Instead, these companies are increasingly inclined to lease software and computer systems because of the low cost, shorter deployment time, and no need for companies to do much of the relevant technology deals.

It is worth mentioning that the IT outsourcing business, which can bring billions of of dollars of revenue to IBM every year, is also in a slump as more companies start looking for service outsourcing companies in India or other low-cost countries.

"This area has begun to ripple effect. "Cherende said.

Response measures

At a Thursday earnings call analyst meeting in local time, some analysts asked whether IBM was under great pressure from cloud computing services. According to Mark Loughridge, IBM CFO, Lefrich's first-quarter results were largely due to failure to deliver software and mainframe contracts worth as much as $ hundreds of millions of in time.

"We still have a shortage of sales execution in software and mainframe business." "Lefrich said.

IBM believes that the company has the right tactics and strategy for the current market environment, but lacks in the execution ability. But investors did not seem to be buying it, and IBM lost 19 billion dollars in market capitalisation in Friday.

To change the company's decline, IBM said it would focus on enforcing efficiency in the second quarter and use 1 billion of billions of dollars to start layoffs. In addition, the company is seriously considering stripping part of the business, one of the larger possibility is to sell their low-end server business. According to sources, IBM is currently discussing the sale of x86 server business to Chinese companies Lenovo issues.

In addition, IBM is strengthening its cloud computing and mobile computing business by acquiring more modern software. But the big challenge for IBM now is that the new technology's sales are often not able to compensate for the decline in revenue from traditional business malaise.

"IBM's biggest challenge is that they survive in a world dominated by traditional business models," says Ed Anderson, a Gartner analyst. ”

(Responsible editor: The good of the Legacy)