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With No Growth, Coke and IBM Struggle to

Please Investors
Coca-Cola Co. (KO) and International Business Machines Corp. (IBM) got a stark
message from investors this week: If they can’t keep their businesses in growth
mode, they’d better do something about it -- and fast.
Shares of both Coca-Cola and IBM fell more than 6 percent this week following
their respective earnings, underscoring failings in their strategies. In Coca-Cola’s
case, investors want deeper cost cuts and assurances that the savings will
reward shareholders. For IBM, it’s the opposite: After years of financial
maneuvering to fund buybacks and dividends, investors want good old-fashioned
sales growth.
Both businesses are under increasing pressure after years of sluggish demand
for their products. IBM and Coca-Cola are in the bottom fifth of the Standard &
Poor’s 500 Index in terms of quarterly sales growth. Five years into a U.S.
expansion -- with the unemployment rate down to a six-year low of 5.9 percent -shareholders are looking for more dramatic remedies from companies that aren’t
sharing in the economic gains.
“If your portfolio isn’t really capable of generating top-line growth, clearly either
management needs to change or the business mix needs to change,” said Pete
Sorrentino, senior vice president at Huntington Asset Advisors Inc. in Cincinnati.
“Because that’s what investors are paying for.”
Sorrentino helps oversee $1.8 billion in funds, including IBM and Coca-Cola

Stock Drops
IBM’s shares tumbled 7.1 percent to $169.10 on Oct. 20, when the Armonk, New
York-based company released disappointing results and backed away from its
long-stated earnings goal for 2015. The stock fell an additional 3.5 percent

according to data compiled by Bloomberg. though. .68 yesterday.S. Sales in the third quarter declined to $11. assuming he hasn’t changed his holding in either since June 30. His firm. the world’s largest beverage maker. Cost-Cutting Plan Chief Executive Officer Muhtar Kent has responded to the slowdown with a plan to cut expenses by $3 billion a year by 2019. he said.Berkshire Hathaway Inc. the biggest one-day drop since October 2008. The strategy may have reached its limit. “What we do with my team is to try to control what we can control and execute flawlessly and implement the plan that we have outlined. Coca-Cola. has spent $19 billion buying back its shares in the past 12 months.1 billion on average. said Ali Dibadj. expand profit margin and increase returns on invested capital. “We have outlined very bold and aggressive plans for cost cutting. marking its worst two-day decline since the depths of the recession in November 2008. Analysts had estimated $12. meanwhile. Coca-Cola has said that the savings will be used to fund marketing. Bernstein & Co. the Atlanta-based company said yesterday. (BRK/B). He didn’t respond to a message seeking comment left yesterday with an assistant.yesterday.” Kent said on a conference call after being asked about investor critics. Shareholders also aren’t sure how they’ll get a payoff from the goal.98 billion from $12 billion a year earlier. Coca-Cola and IBM’s share slides have wiped out more than $2 billion from Warren Buffett’s stock portfolio this week. Coca-Cola’s earnings sent its stock down 6 percent to $40. a New York-based analyst at Sanford C. is the largest investor in both companies and he has publicly supported the strategies of the CEOs. is struggling with slower international growth and mounting concerns over obesity and artificial sweeteners in the U.” IBM. Investors wanted more.

“The company’s growth initiatives are not big enough or growing fast enough to offset the secular pressures facing its traditional businesses. Net income has tripled since 2002. Shareholders may not be as accepting of companies that aren’t growing organically. according to data compiled by Bloomberg. sees a broader shift in investor attitudes. Software While investors had called for a return to revenue growth in the past. he said. telling investors that annual adjusted earnings would fall this year for the first time since 2002. which fell more in the most recently reported quarter than 93 percent of companies in the S&P 500. raising additional concerns. a spokesman for IBM. they had been placated by consistent returns from IBM’s legacy units like services and software. Then this week. .” Besides plying investors with stock buybacks to lift earnings per share. James Sciales. another Bernstein analyst. said Toni Sacconaghi. Rometty has slashed expenses by lowering the company’s tax rate and cutting jobs. IBM has said that revenue declines are a byproduct of streamlining the business. Sorrentino. Services. Sales in those businesses tumbled last quarter. investors are no long satisfied with IBM’s sales. IBM reported its 10th straight decline in revenue and had to scrap a five-year profit forecast. 20 note to clients. didn’t respond to requests for comment.” he said in an Oct. The company has been divesting unprofitable units to help boost earnings. the money manager at Huntington. IBM’s steady increase in income had been praised by investors like Buffett. getting rid of revenue that CEO Ginni Rometty calls “empty calories.Sales Slump Now that earnings growth has also slowed.

“Hopefully this leads to that. and the winners should be the ones generating organic growth and the losers should be the ones misspending shareholder capital.“There should be winners and there should be losers. Statistica si Informatica Economica . These changes are never smooth and never pleasant.” he said. Facultatea Cibernetica.” Source : 2014 Name : Mogos Cristina Grupa Date : Oct 22.