IBM’s shares plunged 24% in premarket trading, putting the company on pace for its worst day in its 115-year history. The warning from IBM CEO Arvind Krishna sent shares tumbling, with the company’s worst day ever being October 19, 1987, when shares fell 23.7%.

Causes of the Decline

Krishna stated that the company struggled over the past three months as customers rapidly changed their technology budgets and scrambled to get their hands on servers, storage, and memory that AI datacenters are gobbling up. This shift in purchasing behavior led to less spending on IBM’s new z17 mainframe computer, which the company was betting on to land business customers in the AI era.

The price of microchips, particularly memory and storage processors, has surged in recent months, leading to increased costs for companies like Apple, which raised prices of Macs and iPads. IBM saw this change coming but was alarmed by the magnitude of the shift in customer purchasing behavior.

IBM’s customers were also distracted by Anthropic’s Mythos debut, which the AI company warned could give hackers tools to discover cybersecurity vulnerabilities in corporate systems before companies become aware of them. This paused several large deals that IBM had anticipated it would close by the time the quarter had ended.

Krishna noted that the company is quickly innovating out of the turmoil, launching its Lightwell open-source security software in rapid response to Mythos. The company’s preliminary sales grew just 1% in the past quarter, and its unadjusted earnings per share fell 2%, both below the company’s forecasts.

Original reporting: KTVZ (Central Oregon) — read the source article.