| His successor Sam Palmisano took things a step further. To attract investors, Palmisano set a plan called Roadmap 2010 in motion to achieve earnings per share (EPS) of $10 by 2010. The target was met and Roadmap 2015 was set. The goal is to double EPS between 2010 and 2015. The problem is that revenue growth wasn't what drove the improvements in earnings. The company struggled to innovate, and tried to grow by buying out smaller companies. IBM really doesn't have sustainable competitive advantages in any major tech areas. EPS Increase Hid Lack of Growth Without strong sales growth, IBM had to increase profits by cutting costs. This meant laying off workers and shifting to cheaper vendors, but it's not a sustainable way to keep increasing profits. For a while, the strategy did boost the share price, but there's only so much fat you can cut before affecting important muscles and bones. Plus, it's terrible for staff morale and it won't attract top talent to work for the company. Until the final quarter last year, IBM hadn't had a single quarter of revenue growth since 2012. And even then, the streak was broken because of a cyclical replacement in mainframe computers. Probably recognizing the need to shake things up, in the last week of October IBM agreed to buy Red Hat (NYSE: RHT) for $34 billion. This is the largest software deal ever and IBM paid a dear 60% premium. IBM will pay with a mix of cash and debt, and it will suspend stock buybacks for fiscal 2020 and 2021. Paying for a Chance to Grow There's no doubt that IBM hopes the deal will boost growth. By adding Red Hat, IBM is doubling down on an area called "hybrid cloud." Hybrid cloud is a fancy term for storing data on premises, on private cloud and public clouds and ensuring smooth operations across the platforms. Basically, more and more companies are transitioning to the cloud, and IBM has to adapt. To quickly increase capabilities in that area, Red Hat was probably a top choice. The hefty $34 billion price tag suggests that there were probably other bidders in play. The deal will help IBM's positioning in cloud, but whether it gives the tech giant an enough growth boost to justify the price remains to be seen. IBM is nowhere near the problems that sank Sears, but it, too, is an example of a once innovative company that failed to keep pace with competitors after spending years at the top. The Red Hat acquisition suggests that the company really is desperate for growth. Big acquisitions like this don't always work out, but to try to recover some of its former glory, IBM had to give this a shot. | 
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