With the caveat that I work for IBM but have no inside knowledge about anything important, it doesn't seem very bad to me? Overall profit is going to be down a tiny amount below expectations.
Sure, but a prediction made 3 months ago turns out to be short by a few percent at most, and that leads to a 25%+ drop in the share price? That seems weird to me.
What if the market expected 25% more then reported ? Nobody "knows" what the market expects. People infer it by looking at forward valuation, company guidance, investor expectations, and many many other things happening in the world, in competition, in the value chain. And of course the market does its thing and figures that this company has x% chance of beating (or missing) by $y, and when it's wrong the moves can be huge.
IME you have to be true to what you predict. Whether you're predictably growing, predictably shrinking, or predictably flat if you blow your prediction that's when people start to worry that you don't know what you're doing.
If I read that as an IBM investor I might fully exit. The new product flopped, growth was 1%, and the CEO sounds extremely unconfident. There are way better places to put your money given the potential for future earnings now looks incredibly weak.
Where would you put your money? Everything in the US seems to have exposure to the AI bubble. Is Europe sitting out of the AI race? Maybe some euro etf?
I work in early stage venture so that’s my primary investment focus given the outsized potential. I do have a target date 401k and a professionally managed portfolio as well (broad across asset, sector, geography) but I don’t really focus on those.
>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. This dynamic impacted client buying patterns. While we anticipated some supply chain related impact in our expectations, we did not anticipate the magnitude of the capex reprioritization. In addition, clients were distracted with rapidly-evolving, industry-wide cybersecurity concerns in the quarter.
The EPS was a lot lower than expectation though - and I thought that was the only reason people held IBM shares, they've not traditionally grown quickly but IBM has traditionally done anything it could to get a good EPS.
The other more techy side is to think that a year or so ago when everyone was climbing on AI, people were buying stocks in lots of tech companies to ride that wave; some companies (Nvidia, Samsung, Micron etc) are making a fortune from it. IBM? It's got some things it can point to it's doing in AI but it's not the big beneficiary of this wave.
Depends what happens next. RSUs are taxed as ordinary income at their market value at the time they vest, so it's not necessarily bad if the stock is down.
In fact, the ideal scenario is that the price drops just before your vest and then bounces back up after.
If an employee periodically vests a fixed number of shares, as opposed to a fluctuating dollar amount of shares, this is actually untrue.
Assume an employee's marginal tax rate is 40% and their capital gains rate is 15%. Then there are 2 scenarios:
1. Vest 100 shares at $100 apiece. After tax that's 60 shares * $100 = $6000 total.
2. A sudden price drop causes 100 shares to vest at $50. After tax that's 60 shares * $50 = $3000. Later the price rises to $100 and the employee sells them. Another $3000 in capital gains, leaving $2550 after taxes. Total = $5250.
>2. A sudden price drop causes 100 shares to vest at $50. After tax that's 60 shares * $50 = $3000. [...]
This is only true if you "sell" 40 shares immediately at the time of vesting to pay the tax bill. Because you lose the 40 shares, you don't have as much shares to appreciate in the subsequent upswing. However if you prefer to settle your tax obligations in cash instead, you don't have this issue and you'd actually pay less taxes (assuming the upswing does materialize). It's risky though, because you're basically taking a long position on the stock, and if it falls even more, you'd lose even more money.
Paying taxes isn't optional. Sure you can invest more in the stock with external funds but that's not a fair proposition. If you were to tell me there's a certain chance of a stock going up by 100% we could also just buy calls with those magic funds and make far more money.
In the UK you pay income tax on the initial price; then if you hold the shares before selling capital gains tax on any gains. However CGT is a much lower rate than income tax so I guess it could be a bit advantageous. But you have to factor that against the risk of holding a single company's shares (also the company you work for), against selling and buying into the whole market.
its ironic that IBM sold off its x86 pc/server to Lenovo and kept their big iron (mainframe) but now everyone is buying up pc/server due to AI boom. Dell's stock have been surging with the rest of AI stocks
They just need to wait until nobody is selling or can buy new PCs and are forced to use outdated equipment to use as dumb terminals to access those mainframes.
History shows that DRAM is a brutally cyclical business with boom and bust cycles. It's also heavily capital intensive. You build an expensive fab now, and then demand plummets and you're stuck selling at near cost while carrying enormous fixed assets.
IBM is already not the best at making strategic calls. I can't imagine them being saddled with DRAM business with its repeated busts.
There is graveyard of DRAM companies that never made it.
I think it made sense on its own terms. They retrenched into the business where they are actually differentiated. It is notable that IBM net margins have been ~15% at best for decades. It's an odd business that is huge and just trucks along without remarkable growth. It is the butt of jokes but also a top 100 company by many measures.
Well, it's odd in that they do this sideways financial performance while also from time to time dropping a state-of-the-art microprocessor, like a real tech giant.
You could also see that it's odd in that most companies from 100 years ago simply don't exist. The perfectly flat trajectory bordering on fade-out is uncommon. The median 100-year-old tech company is Sperry, not IBM.
What does IBM even do? Something with India, and servicing legacy no-bid government pork contracts, as far as I can tell. That appears to be the focus and has been for a long time.
That battle was fought in 2012-2015 and except for a few exceptions, IBM lost. The only real advantage IBM had was in mainframes with 1-10TB RAM. For example, customers who like doing database joins on a time-slice of countrywide telecoms data. Only a few customers have that use case, unsurprisingly.
I remember they were pushing the AI narrative all along the 2010s on their front page. 10 years ahead of everybody.
We looked into it at the time there was nothing interesting.
Outside of the mainframe, power business, some research and cool things they bought like Redhat and Hashicorp, IBM is an horrible company.
