IBM stock was showing a loss of more than 25% in one-day trading at the closing of the New York Stock Exchange on July 14, with a closing share price of $217.07. By Wednesday morning, the stock was up only slightly to $218 a share as of 10 a.m. Eastern Time. The decline began with a plunge earlier on Tuesday in premarket trading. It was the biggest one-day drop in share value since IBM stock’s previous worst day, which was October 19, 1987, also known as Black Monday, when shares fell 23.7%. The stock had gone as low as $213.22 on July 14.
The drop in stock price was precipitated by the release of a message to shareholders from IBM’s Chairman, President and CEO Arvind Kroshna. Shares in the Armonk-based company at 11:30 a.m. had been down 26%, trading at about $214 per share.
Krishna said the company struggled over the past three months as customers rapidly changed their technology budgets and scrambled to get their hands on servers, storage and memory that artificial intelligence (AI) data centers are gobbling up. That gave IBM customers less to spend on its new z17 mainframe computer, which the company was betting on to land business customers in the AI era.
“What played out was worse than our expectations,” Krishna said about the company’s second-quarter financial performance. “We did not adapt and move quickly enough.”
The price of microchips, particularly memory and storage processors, has surged in recent months as demand for those crucial data center components has soared. IBM was alarmed by how much its customers shifted their purchasing behavior to get chips and equipment while they still can or while they’re still reasonably affordable.
“While we anticipated some supply chain related impact in our expectations, we did not anticipate the magnitude of the capex reprioritization,” Krishna said. “In addition, clients were distracted with rapidly-evolving, industry-wide cybersecurity concerns in the quarter. These conditions require our teams to execute perfectly, and this quarter we faltered. We did not adapt and move quickly enough, and numerous large deals failed to close on the timelines we expected, driving the majority of our shortfall. These are not excuses, but they are realities.”
The company said preliminary figures show its sales grew just 1% in the past quarter ended June 30 to $17.2 billion, and its unadjusted earnings per share fell 2% – both below the company’s forecasts. IBM is due to release a quarterly financial report on July 22.
(CNN Newsource contributed to this report.)
