SINGAPORE (Nov 19): Legendary corporate icons can plunge from their exalted status to irrelevance in little or no time. The unfolding saga of General Electric, the world’s largest company by market capitalisation until Microsoft overtook it at the start of the tech boom in 1999, is a case in point. GE, which has been slowly shedding assets since the global financial crisis in 2008, has seen its downward slide escalate over the past two years. Its once lofty stock has plunged 77% from its recent July 2016 peak, and is down 87% from its July 2000 all-time high when it initially rebranded itself as an “industrial internet” company.
A much slower unravelling is seen at another tottering global corporate icon, IBM, or International Business Machines, a pioneering tech company that is now a shadow of its former self. IBM stock is down over 40% from its peak five years ago despite US$50 billion ($60 billion) in share buybacks.
Last week, IBM announced that it was acquiring hybrid cloud player Red Hat for US$36 billion in an all-cash transaction. It hopes the “transformational deal” — the largest in the history of software — will help expedite its makeover from a has-been teetering on the brink of disaster into a player in the tech space. The two companies have been partners for nearly 20 years. IBM is trying to sell the Red Hat deal, the largest in its 107-year history, as a “game changer”. The combination, it claims, will make it the world’s No 1 hybrid cloud provider, “offering companies the only open cloud solution that can help them unlock the full value of the cloud for their businesses”.