Cutting costs: IBM bosses to forgo bonuses after poor results
IBM’s executives will be denied their bonuses for last year, in the wake of what has proved to be consistently poor performance. The company is investing heavily in cloud computing in a bid to boost profits
IBM CEO Ginni Rometty is one of many leaders in the technology industry tackling the challenge of remaining competitive in the face of changing digital trends, such as the introduction of cloud computing
Following a seventh consecutive quarterly decline in sales, IBM executives and senior management are to forgo their bonuses for the past year.
Although the company is still the world’s biggest computer services provider, IBM’s performance has dipped lately, as customers have distanced themselves from hardware and resorted instead to cloud-computing networks. In response, the company, under CEO Ginni Rometty’s watch, has pushed to enter the low-margin but seemingly lucrative market of cloud-computing, and is steadily gaining momentum in this space.
The decline will no doubt spur Rometty on her way to restructuring the business
“While we made solid progress in businesses that are powering our future, in view of the company’s overall full year results, my senior team and I have recommended that we forgo our personal annual incentive payments for 2013,” said the company’s chairman, president and chief executive officer in a statement.
The American multinational’s revenues for the year, at $99.8bn, stopped two percent short of the last, and revenue for 2013’s fourth quarter slipped five percent. The clearest indication of waning demand for hardware – if ever there was need of one – is a dip of 26.1 percent in revenues for the company’s system and technology unit, which was the worst hit of all.
The decline will no doubt spur Rometty on her way to restructuring the business. The overhaul has so far resulted in excessive job cuts – or “workforce-rebalancing” –and an effort on the part of IBM to gain a foothold in the thriving cloud services market, which is forecast by IBM to be worth as much as $200bn by 2020.
On January 17 the company announced plans to commit over $1.2bn to “significantly expand its global cloud footprint,” which represents something of an earnings opportunity for the ailing IT giant.
“As we enter 2014, we will continue to transform our business and invest aggressively in the areas that will drive growth and higher value. We remain on track toward our 2015 roadmap for operating EPS of at least $20, a step in our long-term strategy of industry leadership and continuous transformation,” said Rometty.”
