IBM sales fall, top executives forgo annual bonuses

January 22, 2014 9:43 am

A seventh straight quarterly-sales decline was posted by the biggest provider of computer services in the world – International Business Machines Corp. (IBM) amid the increasing servers demand on the market. This forced the top executives of the company to forgo their annual bonuses for 2013.

The company revealed in a statement that its fourth-quarter revenue decreased by 5.5% to 27.7 billion dollars, which missed the analysts estimates amounted to 28.3 billion dollars.

Currently, technology buyers are becoming more focused on storing data and software on cloud-computing networks rather than onsite. This strategy limits their needs for servers, mainframes and other hardware, which influences on IBM’s sales. Ginni Rometty – the Chief Executive Officer of International Business Machines Corp. has decided to change the strategy of the company and offer more cloud services, which would eliminate some jobs and rip lower-margin business off.

Ms. Rometty said: “In view of the company’s overall full-year results, my senior team and I have recommended that we forgo our personal annual incentive payments for 2013.

A person with knowledge of the issue revealed that currently the company is also in talks with Lenovo Group Ltd. over a sale of its low-end server business, which may be finalized withing a few weeks. This deal is expected to make IBM less reliant on its hardware profit.

The company is also trying to increase its efficiency by cutting jobs and even forecast to post about 1 billion dollars in “workforce-rebalancing” costs during the first quarter of 2014. There is also a management transition in International Business Machines, after the retirement of the former Chief Financial Officer Mark Loughridge at the end of 2013. IBM also is trying to increase its profit in emerging economies’ markets.

The current Chief Financial Officer Martin Schroeter is now facing the expectations to help the company deal with the difficulties. Mr. said on a conference call, cited by Bloomberg: “We continue to position our business for the long term, while dealing with some significant business model issues in hardware.”

On this occasion, the Chief Investment Officer of Tigress Financial Partners – Ivan Feinseth – commented in an interview: “They have to create different products and services that can start to get them market share. That’s where the growth will come from.”

According to CNN Money, the current share price of International Business Machines Corp. is 0.87% down, and its one-year return rate is 0.46% up. The 22 analysts offering 12-month price forecasts for International Business Machines Corp. have a median target of 190.00, with a high estimate of 235.00 and a low estimate of 160.00. the median estimate represents a +0.83% increase from the last price of 188.43.

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