IBM plunges on preliminary Q2 miss, cites weakness in software, infrastructure businesses

WARSH, THE CHAIRMAN OF THE FED, IS GOING TO TESTIFY BEFORE CONGRESS. IT WILL BE THE FIRST TIME HE DOES THAT SINCE TAKING HIS NEW JOB. >> LET'S START WITH IBM TUMBLING ON THESE PRELIMINARY RESULTS. COMPANY CITES WEAKNESS IN ITS SOFTWARE AND INFRASTRUCTURE BUSINESS AS CLIENTS SHIFTED THEIR SPEND TOWARD SERVERS, STORAGE AND MEMORY IN ADVANCE OF POTENTIALLY SOME PRICE INCREASES. IN HIS LETTER TO INVESTORS, ARVIND KRISHNA SAID, QUOTE, THIS QUARTER WE FALTERED JIM GRANT DOWN 24 PREMARKET I THINK WOULD BE THE WORST SINCE AT LEAST THE EARLY 60S. >> YEAH, I SPOKE TO ARVIND ARVIND KRISHNA CEO. YEAH, YOU DID TOO. I MEAN, PRETTY ABJECT. LOOK, THERE ARE THESE CONCERNS HE DID NOT ANTICIPATE. I'M QUOTING THE MAGNITUDE OF THE CAPEX REPRIORITIZATION, WHICH YOU MENTIONED. BUT I ALSO THINK THAT CLIENTS WERE DISTRACTED, RAPIDLY EVOLVING INDUSTRY WIDE CYBER SECURITY CONCERNS, THIS MYTHOS. AND BOTH NIKESH ARORA ON MAD MONEY DAVID AND GEORGE KURTZ JUST NOW FROM CROWDSTRIKE SAID, LOOK, THEY EACH HAVE BRIEFED A THOUSAND COMPANIES, THEIR TEAMS, A THOUSAND COMPANIES ON MYTHOS AND MYTHOS IS FROZEN. A HUGE AMOUNT OF SPENDING THAT I DID NOT KNOW IT HAD GOTTEN THAT BAD. SO I PASS IT ON TO YOU. >> COMPANY REPORTS THE ACTUAL EARNINGS ON THE 22ND. SO EIGHT DAYS FROM. >> NOW SUPREME. >> THE KEY I THINK WILL BE. JIM, DO THEY HAVE THE CONFIDENCE TO GIVE US SOME SORT OF A FORECAST THAT THE ORDERS THAT DID NOT COME IN THIS QUARTER WILL ULTIMATELY COME IN? BECAUSE, AS THEY SAID, COMPANIES WERE PERHAPS MORE FOCUSED ON CYBER SECURITY OR, AS THEY ALSO SAID, SPENDING ON SERVERS, STORAGE AND MEMORY. OR IS THIS LONGER TERM IN NATURE AND SOME REAL REFLECTION OF A LACK OF EXECUTION IN TERMS OF THEIR SALES FORCE? >> WELL, I DO THINK THAT REMEMBER, THIS IS A COMPANY THAT HAS A MAINFRAME, OKAY. AND THE MAINFRAME SOFTWARE STACK WAS DISAPPOINTING. THE MAINFRAME SALES WERE DISAPPOINTING. I MEAN, THE REVENUE LOOKS LIKE IT'S ALMOST IN LINE STREET LOOKING FOR 17.86 BILLION. >> THAT'D BE ABOUT 1%. >> YEAH, BUT IT'S THAT SOFTWARE REVENUE, WHICH IS PEOPLE ARE LOOKING FOR FOR PEOPLE LOOKING FOR 10%. AND IT CAME IN AT 5% INFRASTRUCTURE REVENUE DOWN 7%. THAT'S THE THAT'S THEIR MAINFRAME. AND SO I THINK MY DAVID, MY ANSWER IS IT MAY NOT COME BACK. >> REALLY? >> YEAH. >> THEN IF THAT'S