New Leaders With the Right Experience Will Revitalize IBM Stock

By tapping Arvind Krishna to be IBM’s (NYSE:IBM) new CEO and Jim Whitehurst as its new president, effective April 6, the company’s board has given Big Blue a very good chance to succeed in coming years. Together, the pair should make a great team that will meaningfully accelerate the financial results over the longer term, boosting IBM stock in the process.

New Leaders With the Right Experience Will Revitalize IBM Stock
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Krishna, who had been the company’s senior vice president for cloud and cognitive software, is a cloud and technology expert who has built IBM’s cloud unit into a formidable player in the sector. Meanwhile, Whitehurst, the longtime head of Red Hat, turned that company into a highly successful technology firm, showing that he has tremendous management and marketing abilities.

Krishna is a Technology and Cloud Genius

Ginni Rometty, IBM’s outgoing CEO called Krishna “a brilliant technologist who has played a significant role in developing our key technologies such as artificial intelligence, cloud, quantum computing and blockchain”, as she announced his appointment as CEO on Jan. 31.

He is the co-author of 15 patents, has been the editor of IEEE (a technical professional organization) and ACM (Association for Computing Machinery) journals, and has published extensively in technical conferences and journals, India’s BusinessStandard noted as part of its coverage of the latest Indian-origin executive taking the reins of a global tech firm.

Krishna’s LinkedIn profile states that he had been IBM’s SVP, Cloud and Cognitive Software since January 2019. Before that, he was SVP, Hybrid Cloud from January 2017 until December 2018. And prior to that, he was the company’s Director of Research from January 2015 until December 2016.

Since IBM no doubt conducted a great deal of research on the cloud during the latter period, I’m sure he was immersed in cloud issues in those two years as well. Consequently, Krishna, who had a very strong technology background before 2015, has been closely involved with managing cloud projects for the last five years.

InvestorPlace columnist Matt McCall quoted IBM as saying that its cloud revenue is “more than 2x Alphabet (NASDAQ:GOOGL) unit Google’s cloud revenue.” So, with Krishna involved in managing parts of IBM’s cloud offerings, its cloud business has done fairly well.

Now that he has taken the helm of the company, I believe that he will prioritize its cloud business, hiring the best managers to oversee it and pouring a large amount of resources into it. Krishna will also know the best ways to improve IBM’s cloud offerings.

We’ve seen this movie before. Prior to becoming CEO of Microsoft (NASDAQ:MSFT), Satya Nadella was the EVP of the company’s then-nascent cloud computing unit. After taking the top spot at Microsoft, Nadella made Azure, its cloud business, the number two cloud player in the world, second only to Amazon’s (NASDAQ:AMZN) AWS. The success of Azure, in turn, has revitalized Microsoft and its shares, directly lifting the company’s results and providing it with important new cross-selling opportunities. I believe that Krishna can perform a similar transformation of IBM and IBM stock.

 Whitehurst is a Great Rainmaker and Manager

As Whitehurst’s biography states, “since joining Red Hat (as CEO), Whitehurst has grown revenue from more than $500 million at the end of February 2008, to almost $3 billion for the company’s 2018 fiscal year.” And he was named “one of the world’s best CEOs” by Barron’s in 2018. Moreover, IBM, one of the largest tech companies in the world, felt good enough about Red Hat and its overall performance to buy the company for the huge sum of $34 billion in 2018.

Red Hat’s history shows that Whitehurst is a great manager and marketer who knows how to rapidly grow a technology company. I believe that, as IBM’s number two, he will, using the same management and sales techniques he incorporated at Red Hat, greatly improve the company’s overall performance.

Bottom Line on IBM Stock

The performance of IBM looks poised to greatly improve under this pair’s leadership, lifting IBM stock tremendously in the process.

Krishna looks set to greatly boost the company’s cloud business, enabling IBM to embark on a similar transformation as Microsoft under Satya Nadella’s leadership. Meanwhile, Whitehurst will use his strong management and marketing talents to improve the company’s sales team and its overall performance.

Krishna-Whitehurst is looking like a win-win for the company and IBM stock holders.

As of this writing, Larry Ramer did not own shares of any of the aforementioned companies. Larry Ramer has conducted research and written articles on U.S. stocks for 13 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been GE, solar stocks, and Snap. You can reach him on StockTwits at @larryramer.

 


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