Struggling IBM fends off activist investor attacks
As revenues decline some investors want activist hedge funds to intervene and shake-up company
Some top shareholders of IBM, disappointed by 11 straight quarters of falling revenues, are seeking help from activist investors to shake up the company, but have been turned down by both Bill Ackman's Pershing Square and Jeffrey Ubben's ValueAct, according to sources.
International Business Machines Corp was concerned about a possible attack by prominent activist hedge funds, and was working with two investment banks to formulate a defence plan, the sources said.
When asked for comment, IBM said: "IBM is continuing to execute on our strategy - making investments in growth areas such as analytics and cloud, reinventing our core franchises, and returning capital to shareholders. We are managing the company for the long term."
The American technology giant, worth US$157 billion today, has struggled to transform itself from a low-margin hardware maker into a cloud-based software and services company.
When Virginia Rometty took over as chief executive at the start of 2012, Wall Street was hopeful that she would be able to kick start growth. Analysts praised the former systems engineer for her strategic thinking in guiding IBM's acquisition of PricewaterhouseCoopers Coopers Consulting in 2002.
As revenues continued to decline year on year, however, some IBM investors began to lose confidence in management, according to sources. Last year, IBM withdrew its long-term operating earnings target for 2015, and shares of Big Blue are now down about 25 per cent from a March 2013 high.
Part of the activist funds' concern was that IBM, whose stock is trading at around US$159, is too expensive and the company's structural problems could not be fixed easily.