THE CASE, IS A 24% DECLINE IN THE STOCK PRICE WARRANTED. YEAH. >> I THINK IT IS. I MEAN, THIS IS HARD. A LOT OF PEOPLE KNOW ARVIND HAS DONE A LOT OF THINGS VERY FORWARD LOOKING, BUT I DON'T I THINK THERE'S THIS THIS IS A FUNDAMENTAL SHIFT OF THIS IS BUYING COMPUTE. THIS IS WHAT WE TALK ABOUT. THIS IS THIS IS NVIDIA AND THIS IS SK HYNIX AND THIS IS MICRON. AND THE MONEY'S GOING TO ANOTHER AREA. AND I DON'T KNOW IF IT FLOWS RIGHT BACK. >> SERVICENOW CRM ALL TAKING A HIT PREMARKET. THE MORE PERNICIOUS THEORY, JIM, IS THAT THIS IS PART OF THE MOVE TO DIRECT ENTERPRISE ON PREMISES STARBUCKS WE'VE TALKED ABOUT THESE THINGS. >> I THOUGHT THE STARBUCKS THINGS WAS MUCH MORE IMPORTANT THAN A LOT OF PEOPLE REALIZE. TRYING TO CUT OUT $400 MILLION FROM IBM, FROM MICROSOFT. MICROSOFT HAS BEEN HAS BEEN CREEPING UP HERE. I TALKED WITH WITH MARC BENIOFF. HE WOULD TELL YOU THAT'S COMPLETELY WRONG. I MEAN, THAT HIS BUSINESS IS BETTER THAN EVER. ADOBE BUSINESS IS BAD. SERVICENOW WOULD TELL YOU, BUSINESS IS NOT ONLY BETTER THAN EVER, BUT THEY'RE GOING TO, YOU KNOW, THEY'RE GOING TO SURPRISE A LOT OF THE PEOPLE WHO ARE NEGATIVE. ALL I KNOW IS, IS THAT THIS IS NOT WHERE YOU WANT TO BE, BECAUSE IT JUST DOESN'T RESONATE WHERE YOU WANT TO BE. I MEAN, LOOK AT THIS SK HYNIX NOW LOOK, SK HYNIX, DAVID, WHAT DO YOU THINK IT'S SELLING FOR THE MULTIPLE FOR NEXT YEAR? >> EIGHT TIMES 3.8. >> YOU'RE KIDDING. NO I'M NOT KIDDING. WAIT WHAT 3.8. >> I THOUGHT I WAS GOOD AT EIGHT TIMES. YOU WERE WRONG. I WAS. >> THAT'S THAT'S SORT OF THE RUNNING JOKE THIS MORNING IS THAT IF THE KOSPI IS TRULY POPPING A BUBBLE, IT'S THE CHEAPEST BUBBLE THAT EVER GOT POPPED. >> I MEAN, OF COURSE THIS IS THIS COMES BACK TO THE IDEA THAT USUALLY THESE COMPANIES ARE GOING TO HAVE THEIR EARNINGS CUT BY A QUARTER. REMEMBER, MICRON WAS LOSING BIG MONEY AND YOU KNOW, LOSING BIG MONEY. PEOPLE ARE LIKE SAYING TO SANJAY, WHY AREN'T YOU SPENDING MORE MONEY? WELL, I'M LOSING SO MUCH MONEY. WHAT MONEY DO I HAVE TO SPEND? AND YET HE STILL DID SPEND MONEY, WHICH IS WHY HE'S DOING BETTER THAN THE OTHERS. >> WE'D HAVE EVEN LESS CAPACITY RIGHT NOW, RIGHT? IF HE HADN'T SPENT THAT MUCH ABOUT COMPUTE. >> IT'S ABOUT COMPUTE AND IT'S ABOUT CYBER SECURITY. CYBER SECURITY IS LOOK, THAT'S TOP OF MIND. WE KNOW THAT. BUT WHEN I SAY COMPUTE, IT'S LIKE, THIS IS ABOUT ALL THE THINGS THAT WE TALK