Kyndryl: $14.2bn in deals but margins fail to convince
Kyndryl boasts $14.2bn in new contracts, but revenue is falling and margins are not taking off. When will it show in results?
English · Original discussion in Spanish · Published
Kyndryl: $14.2bn in deals and the eternal promise of margin
One figure is repeated like a mantra: $14.2 billion in new deals over the past twelve months. That is the argument of those who see Kyndryl as a recovery play. The problem is that revenue continues to shrink and profits barely move. The promise that legacy IBM contracts, signed at razor-thin margins, will be replaced by more profitable ones has been on the table for a while. And the market still isn't buying it.
Skeptics don't mince words. They talk of a company trapped in a volume strategy, buying projects at any price to keep a foothold with clients, with margins that barely allow it to breathe. Against Indian consultancies, able to offer lower costs, Kyndryl competes neither on price nor on quality. The result, they say, is a company without differentiated talent that trades cheap for a reason.
The optimistic side responds that the business portfolio is being renewed. That those $14.2 billion will eventually translate into numbers, even if it takes a couple of years. Meanwhile, comparisons with DXC Technology – another big name in legacy consulting that has yet to find its place – float in the air.
When will the margin show up in the income statement? That is the question dividing investors. And for now, no one has a short answer.
One figure is repeated like a mantra: $14.2 billion in new deals over the past twelve months. That is the argument of those who see Kyndryl as a recovery play. The problem is that revenue continues to shrink and profits barely move. The promise that legacy IBM contracts, signed at razor-thin margins, will be replaced by more profitable ones has been on the table for a while. And the market still isn't buying it.
Skeptics don't mince words. They talk of a company trapped in a volume strategy, buying projects at any price to keep a foothold with clients, with margins that barely allow it to breathe. Against Indian consultancies, able to offer lower costs, Kyndryl competes neither on price nor on quality. The result, they say, is a company without differentiated talent that trades cheap for a reason.
The optimistic side responds that the business portfolio is being renewed. That those $14.2 billion will eventually translate into numbers, even if it takes a couple of years. Meanwhile, comparisons with DXC Technology – another big name in legacy consulting that has yet to find its place – float in the air.
When will the margin show up in the income statement? That is the question dividing investors. And for now, no one has a short answer.
Summary of a discussion on Burbuja.info - Foro de economía, actualidad y política., translated from Spanish and reviewed before publication. Read the full discussion (12 replies).
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