Summary
- Ginni Rometty is stepping down as CEO.
- New CEO was focused on the cloud.
- This move reminds me of Microsoft from a while back.
After the bell on Thursday, shares of technology giant IBM (IBM) rallied after the company announced a change at the top. As the chart below shows, shares were up nearly 4% with Ginni Rometty stepping down, as the new leader looks more in tune with the company's future. Now, IBM will need to start delivering more impressive results as it looks to build off the Red Hat acquisition in order to solidify this move.
(Source: cnbc.com)
There have been many people calling for a change in leadership at IBM. In fact, I discussed the move back in October 2018 after one of the company's many earnings report failures under Ginni Rometty. The business just wasn't performing as well as expected under her, with revenues floundering and earnings per share excluding help from the buyback program not looking impressive. As I mentioned in my most recent article on the name, IBM shares were up just 10% in the past five years, dramatic underperformance to the overall tech sector and a number of the company's peers.
IBM has named Arvind Krishna its new CEO, and he would seem like the perfect man for the job. Not only has he been with the company since 1990, but he was most recently the Senior Vice President for Cloud and Cognitive Software. Jim Whitehurst, the Red Hat CEO, was also promoted to company President. When cloud is the area you want to focus your business on in the near term, these are the kinds of leaders to put in charge at the top. In the press release, Rometty provided the following quote:
"Arvind is the right CEO for the next era at IBM," said Rometty. "He is a brilliant technologist who has played a significant role in developing our key technologies such as artificial intelligence, cloud, quantum computing and blockchain. He is also a superb operational leader, able to win today while building the business of tomorrow. Arvind has grown IBM's Cloud and Cognitive Software business and led the largest acquisition in the company's history. Through his multiple experiences running businesses in IBM, Arvind has built an outstanding track record of bold transformations and proven business results, and is an authentic, values-driven leader. He is well-positioned to lead IBM and its clients into the cloud and cognitive era."
Do you know what Thursday's news reminds me of? Well, let's go back to August 2013, when Microsoft (MSFT) came out and announced that CEO Steve Ballmer was stepping down. The company had just announced a large tablet write-down along with a massive revenue/earnings miss. As a result of the changing CEO news, shares of Microsoft rose by more than 7% that day, closing at a dividend adjusted price of about $30. With Satya Nadella eventually taking over and boosting Microsoft's cloud business, Microsoft shares hit a new all-time high over $174 on Thursday after another strong earnings report.