ABOUT. IT'S ABOUT THE SPEND. I MEAN, YOU REMEMBER YESTERDAY YOU SAID, LISTEN, YOU SPEND THE 50 BILLION. THAT'S THAT'S THE ANTE. >> YEAH. FOR FIVE GIGAWATTS OF BUILDING THE BUILDINGS. YES. >> RIGHT. BUT I'M JUST SAYING, WHEN I'M READING TODAY. >> THEY CALL A POWERED SHELL. >> A GIGAWATT IN SALEM, PA. WHAT WAS I DOING BUYING LAND IN UPPER BUCKS WHEN I COULD HAVE BEEN BUYING IN SALEM ANOTHER 100 MILES. I'D BE A RICH MAN. >> YOU WOULD BE. LISTEN. YEAH, THERE HAVE BEEN. I MEAN, THERE ARE STORIES EVERY DAY NOW ABOUT FARMERS SELLING THEIR LAND FOR DATA CENTERS AND REAPING A BIG REWARD. BEVERLY HILLS, BY THE WAY, WE SHOULD MENTION NEW YORK STATE. NO SURPRISE. A ONE YEAR BAN FROM THE GOVERNOR ON NEW DATA CENTER BAN. MEGA MEGA DATA CENTER. >> THE ONLY THING THEY LET US DO IS BRING IS GET THE SAND FROM CORNING. BEST SAND IN THE WORLD. >> BEST SAND. >> IN THE BEST IN. >> THE WORLD. YEAH, IT'S GOOD TO KNOW. THANK YOU. YOU'RE WELCOME. ALL RIGHT. BUT JUST TO GO BACK TO THOSE SOFTWARE COMPANIES, BECAUSE WE ARE SEEING A BROAD SELL OFF. BECAUSE THIS IS A NICE MOVE IN THE NASDAQ. IS IT JUSTIFIED BASED ON THIS LANGUAGE FROM. >> IBM JUSTIFIED ON THIS STUPID ETF THAT TAKES EVERYTHING DOWN. CROWDSTRIKE IN PALO ALTO, WHICH HAVE BEEN THE BIG BENEFICIARIES. THEIR STOCKS ARE GOING TO BE DOWN BECAUSE THIS ALL THE MONEY IS IN THIS. WELL, MOST OF THE MONEY THAT TRADES IS IN THIS INDEX THAT CAN TAKE EVERYTHING. >> I MEAN, WHAT ARE. >> YOU TALKING ABOUT? THE IGV. AND YOU KNOW, I'VE TRIED TO REVISE THE IG. I TOLD MANGOMINT, LISTEN, I'LL REVISE THIS IGB IN A NANOSECOND. IT IS ACTUALLY I DID, I GAVE THEM SOMETHING. I'LL TELL. >> YOU WHAT'S GOING TO HAVE A GOOD DAY IS THE DRAM ETF. >> OH MY GOD. YEAH. >> SOME OF THESE GAINS YOU MENTIONED SK HYNIX JIM BUT GLOW WORMS UP SIX WESTERN DOGE UP ALMOST SEVEN. >> YEAH. I MEAN GLOW WORM IS DOWN BADLY. YESTERDAY WAS DOWN 100 POINTS FROM ITS HIGH. I KNOW THAT NETWORKING AND SECURITY ALSO LOOK I'LL GIVE YOU ONE CISCO CISCO CISCO BY CISCO NOT THE SEC KIND BY THE WAY. >> NO I UNDERSTAND. DO YOU. YEAH. >> YOU SEE MICRON UP 50. IN THE OLD. >> DAYS ALREADY UP 55% FOR THE YEAR. >> WELL IT'S THE BEST BEST DOW STOCK IN CATERPILLAR BACK. >> AND FORTH. IT'S NOT DONE. IT'S AN INEXPENSIVE STOCK VERSUS THESE OTHERS. AND IT'S BEEN A LOT OF MONEY ON CYBERSECURITY WHEN YOU KNOW IT BOUGHT SPLUNK WHICH WAS A GREAT CYBER SECURITY. I'M