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IBM Shares — 3 Pros, 3 Cons

Big Blue continues to prove agile as the tech market evolves

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Just last week, IBM’s (NYSE:IBM) shares hit an all-time high of $190.53, giving the company a $222 billion market capitalization and making it the No. 2 most valuable tech operator in the world.

But as of this week, investors have become a bit more concerned. While IBM’s latest earnings report definitely was strong — with earnings up 13%, to $3.19 per share — it still wasn’t enough to keep up with Wall Street’s expectations. The main reason was IBM’s revenues, which came to $26.2 billion against the consensus estimate of $26.3 billion. On the news, IBM’s shares fell 4.73% to $177.76.

So might IBM be suffering from the slowdown in the economy, or can the company push forward and continue to grow? To see, here’s a look at the pros and cons:


Great management. Even though IBM is 100 years old, the company still has an innovative culture. The management team also knows the importance of execution. For example, back in 2005, IBM sold off its PC division to Lenovo, which allowed the company more flexibility to focus on better growth areas.

IBM’s acquisition approach also is fairly disciplined, usually focusing on smaller deals. This certainly is contrary to the behavior of many other tech companies, including Hewlett-Packard (NYSE:HPQ) and Microsoft (NASDAQ:MSFT), which have been aggressive with large acquisitions. Generating positive results from such deals, however, can be extremely difficult.

Megatrends. During the past decade, there have been most some huge developments in technology, including the emergence of cloud computing, big data and mobile. Yet these require global infrastructures of datacenters, servers and high-end software. The good news is that IBM is one of the few companies that can provide all of this at scale.

Growth markets. For decades, IBM has been investing in emerging-market economies. No doubt, they need top-notch technologies to continue their growth.

Article printed from InvestorPlace Media,

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