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IBM Is Absolutely Down For The Count

Summary

Despite a slew of recent pro-IBM articles the company is doomed.

Earnings are being cast in a manner that looks like a turnaround but actually isn't.

The company plans further drastic downsizing from which it is unlikely to recover.

This essay is in direct response to Daniel Katz's IBM Is Not Down for the Count. The gist of his argument is that IBM's cloud revenue has been growing steadily and this week's announcement of IBM (NYSE: IBM) winning a seven0year contract with Workday (NYSE:WDAY) (a presumed savvy customer) shows Big Blue has its cloud act together. Katz has a follow-up pro-IBM post, IBM's Survival Instinct, which might have led me to title this post IBM's Death Wish, but I think you can see where I am headed with this.

My points here are simple. As I explained in some detail in my post IBM: 1Q'16 Financials Are Misleading, IBM has lately been telling an earnings story apparently intended to misguide Wall Street. The plot of this story is simple: Cognitive Computing (especially Cloud) is up-up-up while Mainframes and associated businesses are fading fast so it is important for IBM to transform itself into a Cognitive Computing company. But the truth is that Cognitive Computing (more on that in a later paragraph) isn't growing much if at all and is actually losing lots of money. But this is obscured in the earnings reports by revenue taken mainly from Systems (Mainframes) and reported as Cognitive when there is nothing - NOTHING - Cognitive about that business. This is IBM's transition story and it is blatantly wrong, but because it takes a little effort to figure that out from the earnings reports, most readers don't understand that.

This segmentation story continued in 2Q so my writing about it had little to no effect on IBM. The company is still robbing Systems to pay Cognitive.

And speaking of Cognitive, that's a relatively new term for IBM to use. You'll recall last year the strategic imperatives were specifically referred to as CAMSS (Cloud, Analytics, Mobile, Security and Social). Why rename it Cognitive when the previous name contained so much useful information? Well Social is a bust for IBM, so Cognitive doesn't include it, for one thing. They could have...


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