Strategic CIO // Executive Insights & Innovation
Commentary
10/16/2009
12:39 PM
Bob Evans
Bob Evans
Commentary
Connect Directly
RSS
E-Mail
50%
50%

Global CIO: IBM CFO Refuses To Comment On Corporate IT Spending

CFO Mark Loughridge noted big improvements in IBM's Q3 business, but declined to comment on the outlook for corporate IT spending--probably because he thinks it's still lousy.

IBM CFO Mark Loughridge yesterday outlined strong improvements in most of IBM's businesses, including significant growth in software at the expense of Oracle and Microsoft, but when asked if those improvements were the result of an uplift in overal corporate IT spending, Loughridge declined to address that issue. Why the silence on such a vital issue?

My guess is, it's because IBM does not see corporate IT spending stabilizing or improving, and Loughridge wanted to avoid making a comment that could only exacerbate an already-delicate situation. On the flip side, he was extremely bullish about IBM's own performance across the board—in services, software, and hardware, as well as in the company's ongoing global initiatives to continue stripping costs out of its own business.

I think what Loughridge was saying primarily is that IBM is continuing to outperform the market, and expects to continue to do so, because it has flipped its business model away from high-volume commodity businesses with low or no margins and has become financially powerful enough to focus its energies on growing the company in strategic new areas while simultaneously wringing out costs in operations and processes around the world. (SeekingAlpha.com's transcript of Loughridge's remarks is here.)

Global CIO
Global CIOs: A Site Just For You
Visit InformationWeek's Global CIO -- our new online community and information resource for CIOs operating in the global economy.

At a time when lots of companies still have their heads down and are obsessed with cost control, IBM's financial strength has allowed it invest in top-line growth—for example, $9 billion worth of acquisitions in business analytics since 2005—even as it prepares to realize $3.5 billion in cost and expense savings built around redeploying its people and streamlining its internal operations globally.

In addition, Loughridge spoke extensively about growth—but those comments were limited to additional business IBM is gaining from existing customers or taking from competitors, as opposed it being the result of stronger overall IT spending. That speaks to the new reality of why CIOs must attack relentlessly their internal IT processes and spending habits to liberate precious dollars to apply toward growth initiatives, because in very few cases will those CIOs be getting more money overall to invest.

Here's how Loughridge answered the two questions he received from analysts about IT spending:

Toni Sacconaghi of Sanford C. Bernstein: "So the question I guess is do you really believe that corporate technology spending is improving at all? Because it’s not evident from this quarter’s performance relative to last quarter and your guidance, so do you believe corporate technology spending is picking up and/or fully stabilized?"

Relevant excerpt of answer from Mark Loughridge: "Now as far as corporate technology spending, I think the results that we are seeing are more indicative of the strength of IBM's offering and our ability to drive value in our offerings to our client base. So I wouldn’t make a comment on technology spending. What we see more broadly I think is some stabilization in the economic environment, and one of the key indicators I think of that stabilization which I would think you would agree with, is credit markets have certainly improved on a year to year basis. You remember last time at this point in time, we were talking about questions like well do you have commercial paper, or do you have a financing business, and we are certainly through those kinds of questions. So with that improvement in credit markets, I believe the environment has stabilized."

And later, this similar exchange with Moshe Katri of Cowen & Company:

Previous
1 of 2
Next
Comment  | 
Print  | 
More Insights
The Business of Going Digital
The Business of Going Digital
Digital business isn't about changing code; it's about changing what legacy sales, distribution, customer service, and product groups do in the new digital age. It's about bringing big data analytics, mobile, social, marketing automation, cloud computing, and the app economy together to launch new products and services. We're seeing new titles in this digital revolution, new responsibilities, new business models, and major shifts in technology spending.
Register for InformationWeek Newsletters
White Papers
Current Issue
InformationWeek Government Tech Digest Oct. 27, 2014
To meet obligations -- and avoid accusations of cover-up and incompetence -- federal agencies must get serious about digitizing records.
Video
Slideshows
Twitter Feed
InformationWeek Radio
Archived InformationWeek Radio
A roundup of the top stories and community news at InformationWeek.com.
Sponsored Live Streaming Video
Everything You've Been Told About Mobility Is Wrong
Attend this video symposium with Sean Wisdom, Global Director of Mobility Solutions, and learn about how you can harness powerful new products to mobilize your business potential.