Media Miss IBM's Shrinking Revenue
Traders broke out the bubbly, and the media nodded their approval, but should they have?
IBM certainly has conviction: It is adding to its software product sales force, a sign that it sees opportunity in that high-margin area.
But seeing opportunity is different from seizing it. The history of expanding earnings reliably when revenue is declining worse than anyone expected is not great. IBM faces a tumbling global economy and encroaching competition from Hewlett-Packard(HPQ) , Dell(DELL) and others.
Most of the media, though, merely focused without question on the increased estimates for 2012.
In an article titled "IBM Boosts Profit Forecast After Quarter Tops Estimates," Bloomberg only touches upon the revenue trouble at the end, and only in passing.
The Wall Street Journal does way better, pointing out to traders that "sales gains for software and in emerging markets overall slowed last quarter," before sounding the appropriate warning bell with this quote: "'IBM continues to show a phenomenal ability to deliver on the bottom line,' ISI Group analyst Brian Marshall said. 'But it is going to be difficult to deliver going forward if revenues keep falling off a cliff.'"