IBM’s Rometty Takes 2014 Bonus Amid Struggles in Cloud Shift

(Bloomberg) -- IBM Chief Executive Officer Ginni Rometty is taking her annual bonus for 2014, a year when the company posted its first per-share profit decline in more than a decade and the shares tumbled 14 percent.

Rometty will get an incentive payout of $3.6 million, according to a company filing released Friday. This year, she will receive her first salary increase -- 6.7 percent to $1.6 million -- since taking the helm in 2012. Last year, the International Business Machines Corp. executive team opted not to take the bonuses tied to 2013 performance “in view of the company’s overall full-year results,” she said at the time.

Since then, the state of the company hasn’t improved much. IBM posted 11 straight quarters of falling revenue, dragged down by weakening demand for hardware and services. New initiatives like cloud computing and business analytics haven’t grown fast enough to make up for sales declines and divested businesses.

Ed Barbini, a spokesman for Armonk, New York-based IBM, declined to comment about Rometty’s pay.

Rometty has tried to reposition IBM for growth through new initiatives like business analytics, which was a $17 billion division last year, and cloud computing, which has an annual run rate of $3.5 billion in revenue for software and services delivered via the Web. Simultaneously, she’s divested lower- margin operations, fired some workers and hired new employees in expanding businesses.

Forecast Change

In October, Rometty ditched a long-held profit goal instated by her predecessor Sam Palmisano, tossing the $18 a share in adjusted earnings guidance for 2014. That drove down the stock, making it the worst performer in the Dow Jones Industrial Average for a second straight year.

The company posted operating earnings-per-share of $16.53 in 2014, a decline of 1 percent from a year earlier, dragged down by fourth-quarter sales that fell in every reported business unit and geography.

IBM’s annual incentive bonuses for the past two years are largely based on performance compared with financial metrics: operating net income weighs in at 60 percent, while revenue growth and free cash flow account for 20 percent each, according to IBM’s proxy statement.

In 2014, operating income from continuing operations fell 9 percent to $16.7 billion while revenue dropped 6 percent, or 1 percent adjusted for currency fluctuations. The company posted free cash flow of $12 billion after cutting its initial guidance of $16 billion in October.

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