Summary
- IBM delivers more of the same: lackluster results.
- IBM's ability to generate cash flows is turning south.
- Why it is time to sidestep IBM.
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Investment Thesis
IBM (IBM) has turned a corner -- to the dark side. One month ago, I wrote:
when nobody had any conviction that IBM was a great stock to own, given that I'm a contrarian and deep value investor, I was bullish on the name for more than twelve months and particularly vocal during the aggressive sell-off of Q4 2018.
As it stands right now, after this rally, I would consider lightening up a little in my position.
With the benefit of hindsight (always helpful!), I should have been more callous and called it a day then, rather than advocating for simply lightening up.
But it is not too late still to heed my own advice: avoid IBM.
(source)
Q3 2019 - Highly Disappointing
Before getting stuck into the nitty-gritty of IBM, I believe it is worthwhile to discuss IBM's CEO Ginni Rometty. So many shareholders point to her as the blame for why IBM is failing.
Sure, she doesn't particularly aid matters, but to contend that if she left, someone would sweep in and deliver shareholders with strong returns is somewhere between wishful thinking and delusional.
IBM's problems are so ingrained, that it is not one person, it's the whole culture.
Moving onto its recent results, starting at the top-line of IBM's Q3 2019 all the way down, the results were hard to stomach. I would go so far as to posit that the market under-reacted to how poor these results transpired to be.
