IBM’s Turnaround

Today’s post is by Randy Russon, founder of TOPCFOS

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A major player in IBM’s remarkable turnaround was Mark Loughridge, who served as IBM’s CFO from 2004 through 2013. “The modern CFO aims to run a top-performing finance operation and take a lead role in setting strategy. Mark Loughridge, ’82, who last year was named to the No. 1 spot in the Wall Street Journal‘s first-ever ranking of CFOs, does just that.”2 The Chicago Booth Magazine held an interview with Mr. Loughridge entitled, “Adding It Up at IBM”. Quoting from this article, they said, “CFO Mark Loughridge has been at the forefront of the technology giant’s remarkable transformation”. And, part of this interview follows.

CBM: After years of dominance, IBM suffered a debilitating downturn, attributed to a series of missteps, perhaps most famously, allowing suppliers Intel and Microsoft to retain proprietary technology for personal computers. Fortune magazine in a 1993 cover story dismissed IBM as a “dinosaur.” What was it like during that period?

Loughridge: It was very, very tough. Most people don’t realize that [in 1993] we were close to not being able to make payroll, that we had 50,000 to 100,000 employees that we could not afford, or that we had four or five major sites that had to close. We were scrambling to negotiate a $10 billion revolver with the banks to secure the balance sheet. In a three-year period, we had $16 billion in accumulated losses, the first losses in the history of the company.5

Mr. Loughridge was hired to the position of chief financial officer early in 2004. Working in concert with IBM’s chief executive officer, Mr. Samuel J. Palmisano, IBM made over 100 acquisitions in 10 years. This was an incredible acquisition clip, which represented just over one acquisition per month. Although Mr. Loughridge was the catalyst behind this, it required a very bright synergistic team to make this happen. As a result, IBM’s earnings per share soared.

Earnings per share went from $3.76 per share in 2003 to $14.94 per share in 2013. This was almost a four-fold increase! IBM’s market capitalization went from $162,754,400,000 in 2003 to $197,772,000,000 in 2013. This means Mr. Loughridge’s services as a CFO were worth over 35 billion dollars. In closing, here’s where IBM’s financial highlights stood at the end of 2013.

  • Revenue – $99,751,000,000
  • Net income – $16,483,000,000
  • Market capitalization – $197,772,000,000
  • Stock price per common share – $187.57
  • Number of employees in IBM/wholly owned subsidiaries – 431,212

As you can see from the forgoing, this was a remarkable turnaround. We hope you’ve enjoyed our Blog today. Please remember, TOP CFOS offers the finest CFO services to companies anywhere in the world and would love to be a part of your team. Feel free to reach out to us anytime. Your feedback is most welcome, and we invite you to share this post with friends and associates. Our next post will come from the Entrepreneurship category on our website and is entitled The Power of Partnerships. And, thank you for joining us!