They are the incarnation of the cold, stupid corporation, the buzzword soup and the sales to entrap you in an expensive unending nightmare.
I heard they had a lot of really good people but my guess is most of them left.
Don't forget when it comes to things like this - if in this case IBM ever had an astoundingly good day, CNN would never write an article about it, and you'd never see it on HN. They choose the picture of reality to install in the reader's minds by selectively choosing what news to report on vs. what to ignore.
It's often interesting to see what the major US news orgs - right and left - are choosing to share with their readers. You see two completely different versions of reality.
Wow ... CNN is definitively not left-leaning. It fully buys into the capitalist ideal. It's more like neoliberal. That's not what I had in mind when I said "left".
You only think this because the Overton window has shifted so far to the right that the center right CNN appears far left because of how far right the ruling party is.
People will argue that it's not dead yet but they're barely top 100 in the world, when they used to be... Number one.
Ouch.
Now, people are going to argue again but IBM, in its dying breath in 2000, did something really amazing: they committed one billion dollar to finance the development of that little known thing in the world called...
Linux.
Maybe Linux would have been immensely successful even without that one billion dollar investment from IBM but I cannot help but see that move in 2000 as the ultimate revenge move against Microsoft.
IBM knew it was falling into irrelevancy, Microsoft had 95%+ browsers market share and the future looked grim. Apple was in bad shape, smartphones didn't exist yet. It looked like Microsoft would conquer everything else.
Turns out: Microsoft (sadly) mostly kept the desktop but, thankfully, it's Linux that conquered just about everything (and OS X / MacOS / iOS quite a bit too).
So big thanks to IBM for that move.
You can think what you want but to me this what a move to prevent Microsoft from owning the entire software world.
48 comments
[ 0.17 ms ] story [ 16.0 ms ] threadWith the caveat that I work for IBM but have no inside knowledge about anything important, it doesn't seem very bad to me? Overall profit is going to be down a tiny amount below expectations.
In fact, the ideal scenario is that the price drops just before your vest and then bounces back up after.
Assume an employee's marginal tax rate is 40% and their capital gains rate is 15%. Then there are 2 scenarios:
1. Vest 100 shares at $100 apiece. After tax that's 60 shares * $100 = $6000 total.
2. A sudden price drop causes 100 shares to vest at $50. After tax that's 60 shares * $50 = $3000. Later the price rises to $100 and the employee sells them. Another $3000 in capital gains, leaving $2550 after taxes. Total = $5250.
This is only true if you "sell" 40 shares immediately at the time of vesting to pay the tax bill. Because you lose the 40 shares, you don't have as much shares to appreciate in the subsequent upswing. However if you prefer to settle your tax obligations in cash instead, you don't have this issue and you'd actually pay less taxes (assuming the upswing does materialize). It's risky though, because you're basically taking a long position on the stock, and if it falls even more, you'd lose even more money.
(so far)
IBM is already not the best at making strategic calls. I can't imagine them being saddled with DRAM business with its repeated busts.
There is graveyard of DRAM companies that never made it.
This isn’t odd at all. It’s a feature common to most businesses that have been around 100 years or more.
You could also see that it's odd in that most companies from 100 years ago simply don't exist. The perfectly flat trajectory bordering on fade-out is uncommon. The median 100-year-old tech company is Sperry, not IBM.
But strategically they decided against a Hardware play and went for software:
2022- ChatGPT released
2023 - IBM buys Manta Software Inc undisclosed sum
2023 - IBM buys Software AG's StreamSets and webMethods $2.33 billion
2025- IBM buys Hashicorp $6.4 billion
2025 - IBM buys Confluent $11 billion.
Jan 28: IBM Mainframe Business Jumps 67%
https://news.ycombinator.com/item?id=46802376
Feb 13: IBM tripling entry-level jobs after finding the limits of AI adoption
https://news.ycombinator.com/item?id=47009327
Feb 23: IBM Plunges After Anthropic's Latest Update Takes on COBOL
https://news.ycombinator.com/item?id=47128907
Apr 30: Granite 4.1: IBM's 8B Model Matching 32B MoE
https://news.ycombinator.com/item?id=47960507
Jun 25: IBM debuts sub-1 nanometer chip technology
https://news.ycombinator.com/item?id=48674967
Tell you what, come back here in 24 hours and let’s touch base and we will see if you or I was right.
IBM currently $217.76 down 24.97% my prediction it bounces back up within 24 hours.
they've the people, tech - only thing stopping them is myopic leadership.
We looked into it at the time there was nothing interesting.
Outside of the mainframe, power business, some research and cool things they bought like Redhat and Hashicorp, IBM is an horrible company. They are the incarnation of the cold, stupid corporation, the buzzword soup and the sales to entrap you in an expensive unending nightmare.
I heard they had a lot of really good people but my guess is most of them left.
Ouch.
Now, people are going to argue again but IBM, in its dying breath in 2000, did something really amazing: they committed one billion dollar to finance the development of that little known thing in the world called...
Linux.
Maybe Linux would have been immensely successful even without that one billion dollar investment from IBM but I cannot help but see that move in 2000 as the ultimate revenge move against Microsoft.
IBM knew it was falling into irrelevancy, Microsoft had 95%+ browsers market share and the future looked grim. Apple was in bad shape, smartphones didn't exist yet. It looked like Microsoft would conquer everything else.
Turns out: Microsoft (sadly) mostly kept the desktop but, thankfully, it's Linux that conquered just about everything (and OS X / MacOS / iOS quite a bit too).
So big thanks to IBM for that move.
You can think what you want but to me this what a move to prevent Microsoft from owning the entire software world.