IBM's Execution Woes Blamed for Second-Quarter Software Shortfall

IBM's CEO Arvind Krishna acknowledged that the company experienced a 'software shortfall' in its second quarter, but attributed it to execution issues rather than a fundamental problem with its business model. The shortfall was limited to areas of the portfolio sensitive to capital expenditure.

In a call with investors, Krishna explained that IBM witnessed a shift in client spending priorities towards supply chain-constrained hardware and cybersecurity-focused software, which led to delays in closing deals on mainframe and associated software stacks. This resulted in a double-digit number of large deals slipping from the expected timeline, contributing to the shortfall.

However, Krishna pointed out that about one-third of these deals had since closed, indicating that the issue was more of a timing problem than a destruction of business. He expressed confidence in IBM's ability to grow and drive shareholder value, citing the strength of its portfolio and innovation in AI.