IBM CEO Pins Software Shortfall on Execution Issues

IBM's CEO Arvind Krishna attributed the company's second-quarter software shortfall to 'execution' issues, rather than a fundamental shift in customer demand. However, he noted that some clients had diverted spending from IBM's core software and infrastructure products to supply chain-constrained hardware components and cybersecurity-focused software.

Krishna explained that this shift occurred at the end of June, with clients prioritizing servers, storage, and memory purchases ahead of expected price increases. As a result, IBM failed to close a double-digit number of large deals on time, accounting for most of the shortfall.

IBM's CFO James Kavanaugh added that these agreements typically contain a high concentration of transaction processing software, which is often treated as capital investments. He stated that about one-third of the shifted deals had since closed, with the remainder expected to close over the next six months.