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International Business Machines Corp. (IBM)’s Painful Transition From Hardware To Software

International Business Machines Corp. (NYSE:IBM) has struggled to justify its long-term plans in the wake of CEO, Virginia Rometty scrapping long-held 2015 profit projections and forecasting a drop in earnings for this year. Bloomberg’s Alex Barinka argues that investors should be concerned about the company’s long-term prospects on failing to provide estimates for next year.

International Business Machines Corp. (NYSE:IBM)

“The problem comes in you have folks like Buffet and other investors who are big holders of International Business Machines Corp. (NYSE:IBM) saying. We loved the fact they have been increasing earnings per share, and they are confident in their investments. […] So with IBM coming out and saying we can’t really predict where we are going to be like we used to be able to, that’s a bit of a concern,” said Mrs. Barinka.

International Business Machines Corp. (NYSE:IBM) is in a transition mode trying to make a shift from the hardware side of the business to focus more on software and services delivery. The cloud is seen as a great investment opportunity for the company although stiff competition from, Inc. (NASDAQ:AMZN) and Google Inc. (NASDAQ:GOOG) could be a big deterrent in the pursuit of market share. International Business Machines Corp. (NYSE:IBM) has already sold a number of servers as well as the disposing of its loss-making chip manufacturing business.

A shift from hardware to software according to Barinka has been a painful experience for International Business Machines Corp. (NYSE:IBM) as customers continue to demand more in terms of service delivery. Rometty has already admitted to the company struggling with sales execution issues; raising questions as to how long it will take for the company to master the intrigues of the software business.

“Now they have this big software and service portfolio, it is about three-quarters of the business a lot of customers though want more that to be delivered on the cloud. They want to be able to go online sign up get it online instead of having International Business Machines Corp. (NYSE:IBM)’s folks come in and install on their own data centers,” said Mrs. Barinka.

Lance Crosby who joined International Business Machines Corp. (NYSE:IBM) with the acquisition of Soft Layer Technologies has been mandated with the responsibility of ensuring a smooth transition from hardware to software with greater focus on the cloud.

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