Jim Chanos - Legendary Short Seller: IBM is the anti-cloud company. Earning projections are an Accounting Scam.

Excerpt writeups from interview in @OP+195yVxtd's post below:
Someone on Wall Street decides to tell the truth about IBM's precarious business situation and likely falling stock price in 2021 and beyond.

Chanos: IBM is the anti-cloud company.
As much as they claim they’re a cloud company, the cloud is k–ling them. Revenues decline every quarter YoY, and they’ve cut every cost they can.
They announced another Rometty-like split, where they’re going to spin off the crummy business and keep the good one.
The problem is, IBM is so structurally impaired, they’re spinning of the really bad business, just to keep the bad business.
This doesn’t solve anything. But, they’ll take a bunch of these charges, call them structural, and add them back to adjusted earnings. That’s how they’ll bridge the gap for the next 18 months or so.
This is just an accounting scam, and it’s a really obvious one.

Comment! It's anonymous!

6 replies (most recent on top)

Just par for the course. This has been going on for a while now. Wall Street's gonna come out on top again by switching to the short side. Everything's gonna get dumped on the institutionals and dumb money.

Both the late Jack Bogle and Warren Buffett mentioned in the past that the standardized GAAP earnings are the primary way to judge IBM. Both were appalled with all the adjustments and financial engineering taking place from IBM accounting and both decided to be frank with their thoughts on this.

The street is not buying IBM’s story. AK is under severe pressure to execute. The street is demanding results if AK wants to tap the credit markets. (why do you think IBM just factored IGF’s leases). An 8% shrink in revenues in 4th Q is criminal and foretells of at least an 8% shrink in headcount in 2021 JUST TO BREAK EVEN. The European shrink of GTS announced at 20% shows IBM is trying to get ahead of this, but AK is way late to the party, and Wall Street has demanded results. I expect IBM sized a 1/3 shrink from Jan 2020 to June of 2022 and was executing a 20% plan prior to the 4th q results. After 4th q results, I expect the 1/3 plan to be executed by July of 2021. Good luck to all as massive changes have been moved up on the timeline. It’s the only way IBM survives as a stand alone company. NOTE Activist investors see IBM’s cash flow as something to be attacked, and IBM is in a quite weaken position right now (timing wise) They have too many heads and Covid is squeezing cash flow. Don’t be surprised if AK’s hand gets forced.

https://finance.yahoo.com/m/0ae34277-1ed6-3a34-a0ec-036eeb3bd21d/ibm-has-a-lot-to-prove-in-2021.html?source=eptyholnk0000202&utm_source=yahoo-host&utm_medium=feed&utm_campaign=article&yptr=yahoo

@1bya - There are "GAAP Earnings", which are "Revenue - Costs = Profits" calculated according to how those variables are defined by Generally Accepted Accounting Principles and reported to the SEC under the law.
Then there are "Adjusted Earnings" which are "Revenue - Costs = Profits" calculated however management wants to calculate them and reported unofficially to Wall Street.

Can someone explain to me how this works and why it would help IBM in the markets?

"...they’ll take a bunch of these charges, call them structural, and add them back to adjusted earnings. That’s how they’ll bridge the gap for the next 18 months or so. "

I don't understand this sort of thing, I'm techie, not a finance guy.

To me there's just Revenue - Costs = Profits... the rest all sounds like hocus-pocus to me.

Well, other than some obvious things like debt, etc.

No surprise there... as IBMers we all know this... wish all Wall Street would realize that... that kinda show you how dumb some of the analysts are!! Lol!!!

Thread regarding IBM layoffs

Jim Chanos - Legendary Short Seller: IBM is the anti-cloud company. Earning projections are an Accounting Scam.

6 replies (most recent on top)

Post a reply