International Business Machines Corp. (NYSE:IBM) has been on a mission to make a strong come back after the lower performance that has prevailed for quite some time. However, there has been some criticism as to whether it’s come back strategy will work.
The questions as to whether the firm is on the road to recovery were especially evident in Big Blue’s InterConnect conference this year when IBM faced a negative analysis report. Toni Sacconaghi, an analyst at Sanford C. Bernstein, expressed his distrust in IBM’s highly announced transformation in a research note. So far the transformation has been working well enough to revive the company’s legacy businesses from their decline. However, the transformation strategy relies a lot on cloud, security, mobility and analytics businesses.
Sacconaghi’s concern is that IBM’s growth has not yet improved despite the expectations that it will improve over time as the strategic incentives grow bigger. The strategic incentives have gained by $13.8 billion in the last four years, and this includes acquisitions. The company’s revenue from the core businesses has dropped by $29.7 billion and as a result, the firm’s revenue has been dropping every year for the past four years.
IBM is also venturing deeply into emerging market such as its recent bet in the healthcare data analytics through the $2.6 billion acquisition of Truven Healthcare. Though it is a huge move for the company, analysts are still skeptic as to whether the massive investments of the company will bring forth the expected rewards. Some of the analysts believe that IBM is also purchasing customers for Watson in addition to technology and data, rather than selling to already existing customers.
IBM is yet to make a comment about Sacconaghi’s statements. According to the firm’s CFO, Martin Schroeter, revenues from analytics, security, mobile, social and cloud businesses added up to a total of $29 billion. Schroeter stated that the total revenues from these businesses is more than a third of IBM’s business and that it represents a 22% rise from two years ago.