It might be tempting to dismiss IBM’s early profit warning — its first since the early 2000s — as a misstep by a tech company stuck in an earlier era, rather than an indictment of the software sector or a broader economic warning bell. But CEO Arvind Krishna’s comments paint an ominous picture for more than just IBM, whose shares dropped 25% Tuesday, wiping out $70 billion in market value.
Customers pulled money out of their software and IT services budgets and threw it at buying servers, memory chips, and other hardware whose prices are about to spike due to shortages, Krishna said. “Numerous large deals failed to close on the timelines we expected,” he said. “While we anticipated some supply chain related impact in our expectations, we did not anticipate the magnitude.”
That the alarm came from IBM, a notoriously conservative company that guards its no-surprises reputation with investors, is noteworthy. That warnings from front-line salespeople took so long to bubble up to senior management, and out to stockholders, is also alarming. Shares of Adobe and Salesforce both fell today, but neither reports quarterly earnings until September. Buckle up for a bumpy August.
