No offense, do you subscribe to EMH? Because:

http://en.wikipedia.org/wiki/Enron_scandal#Timeline_of_downf... ($90/share to bankrupt in about a year)

http://en.wikipedia.org/wiki/Bear_Stearns#Fed_bailout_and_sa... ($140/share to $2 in less than a year)

http://www.sec.gov/Archives/edgar/data/723527/00009317630300... ($90/share to bankrupt in 2 years)

These are just egregious cases. The stock market as an oracle is thoroughly overrated. BlackBerry, the late 90s market bubble, the mid-00s financial products bubble... stock price movement says less than you think it does.

Each of these companies had huge scandals related to accounting fraud. Are you assuming the same is the case with IBM?

Whenever you see many people (not just this author) talk about a company's "financial engineering" you should be concerned they might cross that line; couple that with an explicit pledge to double earnings/share to $20 by 2015 and the danger should be apparent.

.. and you're talking about 2010-2014, a period when the market as a whole went up by about 50%, and pointing to IBM as a success story?

I believe his premise is that IBM will do anything to improve revenue-per-share numbers, even if that kills their future. So from his perspective, good stock performance is expected even if you agree with him that the company is doomed.

Exactly. Based on reading some of his previous essays, plus many other sources that are seeing the problem, "In 2010, Rometty’s predecessor, Sam Palmisano, pledged that per-share earnings would reach $20 in five years, a plan called Roadmap 2015. (http://www.businessweek.com/articles/2014-05-22/ibms-eps-tar...).

So part of this policy is an explicit pledge of the company. How it's being achieved, or attempted, is of course another story, as well as, say, whether everyone should dump their IBM stock once it reaches that goal, assuming enough greater fools can be found....

Check the revenues, the stock price is meaningless.

Stock price is mostly a matter of public opinion, and often diverges wildly from fact.

     ...often diverges wildly from fact

What is it called when somebody writes a book titled "The Decline and Fall of [company still around]"

Blackberry is technically still around.

If you're good at determining when the public is wrong about the stock price, you can make a quick fortune by going long or short on those stocks.

Unless the incorrect opinion of the herd sustains a day past your margin call.

A short sale doesn't have an expiration date.

And you don't get margin calls if you're not buying on margin.

The expriation date of a short sale is the day the interest and fees required to carry the transaction drives you to bankruptcy.

Depending on your solvency and leverage, that's either close by or eons away away but it is real.

A short sale doesn't have a limit to how much you can lose, either. I'm sure you get my point.

If you're sure the market has a stock overvalued, how can you lose?

Again, by running out of money before the market comes to its senses. I'm not sure what's confusing about this.

One of the first lessons to learn is to cut your losses early and let your profits ripe.

If IBMs stock price were nothing more than uninformed public opinion, then it would have been plummeting for what, the past decade? Most non-technical people don't know IBM still exists (they nearly entirely disappeared from the general public's view when they stopped making consumer products); and most people in the trendy half of the tech industry seem to think that IBM is not long for this world.

Its a speculators market so applying logic is a fools errand. None the less, if you buy IBM you're trading a very liquid $185 cash for a very liquid share with tradition of paying a quarterly dividend around $1. Thats an equivalent interest rate "yield" of 2.40% or so. My local credit union is only paying 1.44% on a similar long term-ish investment. Its not completely worthless, but its being milked like a cash cow not treated like a tech company. The PE ratio is like "ten" compared to googles "thirty" or facebook which off the top of my head is like "a hundred".

Comparing the yield of this dead horse to a company that actually matters like Caterpillar or XOM its about the same, around 2.5%.

Of course .gov guarantees return of my capital from my credit union, but who knows what'll happen in the market WRT IBM, so it should return a bit more. CAT and XOM are actually worth something as a going concern. IBM, well...

So.. rate of return below real world inflation rate, no prospects for growth, no one in the market expects future growth (not paying a high price now for earnings later). Doomed. Maybe google or apple will buy them for pennies on the dollar? IBM has patents...

They've also employed a lot more "financial engineering" to make that happen too.

Bloomberg Businessweek had a feature article two weeks ago and one thing it highlighted was that the use of "non-gaap" in IBM's earning release increased 10 fold or something

BlackBerry sales were also up even after the iPhone came out. Even after the Android first hit the market too.

Now they're pretty nearly dead - and I don't think there's any doubt that it was iPhone and Android that killed them. Sales and stock prices often lag behind a real inflection point.

At that scale, even if its fundamentals have rotted a business can coast quite well on inertia alone for years.

enron looked pretty good too.