Re: Asleep during business 101.
Yes, certainly. However, the stock market values revenue growth, not profits, free cash flow, or dividends paid. In principle that shouldn't matter; everyone with sense should be happy to buy quality companies at low prices because others are idiots. But that collides with modern executive compensation, which holds that everyone in charge of the company should be paid primarily in either stock or stock options, meaning that they have an overwhelming personal interest not in how successful the business is but in how high the stock price can be sent. Hence the absurd focus on revenue growth not only at IBM but almost everywhere else.
IBM is in fact an excellent cautionary example of where this leads, because the company now has neither growing revenue nor growing profits and is continuing to shrink on nearly every axis, including the valued-above-all-else share price. The businesses have been pretty thoroughly rotten for a long time and management incompetent; inevitably, Mr Graham's weighing mechanism has caught up to IBM and no amount of pandering to the voting mechanism can overcome it.
Lessons to have learned:
* Compensate your executives with cash flow sharing, not shares or options; then focus on the business, not the stock market
* Large corporations should be managed for terminal growth in line with the overall economy; higher expectations are unrealistic
* Inexperienced, ineffective, and offshore employees are cheaper than others, but the difference in value is orders of magnitude greater
* Cheating and abusing people destroy incentives to hustle and innovate, so if you do the former you will have less of the latter
* Successful acquisitions are immediately accretive
* Profitable but low- or negative-growth lines of business should not be sold off but managed for decline and their cash reinvested in growing lines or paid out to shareholders
* No one is fooled by restructurings done to make comparison harder, nor by prolonged financial engineering
It is probably too late for IBM to learn these lessons, though I would hope that some of their more observant junior executives have learned them and will carry them to other companies. Certainly nothing we have seen from their directors and senior managers would suggest an understanding of these lessons.