IBM Falls - I Told You So
by Sneha Shah
International Business Machines (IBM) is the world's largest software services company with annual revenues of ~$104 billion. The company has a big presence in the software and hardware segments as well. The company's management has shown great foresight in the past, successfully navigating the shift from a hardware focus to a software/services focus. The company's sale of its PC division to Chinese giant Lenovo was a master stroke. While US PC companies like HP (HPQ) and Dell (DELL) have struggled in recent times, IBM has thrived. The company's stock has outperformed the major US technology companies such as Dell, HP, Intel (INTC), Cisco (CSCO) and Microsoft (MSFT) in the last 5 years giving a ~53% return to investors. However, I have been bearish on IBM stock for quite some time now due to concerns about revenue and margin growth. IBM's topline has remained mostly flat over the last decade, despite a number of acquisitions. The limits of margin expansion have also been reached as the company has mostly shifted out of the low margin hardware business. I don't think that the IBM stock is a good one to own and investors should look at better alternatives. IT services companies like Cognizant Technologies (CTSH), TCS and HCL Technologies have shown excellent growth and are better investments in my view. read more »
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