Tech giant IBM reported a miss on profit and revenue targets by 1 and 5 percent respectively.  This is surprising, given the fact that for the past 31 quarters, IBM was able to meet or surpass analysts’ expectations.  So what happened?   And what does this say about the newly appointed CEO Virginia “Ginni” Rometty?

The problem IBM is encountering stems from the fact that some of the orders the company was waiting on did not arrive, which led to missed targets in the quarter that just ended.  It wouldn’t have been a problem if the company had something to fall back on, but in the previous quarter, IBM company was already hinting at supply problems.

Wikibon Chief Analyst Dave Vellante pointed out on this morning’s Live NewsDesk Show with Kristin Feledy that Rometty’s absence during the conference call was deemed inappropriate, especially since IBM missed its target.  Some are pointing to the poor sales execution, which Rometty used to head before becoming IBM’s current CEO.  Still, all is not lost.

“I still think the prognosis for IBM is good. IBM is on very fertile ground. It’s like a farm that has great soil – that soil, of course, being IBM’s massive customer base,” Vellante sated.  “I think that IBM’s got to make some moves, but I think it is positioning for things like cloud. It’s definitely positioning for Software-as-a-Service. It is the number one company in big data according to some analysis that Wikibon has done. I think long-term the prognosis is good, particularly because IBM it’s a got a huge customer base. It has great services. I mean, services is IBM’s secret weapon. And as well, it invests a lot of money in R&D so it’s got a good pipeline of R&D. I think long-term IBM is going to be just fine. I don’t think this is any kind of fundamental systemic problem that signifies that IBM is broken like in the early ‘90s. I think it’s more some transitions and some tweaking of the model.”

But is cloud computing playing a role in IBM’s slump?  Vellante stated that IBM’s cloud business is up by 70 percent which tells you that it’s affecting the company.   IBM knows that investing in the cloud is necessary to keep up, but it also knows that though cloud adaptation is growing fast, the audience is still quite small.  The downside with missing the target is that there’s a possibility that IBM would lay off some of its workers just to please people – meaning its investors.

For more of Vellante’s analysis, check out the video below.