IBM’s share price just dropped by a whopping 25%. That’s thanks to IBM’s CEO, Arvind Krishna, saying the company didn’t adapt quickly enough to the industry moving towards spending less on software and more on data centre infrastructure (via CNN).
As noted by CNN, this puts the company in the vicinity of its worst day ever, which was Black Monday in 1987. Although it should also be noted that this steep drop occurred during pre-market trading, which tends to be more volatile than in-hours trading. We’ll have to see where the chips actually fall by the end of the day.
There’s also the fact that although it’s a big drop for a single day, it’s just returned things to how they were back in mid-May, with the stock price sitting at around $215. That’s already climbed back up ever so slightly to around $220.
According to CNN, the company CEO explained: “What played out was worse than our expectations. We did not adapt and move quickly enough… While we anticipated some supply chain related impact in our expectations, we did not anticipate the magnitude of the capex reprioritization.”
“These conditions require our teams to execute perfectly, and this quarter we faltered. These are not excuses, but they are realities.”
Given this tone will have been directed at investors, it’s obvious why the share price has fallen. Investor calls and previews are times for presenting as good an image as possible, and given this context, presenting “not excuses” but “realities” isn’t likely to inspire much confidence.
(Image credit: Yahoo Finance)
IBM is now largely a business-to-business software solution and consulting company, and it’s understandable how the once-dominant behemoth could therefore have struggled to make the most of the new AI data centre-centric industry. That being said, the company does still have its foot in hardware, as it recently announced the “world’s first” sub-nanometre chip tech.
The CEO’s comments were a preview of the actual reporting of the company’s second-quarter earnings. Those are set to be reported next week, on July 22.
