Business World

Monday 20 November 2017

Rometty under pressure to turn around IBM's fortunes and hit targets

Chairwoman and CEO of IBM Ginni Rometty
Chairwoman and CEO of IBM Ginni Rometty

Alex Barinka

IBM boss Ginni Rometty will face a sceptical audience when she speaks to Wall Street analysts today.

As she's worked to revamp the company in a shifting technology industry, Ms Rometty has kept herself bound to IBM's target of at least $18 (€13) a share in adjusted earnings this year – a number that 60pc of analysts anticipate the company will miss.

After eight consecutive quarters of revenue declines, she must start increasing sales or reduce expenses further to avoid missing the profit goals.

At a day-long conference in New York, Ms Rometty (56) will probably lay out her plan to use newer technology, such as data analytics and cloud computing, to mount a strong comeback in the coming quarters. The question is whether those lines of business can expand quickly enough to make up for falling sales in IBM's hardware unit and in emerging markets like China.

"There has to be intense pressure on her to carry out the execution of the plan," said Bill Kreher, an analyst at Edward Jones.

An IBM spokesman, declined to comment.

"We're transitioning to key growth areas and transforming parts of the business," chief financial officer Martin Schroeter said last month. "We're continuing to make investments in key growth areas such as mobility, security and cloud."

Those changes need to happen more quickly, and Ms Rometty should consider dropping her earnings targets to focus on the transition, said Ben Reitzes, an analyst at Barclays Plc.

After a 30-year career at IBM, Ms Rometty stepped into the role of CEO in 2012 amid sweeping changes in the industry. Her company is still adjusting to the upheaval in the technology world.

"IBM has implemented significant actions as it shifts toward a higher valued-added mix; by no means is the company standing still," Jim Kelleher, an analyst at Argus Research in New York, said. "IBM has also shown an ability to align costs in periods of challenging revenue growth."

He estimates IBM will fall just short of its target with earnings of $17.96 a share this year. (Bloomberg)

Irish Independent

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