Thursday, February 27, 2014

IBM: “No, Really, We Love Our Customers! Honest! Wait! Come Back!”


 Well the IBM 2013 10K is out, and it kicks off with what can only be described as a 180-degree turn in the way the company presents itself to the public.
 As we pointed out here and here, IBM has spent the last five years presenting itself to the public as a shareholder-friendly—indeed, shareholder-obsessed—dividend-and-buyback machine that prided itself on jacking up margins (both gross and net) by swapping in and out of business lines,  “rebalancing” its workforce (i.e. layoffs), and avoiding the taxman however (and wherever—e.g. The Netherlands) the laws allowed it to.
 But that was last year.
 This year, it seems, IBM is a new company.   
 Gone from the “Strategy” declaration in the opening pages of the 2013 10K is  the previous year’s braggadocio about “sustained earnings per share growth and strong cash generation” on the backs of customers whose main role seemed to be to hand cash to IBM in return for the pleasure of watching IBM’s stock price rise on the strength of ever-increasing EPS, thanks mainly to share repurchases from all that cash.
 In its place is a new “purpose,” which, we are told with a straight face, is “making our company essential to clients, employees, partners, investors and communities.”
 (Note to Wall Street: you no longer rank first on IBM’s list of pals—you now rank fourth.)
 Lest readers think we are making up this 180 turn in the infamous IBM “Roadmap,” we provide below the deletion (in red type) from the “Strategy” discussion in Part 1, Item 1, of IBM’s 2012 10K, followed by its replacement (in green type) in IBM’s newly released 2013 10K.  (Both thanks to the indispensable StreetEvents “Daily Delta” service.)

 Old IBM:

 New IBM:






 Meet the new IBM—way different than the old IBM!



Jeff Matthews
Author “Secrets in Plain Sight: Business and Investing Secrets of Warren Buffett”
(eBooks on Investing, 2013)    $4.99 Kindle Version at Amazon.com

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