"There is a certain relief in change."
-Washington Irving
October 11,2017
Op-Ed: It’s Time for IBM to Break Up
In May, Warren Buffett sent Wall Street into a frenzy when he sold a third of Berkshire Hathaway’s stake in IBM. In response to his decision, Buffett stated, “I don’t value IBM the same way that I did six years ago when I started buying…I’ve revalued it somewhat downward.” Agreeing with Buffett, martinwolf President Marty Wolf goes a step further to write: “IBM should break up.”
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Taking into account the company’s 21 consecutive quarters of revenue loss when it posted earnings in July, Marty posits that IBM has been tied down by its declining assets for far too long. While the company was once the unparalleled market leader in mainframe computing, the technology landscape has changed so drastically that its legacy businesses are now outdated; the units that once propelled IBM to international fame have become irrelevant with the rise of cloud and modern platforms. As a result, IBM faces an identity crisis: it is too late to join the profitable markets that the FAANG companies have tightened their grips on, while the company’s scope is too broad to specialize into more niche markets — where successful pure-play vendors have been able to maximize opportunity.
Furthermore, regarding IBM’s new initiatives, Marty writes that IBM would be “robbing Peter to pay Paul” — nominal gains would not be able to salvage the company from having net worth and cash in the red. Ultimately arguing that IBM must face the elephant in the room, Marty offers additional insight into what could finally lead Big Blue in the right direction.
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