Stanley Druckenmiller Nailed The Biggest Problem Facing IBM

Back in July, we highlighted comments from hedge fund manager Stanley Druckenmiller, who called IBM the "poster child" for what was wrong with modern corporate behavior.

Druckenmiller said IBM's financial-engineering practices, which include tripling its debt to repurchase stock, were exactly what had been wrong with the economic recovery.

But there was something else Druckenmiller nailed that is an even bigger problem for Big Blue: revenue is falling.

In Druckenmiller's comments back in July, he said that despite a stock price that had, to that point, risen more than 50% since the 2008 stock market bottom, IBM's sales were identical to what they were six years ago.

And on Monday morning, it got worse, as IBM reported earnings that declined 4% year-over-year to $22.4 billion.

In morning trade on Monday, shares of IBM were down about 7%.

According to data from Yahoo Finance, Wall Street expects IBM's annual revenue in its fiscal-year 2014, which ends in December, to decline 2.3% to $97.4 billion. Those expectations are not yet adjusted for Monday's results, which disappointed by about $1 billion, so the Street's annual expectations are likely to be pared further.

And comments from IBM CEO Ginni Rometty certainly didn't do much to engender a great deal of confidence. "We saw a marked slowdown in September in client buying behavior," Rometty said, "and our results also point to the unprecedented pace of change in our industry."

Overall, Druckenmiller's comments were in the spirit of highlighting the problems he believed had been created by Fed policy, in particular thwarting capital spending and encouraging companies to engage in financial engineering rather than to invest in their business.

At the end of September, IBM had $1.4 billion remaining on its share-repurchase authorization.

The company said it expected to request an additional repurchase program at its October board meeting.