IBM’s annual Letter to Shareholders is attracting more than the usual amount of attention it does thanks to some blunt analysis and frank disclosures offered in it by CEO Virginia Rometty.
Several media outlets including The Street, Bloomberg, ZDNet and Channelnomics have picked up on some of things Rometty ruminates on. In the 2,679-word letter, Rometty paints a picture of an organization at a turning point — a time for the current generation of IBMers “to invent a new IBM" focused on cloud computing and Big Data. The latter, she says, will be to the 21st Century “what steam power was for the 18th, electricity for the 19th and hydrocarbons for the 20th."
“To capture this growth potential, we have built the world’s broadest and deepest capabilities in Big Data and analytics — both technology and expertise," she wrote. All told, IBM has invested more than $24 billion to take advantage of opportunities created by these new technologies, including $17 billion to acquire more than 30 companies, plus millions more to employ, train and coordinate the work of 15,000 consultants and 400 mathematicians.
“Two-thirds of IBM Research’s work is now devoted to data, analytics and cognitive computing. IBM has earned 4,000 analytics patents," she added. “We have an ecosystem of 6,000 industry partners and 1,000 university partnerships around the world developing new, analytics-related curricula."
In addition to the grandiose vision she offered, Rometty was uncharacteristically frank for a CEO of a Blue Chip company.
“We must acknowledge that while 2013 was an important year of transformation, our performance did not meet our expectations," she wrote in the letter. “Our operating pre-tax income was down 8 percent. Our revenue in 2013, at $99.8 billion, was down 5 percent as reported and 2 percent at constant currency."
To restore IBM’s momentum, Rometty said Big Blue is making two strategic changes to its business in areas that “are holding us back." First, it is accelerating IBM’s shift to Linux and other higher-growth, hardware opportunities, and second, it is readjusting its focus in emerging markets in Africa, the Middle East and Latin America to where consistent levels of business and engagements can be attained.