Daily Times

On Tuesday, IBM (IBM) reported its 21st consecutive quarterly revenue decline. That’s more than five years without revenue growth. And at least one prominent business professor thinks Big Blue might be better of simply shrinking by allowing its legacy businesses to fade away, rather than trying to push itself to grow.

“I think IBM has had a good run,” NYU Stern School of Business professor Aswath Damodaran told Yahoo Finance. “Not all companies last forever. There is a life cycle to a company. They are born grow and then decline. They [IBM] have been in decline for 10 or 12 years.”

Damodaran, who teaches corporate finance and valuation, says trying to force growth in older companies like IBM could actually have a negative impact on them, because they might end up simply throwing good money away. “When you’re 75, you’d love to be 35 again, but you’re not going to,” Damodaran said. “So that’s the way I think of aging companies. Trying to turn them around might be the most dangerous thing you can do.”

‘We continue to believe IBM will merge … much stronger’ So how exactly is IBM trying to turn itself around? By focusing on what it calls its strategic imperatives. Those include businesses like the cloud, cybersecurity, mobile, analytics and its Watson AI solution. According to IBM vice president of finance and issues communications Ian Colley, the company’s strategic imperatives have grown from $13 billion in business in 2010 to $34 billion.

Unfortunately, the firm’s legacy portions, which are made up of hardware and software offerings, are still weighing it down. Year-over-year revenue was down 4.7% in the second quarter of 2017 to $19.3 billion. That, according to Reuters, is the largest decline in the company’s last five quarters. Still, the firm’s cloud business saw a 15% revenue increase to $3.9 billion, while the analytics division saw a 4% increase to $5.1 billion.

Published in Daily Times, July 23^rd 2017.