IBM CEO takes bonus, gets a raise

IBM’s CEO Ginni Rometty is taking a bonus of $3.6 million for 2014, according to SEC documents posted Friday and spotted by Bloomberg News. She will also receive a 6.7 percent salary increase bringing her salary total to $1.6 million for 2015 — her first raise since becoming IBM CEO in 2012.

Here’s the chart posted in the 8K filing.

ibm salaries 2014

News of more money flowing to IBM’s top dogs comes at a dicey time — just days after the company kicked off another round of layoffs last week.

[company]IBM [/company]has taken it on the chin in the past few years for obsessing about attaining $20 earnings per share per year by the end of 2015. That milepost was set in 2012 by former CEO Sam Palmisano (pictured above with Rometty). Critics said IBM was more interested in delivering on that metric that than in building great products people want to buy. Rometty finally jettisoned that $20 EPS goal in October.

IBM share buybacks were also controversial among people who felt IBM should be pouring money back into its businesses, not placating shareholders.

Tough transition

It’s clear that IBM faces big macro issues, most notably the move of many workloads to cloud and Software-as-a-Service (SaaS) infrastructure. That means big companies — IBM’s traditional companies — are buying less on-premise software and hardware. And the big SaaS providers are not necessarily using IBM technology to run their businesses.

Rometty has sold off lower margin businesses, while focusing on cloud, analytics and mobile areas, but many doubt IBM’s claim that it now owns a $7 billion cloud business. In this shift, it faces competition not only from traditional rivals — [company]HP[/company], [company]Dell[/company], [company]Oracle[/company], [company]Microsoft[/company] — but also from made-in-the-cloud giant Amazon Web Services.

Lack of vision?

When I spoke to a former long-time IBM VP last week about other topics, I asked what he thought about his alma mater. He did not want to be quoted by name, but said he has been and remains a fan of Rometty.

However, in his opinion, she was hobbled by IBM’s EPS goal. He likened IBM to a person who is blind in one eye with both hands tied behind his back.

“[IBM] has no sense of what consumers want, that’s the blind in one eye part. The hands-tied part is they’ve been so aggressive in capital allocation, on returning capital to shareholders via dividends and share repurchases, that they’ve not invested in growth,” he said.

An IBM spokesman had no comment, but generally, IBM has disputed the notion that it hasn’t invested in  research and development with an eye to building great products. It typically trots out Watson as an example. It would also likely point to an alliance with [company]Apple[/company] announced in July that focuses on building consumery enterprise applications for iPhones and iPads, as a sign that it “gets” what customers want.

That’s all well and good. The question is whether it’s too late.

This story was updated at 8:15 a.m. PST with IBM’s no-comment

As goes IBM, so goes the enterprise

IBM posted disappointing news for financial analysts and shareholders last week, with a decline in revenue of 4% to $23.72 billion while profit rose 6% from a year earlier to $4.04 billion. This precipitated a shakeup as CEO Gina Rometty reassigned James Bramante — who was until last week running the growth markets group, a role she placed him in when she became CEO the company a year ago, but which fell 9% from last year — and placed Bruno Di Leo back in charge of the  group, which he started in 2008 and grew for several years. She also sounded the alarm bell:

“In the third-quarter we continued to expand operating margins and increased earnings per share, but fell short on revenue. Where we had identified high growth opportunities and pursued them aggressively — cloud, mobile, business analytics, and security — we continued to show strong growth. This underscores our strategy to continuously transform the company to high value,” said Ginni Rometty, IBM chairman, president and chief executive officer.

From my perspective, IBM is a bellwether for the tech sector as a whole, and there is no way to soft pedal the bad news in the tea leaves. They are confronted by the same problems as HP, but Rometty at least has not announced the tailing off of IBM’s remote work policies (see HP’s Meg Whitman follows Marissa Mayer’s lead: All Hands On Deck). Hardware sales are down 17%, especially in proprietary servers running IBM’s version of Unix, as well as a decline in IBM’s enormous services consulting business, which declined 4%.

The few bright spots in IBM’s P&L are those areas that reflect the rapid transition to the next generation of computing: mobile, cloud, analytics, security, and social workforce solutions.

Revenues from social workforce solutions increased 14%, an indication of the fact that social has gone mainstream, and companies are upping their investments.

Notably IBM’s WebSphere solutions business is flat — an indication that it may be reaching the point of decline, but the Rational Software — tools for developers — increased 12%.

IBM is like a mirror that shows what’s going on in the enterprise: companies are investing in mobile and cloud, deleveraging away from proprietary, ‘vanity’ servers in house, and investing in social tools, analytics, and security that meet the needs of a drastically changing workforce. It remains to see if IBM can deleverage its investments in the old technology paradigms and reorient its business lines and operations to get out ahead of this transition.

At the end of her first year, I’d say that Rometty has already opened her second envelope, and blamed the newest disastrous results on Bramante. Earlier in the year she opened the first envelope, and blamed the company’s troubles on the legacies of the past. The third and last note is all she has left, the one that reads “Prepare three envelopes.”