Home Business Wall Street analysts pushed for IBM CEO Ginni Rometty to retire – Business Insider

Wall Street analysts pushed for IBM CEO Ginni Rometty to retire – Business Insider

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Wall Street analysts pushed for IBM CEO Ginni Rometty to retire – Business Insider

The announcement that Ginni Rometty would retire as CEO of IBM was long-awaited but still came as a surprise given the timing.That’s because Rometty said she had finally pulled the company out of revenue declines after years of working on a turnaround, which included the massive $34 billion purchase of Red Hat.Earlier this month, IBM announced earnings that were ahead of estimates, a positive sign that Rometty’s strategy was bearing fruit.But IBM didn’t announce the CEO swap at the time of that earnings report, which is when companies traditionally share news of this magnitude.In the days that followed IBM’s earnings announcement, pundits and analysts still called for her retirement, and the stock gains were short-lived.Visit Business Insider’s homepage for more stories.

IBM on Thursday announced CEO Ginni Rometty would retire from the CEO role in April and named the 29-year company veteran Arvind Krishna as her successor. Rometty will stay on as executive chairman through the end of 2020.The move was both a surprise to Wall Street and not much of a surprise at all. While it has been clear to many industry insiders for over a year that IBM was working on a succession plan, the timing was sort of random — a week after IBM announced its 2019 full-year earnings.IBM surprised the naysayers on January 21 by reporting a better-than-expected quarter, including revenue growth on the back of its $34 billion Red Hat acquisition, that marked a turnaround after years of declining revenues. The day after earnings, the stock soared to just under $144.Better still, in the earnings press release and on the quarterly conference call, IBM promised the quarter wasn’t a one and done. Rometty doubled down on that promise in interview from Davos, Switzerland, with CNBC, saying that after all the years of shedding shrinking businesses, IBM was now in a position for sustained growth. She reiterated the company’s promises that in 2020, growth would come across all metrics: “We said revenue. We said EPS. We said free cash flow and margin expansion.” Her comment on “margin expansion” meant IBM was now making more profit from its younger higher-growth units.

And she further promised that IBM was “going to lead on enterprise cloud.” That’s a tall order, given that the market today is dominated by Amazon Web Services and Microsoft, with Google considered the third-place contender.Promises aren’t enoughBut even in the wake of a promise to get back to growth, and some real results showing progress in that direction, a number of pundits and analysts were still skeptical of Rometty’s leadership.On CNBC’s “Fast Money,” a roundtable of traders said the stock’s jump wasn’t enough.”It was a $150 stock less than a year ago. It was a $180 stock three years ago,” one said.

Another said, “The stock’s gone nowhere for a long period of time. That tells me that current management aren’t the people you want to have in there. So if Ginni Rometty is to retire, I think the stock pops on that.”The discussion followed a hint from Morgan Stanley that Rometty had already been at the helm past IBM’s usual retirement age and “a CEO transition could be likely.” Morgan Stanley had downgraded the stock before earnings. It raised its price target after the killer earnings but didn’t reverse the downgrade.Then, the stock drifted back down, and other headlines flat out called for her retirement.So on Thursday, when IBM announced she was indeed retiring, many analysts greeted the news with a sigh of relief.Moshe Katri, a Wedbush Securities analyst, told MarketWatch the move would be “viewed as a long overdue, welcome change at the leadership level.” 

Amazon casts a long shadowCoincidentally, IBM announced Rometty was stepping down on the same day Amazon, the enterprise-cloud leader, announced its earnings. And to compare and contrast: IBM had $21 billion in cloud revenue for the year, it said. This includes revenue from things like consulting services and on-premises hardware used for what’s called “hybrid cloud,” the industry term for private data centers that work with hosted cloud services. Each of IBM’s major business units include such cloud revenue. Amazon Web Services had $35 billion in cloud revenue for the year, it said. And this was made up almost exclusively of its hosted cloud services, as Amazon doesn’t have a significant on-premises hardware-software businesses.Katri told MarketWatch, “IBM in the last few years has struggled with competitive positioning and losing relevance in a vastly changing tech landscape.”

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