IBM’s CFO Warns of “Substantial Action”

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IBM’s quarter one results didn’t just miss expectations – they were a massive disappointment. At the end of the first quarter, revenues were off by 5.1 percent, while the net income fell by 1.1 percent. The reason? Deals in mainframe systems and related systems that totaled over $400 million were rolled over to the next quarter. While there were a number of circumstances that led to the revenue disappointments, the last time that IBM experienced such a massive letdown was in 2005.

However, digging deeper into the situation, it’s apparent that it was sales-execution problems that led to the miss. While the political power shifts in China as well as federal budgeting by the US government had an effect, IBM is turning its focus inwards and is threatening a “workload rebalancing.”

CFO Mark Loughridge Investigates Big Blue

To prevent a repeat in Q2 and Q3, IBM’s CFO Mark Loughridge is performing an in-depth inventory to determine exactly what product lines showed disappointing performance and how they can be filled. According to Loughridge, they’re taking “substantial action.” While it’s unclear what this action might include, many expect the CFO to make a radical move.

However, Ambuj Goyal and his team at Big Blue shouldn’t be worried despite being called an “underperforming” storage crew. It seems that the first action being taken by CFO Mark Loughridge is revolving around product line changes, and not any workload rebalancing. There are rumors IBM might withdraw from the commodity server market, especially with Power X and related product lines underperforming.

Tips for CFOs to Avoid Underperformance

While company underperformance can’t be blamed on the CFO, there are many steps that a CFO can take to prevent a scenario similar to that of IBM. While CFO Mark Loughridge is doing an excellent job investigating and rectifying the problem, it’s important to remember that a CFO is only as strong as his team. With the storage crew “underperforming” at Big Blue, it’s no wonder that Loughridge is playing a more hands-on role.

To strengthen your team:

  1. Seek top talent and develop it.
  2. Instill a sense of purpose so that all team members take proactive actions to grow the company.
  3. Find ways to improve sustainability.

By incorporating these elements, you’ll be strengthening your company and its team for the long haul.