Investors began to buy IBM after the news about the change of CEO. One of the largest IT companies in the world in recent years has lagged behind market leaders. The new CEO will try to reverse this trend. IBM shares have risen.
IBM has announced a massive reshuffle in leadership. Ginny Rometti, who led the American corporation for the past eight years, will leave the post of CEO. In its place will come Arvind Krishna, who is currently developing the IBM cloud division.
Why is it important?
Rometti has worked at IBM for almost four decades and has become one of the most influential women in the industry, writes The Wall Street Journal. However, the period of her leadership did not bring the company a breakthrough. On the contrary, over the past eight years, IBM has rapidly lagged behind other technology companies.
While the developer was led by Rometti, the stock fell 25%, and revenue fell by the same amount. For comparison, at the same time, Microsoft shares rose by more than 500%, Oracle – by 115%, NASDAQ Composite technology index – by 250%.
While Microsoft or Amazon actively developed their own cloud technology divisions and occupied the market, IBM was always late – large companies stopped buying expensive servers, and instead began to use the power of large providers, and IBM did not have time to adapt to these changes.
In recent years, Rometti has repeatedly stated that IBM will become a major player in the field of cloud computing, but so far the company ranks fifth in the list of the largest providers of cloud infrastructure and less than 2% of the market.
The latest attempt to rebuild was the $ 34 billion purchase of Red Hat, a cloud software company. Thanks to Red Hat in the last quarter, IBM was able to increase profits – before that, sales had been declining for six consecutive quarters. The closing process of this transaction was led by Arvind Krishna, who will replace Rometti.
Who is Arvind Krishna and how did the stock respond?
Krishna spent his entire career at IBM. In January 2019, he was appointed Senior Vice President of the IBM Cloud Division. When the company agreed to a large-scale deal with Red Hat, his task was to obtain approval from antitrust monitors around the world, which he successfully managed.
Shares reacted positively to the reshuffle in the company. At the auction on January 30, after the end of the main session, IBM quotes jumped 4.6%.
Analysts at Bank of America predict that IBM may grow 25.7% in the period before early August 2020. If this forecast comes true, the value of the shares will be $ 170 per paper.
At the same time, the Refinitiv service based on 21 forecasts gives a target cost lower – $ 150 (+ 9.6%). Five analysts give recommendations on the shares “buy” or “actively buy”, 14 recommend holding IBM papers, two experts gave a recommendation to “sell”.
