IBM's China-driven slump sparks executive shakeup
Updated: 2013-10-18 11:25
IBM Corp has reassigned the head of its growth markets unit, a source with knowledge of the move said, after a surprisingly steep drop in quarterly hardware sales in China prompted a 7 percent share slide on Thursday.
James Bramante's reassignment was first flagged during the company's conference call on Wednesday, when Chief Financial Officer Mark Loughridge said sales chief Bruno Di Leo would be taking over at the unit, which oversees growth markets for the company.
"They know how to get this done," Loughridge told analysts on the call, referring to Di Leo and his team. "They helped build this to begin with."
IBM declined to comment, and the source did not say where Bramante would be reassigned.
The shakeup comes amid concerns that International Business Machines Corp, which is moving steadily into higher-margin businesses such as software and cloud computing, is struggling to sustain growth through its emerging markets business.
The company reported a worse-than-expected 4 percent dip in third-quarter revenue, its sixth straight quarterly decline.
Much of that came from a 17 percent slide in overall hardware. Profitability in that business has declined by $1 billion so far this year.
At least eight brokerages cut their price targets on the stock by as much as 9.5 percent to between $160 and $220, while analysts at UBS Investment Research downgraded the stock to "neutral" from "buy".
The latest quarterly disappointment deals another blow to Chairman and CEO Ginni Rometty in her first year as head of the board. Including Thursday's plunge, IBM's stock has dropped 15 percent since she stepped up as chairman compared with the S&P 500's 18 percent gain.
"We are concerned about future earnings power. IBM has been successful in multiple computing waves in the past but we believe the execution issues combined with the weak IT spending environment will hold back any potential revenue growth," UBS analysts said in a note to clients.