The Right Way to Deliver Bad Earnings News

On July 14, Arvind Krishna did something CEOs spend their entire tenure hoping to avoid. Eight days before IBM was scheduled to report second-quarter earnings, he published an open letter to investors warning that the results would fall well short of expectations. By the closing bell, IBM’s stock had fallen roughly 25%—the worst single day in the company’s 115-year history. Within days, Wall Street was debating whether activist investors might try to break up Big Blue.