AWARE. NO. BUT LISTEN, THEY'RE ALL THEY'RE. >> RELATIVELY CHEAP. UNLESS SOMEHOW THE SPENDING WERE TO DROP PRECIPITOUSLY FOR UNKNOWN REASONS. >> OKAY. SO YESTERDAY THEY WERE RELATIVELY EXPENSIVE. TODAY THEY'RE RELATIVELY CHEAP. >> WELL, NO, YOU JUST TOLD ME SK HYNIX IS SELLING FOR LESS THAN FOUR TIMES EARNINGS. >> NEXT YEAR. NO, I'M SAYING THAT YESTERDAY WAS A HORRIBLE DAY FOR EVERYTHING. THAT'S GREAT TODAY. SO WHAT IS THAT. ARE WE GOING TO PLAY THIS GAME EVERY DAY. COME IN HERE AND SAY YOU KNOW WHAT. ARMS. WELL NO ARM TODAY. THERE WAS A NEGATIVE PIECE ABOUT HOW THEY DIDN'T GET ANY FOUNDRY. >> OH I SAW CITY TAKE IT HIGHER ARM THAT IS. >> WELL I MEAN YEAH LOOK THERE'S A CASE FOR ARM BECAUSE IT'S IT'S WELL IT'S IN EVERYTHING AND IT'S HARDWARE. BUT I MEAN YOU KNOW, YOU LOOK AT SOMEBODY WANTS TO MAKE A NAME EVERY DAY LIKE THIS FELLOW WHO HASN'T LIKE APPLE SINCE THE 100. >> I KNEW YOU WERE GOING TO GET. >> TO THIS. WELL WHY NOT? I MEAN, WHY NOT? LET'S GO OUT TO. >> TO UNDERWEIGHT. >> YEAH, WELL, HE WANTS PEOPLE OUT OF A GREAT OPPORTUNITY AND I DON'T BLAME HIM. I MEAN, SOMETIMES ANALYSTS SAY, YOU KNOW WHAT. I'M GOING TO I'M GOING TO MAKE IT SO NO ONE MAKES ANY MONEY ON APPLE. >> YOU'RE NOT FINDING IT. >> I WILL. >> YOU'LL GET TO IT. >> THERE IT IS. HE FOUND IT. >> OKAY. SO WHAT HAS HE DONE? WHEN WAS THE LAST. >> TIME HE WAS AT THE BOTTOM OF YOUR PACK? >> I'M GOING TO GIVE A LITTLE QUIZ TO MY PARTNER OVER HERE, MR. 3.0. WHEN DO WE GOT. WHEN WAS THE LAST TIME HE LIKED MR. BRANDON KNISPEL? I PROBABLY WAS SITTING THERE RIGHT NOW AND SAYING, OH MY GOD, HE'S MAKING FUN OF ME. WHAT WAS THE WHEN DID HE LIKE APPLE LAST? >> I HAVE ABSOLUTELY NO. HOW ABOUT 178? >> OKAY. WOW, HE REALLY NAILED IT. GEEZ. >> AND WE DIDN'T EVEN MENTION HSBC TAKING IBM TO REDUCE. THAT WAS THE OTHER SORT OF NEGATIVE CALL. >> JUST AFTER THE. >> THIS WAS BEFORE. >> BEFORE IT. >> WAS BEFORE. YEAH. LIKE THE THESIS IS, IS THAT IT'S DOUBLE THESIS THAT THAT THE. >> INQ TAKING THEIR QUANTUMS. >> AND AND THEN THE IDEA THAT THEY ARE GOING TO GET HURT BY THE CARRIERS, NOT NOT GIVING YOU SUCH A DISCOUNT. OH, AND THAT THE SERVICE STREAM IS NOT AS GOOD. HOW MANY TIMES HAVE I TOLD TIM COOK, I SAID, IS THERE ANY WAY YOU CAN NOW YOU CAN ANY WAY YOU CAN FIGURE OUT THE SERVICE STREAM AHEAD OF TIME, IS IT? ABSOLUTELY NOT. YOU'LL NEVER BE ABLE TO DO THAT. I MEAN YOU