IBM’sIBM revenues have been declining for the last decade and so has its stock. IBM is not alone — there are many public companies that are on the wrong side of the future of business strategy.
How so? Every company these days is in a pitched battle for investors’ very limited attention. What makes the difference between the few that trigger investors’ fear of missing out (FOMO) and the rest?
Simply put, companies that exceed investors’ growth expectations spur investor FOMO. Companies that disappoint those expectations get left behind. A corollary of being left behind is envy of the small number of winners — which spurs a struggle for faster growth.
Sadly growth does not happen just because the CEO wants it. Instead growth goes to companies with the most effective and speediest Observe, Orient, Decide, and Act (OODA) loops.
What’s an OODA loop? Picture two fighter jets in midair. The pilot that sees the enemy first, positions the jet to attack, aims to where the enemy will be and fires their rocket first will be the survivor. The same principle — with many differences in execution — applies in business competition.
Many large companies like IBM simply can’t win the OODA loop race against fast-moving startups. A source close to the company told me in a March 15 interview that IBM bows down to a deity known as “the stack” — which drives IBM to sell each customer “a combination of hardware, software, consulting and the ability to finance it all.”
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Sadly for IBM’s stack-worshipping executives, the cloud has enabled customers to free themselves from Big Blue’s octopus-like grip. Whenever a visionary IBM executive realizes that Big Blue has to overtake these upstarts with a better value proposition, IBM’s stack worshippers slam on the breaks.
Until IBM can reverse that situation, I would avoid the stock.
An IBM spokesperson declined to comment on why IBM’s revenues and stock price have declined. He said IBM expects revenue to grow after it spins off the business that’s dragging it down — resulting in “mid-single digit revenue growth following the separation of its managed infrastructure services business by the end of 2021.”
(I have no financial interest in the securities mentioned in this post).
IBM’s Lost Decade
IBM’s stock has severely lagged the NASDAQNDAQ index in the last decade. How so? In the 10 years ending March 12, 2021, IBM shares have fallen over 21% while the NASDAQ has soared 450%, according to MorningstarMORN.
IBM’s revenues and profits have also declined. In 2010, IBM revenues were about $100 billion — they’ve dropped every year since at a 3% compound average rate of decline to $73.6 billion in 2020, according to macrotrends. Big Blue’s net income is also down — at a 9.3% compound annual rate of decline from $14.8 billion to $5.6 billion in 2020, according to macrotrends.
IBM can’t blame a declining market for its shrinking sales. After all, global IT spending rose from about $3.4 trillion in 2010 to $3.7 trillion in 2020, according to Statista.
In the latest quarter IBM kept on shrinking. According to CNBC, its January 21 Q4 2020 report marked the fourth consecutive quarter of falling revenue and featured no earnings guidance for 2021.
More specifically, IBM’s revenue fell 6% on an annualized basis and at $20.37 billion was $400 million below analyst estimates according to Refinitiv. Adjusted earnings of $2.07 was 28 cents a share above estimates.
IBM blamed external factors. IBM’s CFO Jim Kavanaugh told analysts, “The challenging environment we have seen since March continued with the shift in clients buying behaviors and priorities. Giving the level of macroeconomic uncertainty, more clients tended to move toward shorter duration engagements impacting our software revenue.”
What does the future hold for Big Blue? CNBC noted that despite a lack of formal earnings guidance, IBM expects revenue to grow this year and for the company to generate “$11 billion to $12 billion in free cash flow.”
CEO Arvind Krishna is aiming IBM at top-line growth. As he said, “I want to measure the company on revenue growth.”
One analyst does not see much revenue growth in 2021. According to Morningstar Equity Analyst Julie Bhusal Sharma, IBM will post 1% revenue growth — the achievement of which hinges on a proposed 2021 spin-off of its “largest and worst-performing segment, global technology services.”
Sharma argues that once this happens perhaps investors will notice “IBM’s other segments’ better growth and profitability profiles.”
How IBM Worships At The Altar of ‘The Stack”
IBM’s stack model worked well before the rise of the cloud — but it also created an attractive target for rivals seeking to unlock Big Blue’s grip on customers with more powerful technology that costs customers much less.
My source — an executive with well over a decade at Big Blue — points out how valuable the stack model was to IBM. “Most software sales were accompanied by a hardware and consulting order that was five times larger. IBM encouraged this to the point that it was virtually expected that every software sale came with services,” he explained.
The tip of the spear against the stack was cloud computing — which boosted the effectiveness and lowered the cost of every element of corporate computing. What was great for customers was terrible for IBM — reducing its revenues and slashing salesforce commissions.
How so? “The shift to cloud computing disrupted every layer of the stack. Customers bought compute cycles from the cloud rather than hardware. Software no longer needed installation, only configuration, affecting the consulting business. Software revenue was recognized by monthly subscription, upending sales commission and incentives. And, of course, the entire cloud model was OpEx wiping out the financing business,” he said.
IBM’s consulting business could not cope well with the shift to cloud computing because its people lacked the skills needed to compete there. As my source explained, “The consulting teams tried to reframe their value proposition to software best practices and driving competitive advantage through technology, but most consultants were software installers without the deep business or industry knowledge to help customers drive change.”
While some IBM executives realized that the cloud was the future, its Fortune 100 clients that made up the bulk of its revenues were not yet moving to the cloud. IBM delayed “significant investment and change in business priorities out of fear of cannibalizing the stack,” he said.
