IBM Stock Is Falling. Investors Are Digesting an Executive Exit and Email Server Snafu.
IBM announced Friday the departure of executive Jim Whitehurst, pictured here.
David Paul Morris/Bloomberg
International Business Machines stock continues to sag following the company’s Friday announcement of a management shuffle that includes the surprise departure of IBM President and Red Hat CEO Jim Whitehurst. While IBM said that Whitehurst will remain a “senior advisor” to CEO Arvind Krishna and the rest of the executive team, the lack of any clear explanation for the unexpected exit obviously is making IBM investors worried that something is wrong.
IBM (ticker: IBM) stock on Tuesday is down 1.5% to $137.93, boosting the stock’s two-day decline to 6%.
Stifel analyst David Grossman wrote in a research note Tuesday that many observers had thought Whitehurst eventually would succeed Krishna as CEO of the company. “It remains unclear why Whitehurst is leaving,” Grossman wrote, adding that leaving the question unanswered could create an overhand on the stock.
But Grossman repeated his Buy rating on IBM shares, keeping his $151 target price, noting that the stock now sports a 4.7% dividend yield.
Morgan Stanley analyst Katy Huberty writes in a research note that Whitehurst’s departure is “more of a natural progression than a red flag,” adding that “while investors are concerned that this has negative read-throughs for the health of IBM’s hybrid cloud business and/or future outlook, we see this as a natural progression for Jim, as most of the Red Hat integration is complete.”
Meanwhile, she notes that there is the potential that a widespread recent email outage at IBM could affect the timing of some deals and impact second-quarter financial results. She notes that IBM has shifted to new internally hosted email servers, and that “the migration didn’t go as planned,” leaving some employees with intermittent email access and no access to their calendars for four to five days.
“This could lead to some revenue recognition being pushed out, as IBM reportedly requires contract e-signatures before midnight on the last day of the quarter to book a deal as revenue in the quarter,” she writes. “In addition to any impact in the June quarter, the outage raises some reputational risk for IBM Services which manages thousands of customer migrations similar to this one each year.”
Huberty keeps her Equal Weight rating and $152 price target on IBM shares.
IBM could not immediately be reached for comment.
Write to Eric J. Savitz at [email protected]
