IBM's worst-ever stock crash since October of 1987 is making headlines across the software and IT services universe. The share plunged 25% to a low of $215.67 on Tuesday, after the company missed Wall Street expectations in their quarterly financial performance.
The company's CEO Arvind Krishna has attributed the blame of the disappointing Q2 earnings to an unanticipated shift in client spending. In a letter to investors that has been making rounds, Krishna said clients shifted spending toward hardware purchases such as memory chips.
"In the last few weeks of June, we saw clients shift their quarterly capex spend toward servers, storage, and memory purchases to secure supply-constrained infrastructure ahead of expected price increases," he stated in the letter.
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IBM "did not anticipate the magnitude of the capex reprioritisation," and said clients were also distracted by "rapidly-evolving, industry-wide cybersecurity concerns," the letter stated.
He added that the conditions required IBM teams to execute perfectly but they "faltered". Krishna admitted to being under-prepared and failing to adapt for the re-prioritisation and not moving "quickly enough".
"We did not adapt and move quickly enough, and numerous large deals failed to close on the timelines we expected, driving the majority of our shortfall," the CEO remarked.
Krishna clarified that these were not "excuses" but "realities". He said that IBM's job is to help their clients through uncertainty, and to find paths forward to grow their businesses "no matter what is happening in the external environment."
However, he concluded the letter on a hopeful note satting that many areas showed strength even as the financial results were disappointing.
"While our second-quarter results are disappointing, our performance in many areas showed strength, reinforcing the conviction we have in our portfolio and strategy," the letter stated.
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IBM Q2 Highlights
IBM reported adjusted earnings per share of $2.93 below analysts' expectations for earnings of $3.01 a share. Topline of $17.2 billion, fell short of Wall Street estimates of $17.86 billion revenue.
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