IBM Credits Execution Issues for Software Shortfall
IBM CEO Arvind Krishna attributed the company's software shortfall in its fiscal second quarter to execution issues, rather than any fundamental problems with its business. In a recent earnings call, Krishna explained that a shift in customer spending priorities had led to a delay in closing several large deals, which accounted for most of the shortfall.
The shift was primarily driven by clients prioritizing supply chain-constrained hardware and cybersecurity-focused software, which moved away from IBM's core software and infrastructure competencies. CFO James Kavanaugh noted that this shift was due to customers securing supply-constrained infrastructure ahead of expected price increases.
However, Krishna claimed that about one-third of the deals that slipped have since closed, indicating that the delay was likely a deferral rather than a destruction of business opportunities.
Despite the software shortfall, IBM's stock price remained stable following the earnings release. The company is optimistic about its future prospects, with Krishna highlighting plans to increase the use of AI to help scale software development and bolster sales and marketing efforts.