Last quarter took the wind out of IBM's (NYSE:IBM) sails. Though IBM was hardly skyrocketing, its stock was at $170 a share ahead of first-quarter earnings and shareholders were enjoying a slight increase in 2017. After sharing another quarter of total revenue declines, IBM shares have since dropped 10% and are now in the red year to date.

The recent decreases could be viewed as an opportunity for value investors, but that's only if CEO Ginni Rometty and team are able to avoid a few pitfalls that could result in a turn for the worse, particularly considering its somewhat tenuous position with Wall Street.

The slump must end

Investors who follow IBM couldn't help but hear about its five-year run of year-over-year quarterly revenue slides. The $18.2 billion in sales IBM reported last quarter was a 3% drop and started a sell-off. Whether it was warranted or not, the simple fact is that total revenue is going to be under a microscope until IBM can turn the negative tide.

To right the ship, IBM will need to rely on the success of its all-important transition away from legacy hardware and enterprise solutions and start hitting a few more home runs from its strategic imperatives initiative. IBM is relying heavily on its new-ish shift to all things cloud, analytics, data security, and mobile, which brings us to the second reason its stock could fall.

Close-up picture of IBM logo at its headquarters.

Image source: IBM.

Light at the end of the tunnel

One bright spot from last quarter that was overshadowed by the dip in total sales was growth in IBM's strategic imperatives revenue. IBM generated a combined $7.8 billion from its key segments, a 12% improvement over a year-ago. Cloud-related revenue rose to an annual run rate of $14.6 billion, putting IBM on a short list of the world's largest providers in the burgeoning market.

If IBM isn't able to post continued growth in strategic imperatives to at least somewhat offset its overall sales declines, the bears will really have a field day. IBM's key units will likely keep inching up with each passing quarter, but if they don't? IBM shareholders will learn the light at the end of the tunnel is a train, not salvation.

A crowded playing field

Given the seemingly limitless opportunity the cloud, cognitive computing -- sometimes referred to as artificial intelligence or machine learning -- and analytics represent, IBM is facing stiff competition from some of the biggest tech players on the planet. One of the few providers that can boast a higher annual cloud revenue run rate than IBM is Microsoft (NASDAQ:MSFT) with over $15.2 billion as of last quarter.

Competition from Microsoft, along with other industry leaders including Alphabet, doesn't end in the cloud. Microsoft recently earned an upgraded target price based on potential growth of its AI business. IBM is no stranger to competition from industry heavyweights, but with so much on the line, losing share to the competition would hit its stock hard.

Change would breed uncertainty

Rometty has a growing number of industry pundits calling for her removal. One of the biggest talking points coming from last month's IBM shareholders meeting was the narrowly approved 60% bump in pay to $33 million Rometty is now earning, making her one of the highest-paid CEOs in the country.

Should the grumbling about Rometty pick up steam, the result could be a near-term stock price disaster for IBM. Uncertainties involving IBM's total revenue and the success of its strategic imperatives or lack thereof in some investors' minds are already pressuring its stock. A change in management would likely be seen as a positive by IBM bears, but the uncertainty it would bring could send its shares spiraling.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Teresa Kersten is an employee of LinkedIn and is a member of The Motley Fool's board of directors. LinkedIn is owned by Microsoft. Tim Brugger has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares) and Alphabet (C shares). The Motley Fool has a disclosure policy.