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CEO Daily: Tuesday, April 21st

April 21, 2015, 10:41 AM UTC

IBM CEO Ginni Rometty told Fortune’s Michal Lev-Ram last fall that she has three rules she repeats incessantly to Big Blue employees:

  1. Don’t protect the past,
  2. Never be defined by your product,
  3. Always transform yourself.

Give her credit: She’s sticking to the first two. The company reported its twelfth straight quarter of sales decline yesterday, as hardware sales dropped 22% from a year earlier.

The remaining question – a familiar one to those of us living through the digitization of media – is whether transformation can ever be big enough or fast enough to fill the hole. The company is making a $3 billion bet over the next four years in the “internet of things,” and putting an unspecified amount into its transformative Watson health project. It says its cloud business has grown to $3.8 billion from $2.3 billion a year ago, although details of what’s in that number are a bit, well, cloudy.

Whether this particular elephant can learn to dance is one of the great business questions of this Age of Disruption. Clearly, time is running short.

Our daily story selection below. Please let us know how we can make this newsletter serve you better.

Alan Murray

Top News

 Ginni Rometty's IBM stuck in a rut

IBM has now reported weaker sales for twelve consecutive quarters, with results yesterday showing a 12% drop, or down by nearly $2.65 billion. The company's once healthy computer hardware business is now a significant laggard, and so executives have resorted to talking optimistically about investments in new technologies like data analytics and the Internet of Things. IBM still hasn't seen the fruits of its labor just yet, and while investors were optimistic yesterday, they might not remain so tomorrow.  Fortune

 Wells Fargo in talks to buy GE assets

Wells Fargo is possibly looking at buying all or some of General Electric's biggest lending operation, a portfolio that consists of $74 billion of loans to U.S. businesses. The rationale, if such a deal were to occur, is that buying such a large bundle of loans could be attractive now because interest rates are so low, making it harder for banks to make money. Though other bidders are also in talks with GE, it would make sense for Wells Fargo to seek to extend its lead in helping finance midsize businesses, which are typically companies with revenue ranging from $25 million to $500 million.  WSJ (subscription required)

 SAP seeing some blue sky through the cloud

Europe's largest software firm, SAP AG, said new cloud subscription and support business more than doubled year-on-year in the first quarter, growth that wasn't enough to stop net profit from tumbling 23% but did allow the Germany company to avoid a third consecutive profit warning. It recently bought two companies in the space, Concur and Fieldglass, to help bolster the business. SAP, like IBM, saw its shares struggle last year as both companies pivot to better compete in the changing world of tech.  Fortune

 Bird flu outbreak strikes Iowa farm

Iowa's $2 billion commercial egg-laying industry, which supplies nearly 1 in every 5 eggs consumed in the United States, was hit by a second outbreak of avian influenza in the state. A farm in northwest Iowa will destroy about 5.3 million laying hens after testing confirmed the virus, which is capable of killing an entire flock within 48 hours. Though no human infections with the virus have ever been detected, some major turkey producers have lamented the challenges of recent outbreaks with hopes that there will be fewer incidents as the weather warms up.  The Des Moines Register

 How one companies makes genetic testing cheaper

A Silicon Valley company made up of former developers from Google and Twitter is trying to shake up the genetic testing industry by selling a comprehensive kit that analyzes 19 genes, including the two gene mutations related to breast and ovarian cancer. Color Genomics charges $249 per kit, which is sharply less than the price tag of at least $1,500 offered by competitors -- a price that may be too steep for many Americans unless covered by insurance. The startup has raised $15 million in funding from a handful of investors, including Steve Jobs’ wife Laurene Powell Jobs and PayPal co-founder Max Levchin.  Fortune

Around the Water Cooler

 Can a diet stave off Alzheimer’s?

The newly created MIND diet (Mediterranean-DASH Intervention for Neurodegenerative Delay), developed by researchers in Chicago, was shown to reduce the likelihood of developing Alzheimer’s by 53% in people who followed it rigorously and by 35% in those who adhered to it only modestly. The MIND diet includes specific foods and nutrients found in past studies to be linked to optimal brain health, including green leafy vegetables, berries, fish and olive oil. The findings also hinted that the longer a person follows the MIND diet, the greater the protection from Alzheimer’s disease.   The Globe and Mail

 The companies cashing in on cannabis

The marijuana industry, worth $2.7 billion last year, could potentially generate more than $10 billion in annual legal sales by 2018 according to a cannabis-focused investment firm. As with any emerging industry, even one that faces significant legal and political obstacles, there are a few dominant players worth keeping an eye on. Fortune looks at five notable companies looking to cash in on cannabis, including one publicly traded firm that has posted a stock jump of nearly 68% so far this year.  Fortune

Pensions are becoming a greater liability

Pension plans ended 2014 only 82.5% funded, down from their 89.7% funding level in 2013, according to a report issued by Wilshire Consulting last week. That means defined benefit plans only hold 82.5 cents in assets for every dollar in liabilities they face in to satisfy pensioners’ claims. Shortfalls could push companies to put more money into their pensions, a trend that is already a costly endeavor. Last year, the S&P 500 reported pension expense of $43.5 billion, that is up from $35 billion in the previous year.  USA Today

 South Korea's standard of living to soon outpace France

South Korea, which in the aftermath of the Korea War was one of the poorest nations on earth, is within five years expected to gain ground on some of the world's wealthiest nations. South Korea's GDP is forecasted by one ratings firm to rise to $46,980 by 2020, putting it above France's forecasted figure. The Asian nation's growth can be attributed to close ties to the U.S., as well as high competitiveness. The second factor is also a burden, as rates of liquor consumption and suicide are often among the world's highest. Birthrates are also low and that's something the French have figured out. A top social safety net have helped France report some of the highest birthrates in the developed world.  Quartz