IBM CEO Blames Execution for Software Shortfall, Sees Rebound
IBM CEO Arvind Krishna attributed the company's software shortfall in its second quarter to 'execution' rather than a shift away from core competencies. In an earnings call, Krishna explained that IBM witnessed a sudden and dramatic shift in customer spending towards supply chain-constrained hardware and cybersecurity-focused software at the end of June.
This shift led to IBM failing to close a double-digit number of large deals on time, accounting for most of the shortfall. CFO James Kavanaugh added that many clients purchase mainframe and associated software through enterprise license agreements, creating a strong incumbency moat for IBM. However, as clients prioritize other capex investments, the timing of these deals shifted.
Krishna said that about one-third of the delayed deals had since closed, giving the company 'a good indication' that it was a deferral rather than destruction. He also touted plans to increase AI use in software development and sales efforts, as well as optimizing its supply chain.