As executives hoped it would prove to be a fad, cloud computing eroded IBM’s margins and reduced the magnitude and frequency of customer purchases. IBM executives leading those shrinking business lines put lipstick on the pig by “attaching ‘cloud’ to every division name and job title.”
In 2014, my source recounted a meeting at which IBM required its managers to listen for two hours to IBM’s vision for the “business cloud which would quickly catch up to and overtake its cloud rivals.”
But IBM was just kidding. “During the breaks I overheard one of the executive presenters consoling a manager from the hardware team by saying, ‘Don’t worry all IBM needs is a quarter or two of good stack revenue and we’ll be back!’ It was quite revealing that even as late as 2014, well into our revenue slide, senior executives still didn’t realize the severity of the business disruption,” he told me.
IBM’s Sluggish Product Development Process
The core of the problem is that without an industry-leading product development process IBM can’t catch up — indeed efforts to acquire its way to relevance have fallen short.
Five year ago, I wrote about IBM’s ponderous approach to developing new products. In a nutshell, IBM executives imposed requirements on product development teams — such as requiring that products can be used by vision-impaired individuals regardless of whether there is strong demand for the feature or that software can run on mainframes.
While these requirements may have been important to some customers, such internal mandates slowed down IBM’s ability to respond to more urgent and broadly felt customer needs
A case in point was IBM’s loss of market share in the market for identity management services. Identity management service provider SailPoint’s CEO Mark McClain, who previously worked at IBM, told me, “Big technology companies [including IBM] acquire companies that make point products. [IBM] product managers focus on making the acquired products compatible with other [IBM] products such as database software and middleware. Their product managers don’t spend enough time listening to customers and if a customer wants new features, they struggle to get the engineering resources to respond.”
My IBM source echoes McClain. He describes IBM’s product development process as “sluggish” compared to those of other software companies.
The reason is that IBM’s internal process requirements take precedence over urgently bringing compelling new products to market. “Everything takes just a bit more time and executive approvals than necessary. Every team is distributed across time zones and low-cost countries. Executives who are fighting to stay relevant exacerbate IBM’s weakness working across departments. [IBM expects departmental vice presidents to collaborate by sharing success] but no one wants to share.”
It’s not all doom and gloom at IBM. My source said in the past. IBM would acquire companies and “Blue Wash” the acquired products — forcing them to conform with IBM’s standards. This process “often consumed several quarters and crushed the product’s innovation road map and standing with the analyst community.”
He’s glad IBM has preserved the management independence of two recent acquisitions —Weather.com and Red Hat — whose branding “has been retained with the small addition of ‘…an IBM company’ to the logo.”
Until IBM can accelerate its product development process to bring products to market that customers value more highly than those of faster-moving upstarts, there is no reason to believe that Big Blue will grow fast enough to be a good investment.
IBM expects its revenue to rise by the mid-single digits between 2022 and 2024. It expects its consulting and software divisions to drive that growth. IBM still faces a lot of competition, but the stock looks cheap relative to its expectations for the next three years.
In 10 years, the sales of IBM declined by more than 40%. The decline can be associated with the company's weakening legacy business, the Kyndryl (KD) spinoff, and other divestments of non-core business. In 2021 and 2022, we begin to see steady growth in sales.
These factors make Big Blue a compelling investment. And with the secular trend of AI still in its early days, as businesses ramp up AI adoption, IBM is well positioned to continue growing its revenue, making IBM among the best AI stocks to buy for the long run.
However, considering its expansion into cloud and AI technologies, IBM might continue the upward growth of 2022 and see an even stronger financial year in 2023. Although it isn't as reliable as Apple or another tech giant, IBM stock may be a worthwhile investment in the long term.
The 14 analysts offering 12-month price forecasts for International Business Machines Corp have a median target of 146.00, with a high estimate of 165.00 and a low estimate of 110.00. The median estimate represents a +13.95% increase from the last price of 128.13.
Out of 8 analysts, 1 (12.5%) are recommending IBM as a Strong Buy, 1 (12.5%) are recommending IBM as a Buy, 6 (75%) are recommending IBM as a Hold, 0 (0%) are recommending IBM as a Sell, and 0 (0%) are recommending IBM as a Strong Sell. If you're new to stock investing, here's how to buy IBM stock.
IBM's 2022 success is poised to continue next year. During its Q3 earnings call, IBM management reiterated its belief that the company will achieve mid-single-digit revenue growth in 2023, along with continuing to progress toward its $35 billion cumulative free cash flow goal.
IBM is a leading research and development corporation and is one of the technology sector's largest employers, with approximately 303,100 worldwide employees.
quote is equal to 126.410 USD at 2023-04-30. Based on our forecasts, a long-term increase is expected, the "IBM" stock price prognosis for 2028-04-19 is 132.427 USD. With a 5-year investment, the revenue is expected to be around +4.76%. Your current $100 investment may be up to $104.76 in 2028.
Institutional investors hold a majority ownership of IBM through the 59.50% of the outstanding shares that they control. This interest is also higher than at almost any other company in the Information Technology Services industry.
International Business Machines made the "Dividend Channel S.A.F.E.25" list because of these qualities: S. Solid return — hefty yield and strong DividendRank characteristics; A. Accelerating amount — consistent dividend increases over time; F.
2023/04/30. IBM stock predictions for next months and years.
IBM stock price predictions for April 2023. The forecast for beginning of April 131. Maximum value 134, while minimum 119. Averaged IBM stock price for month 128.
In terms of guidance, IBM called for full-year revenue growth of 3% to 5% in constant currency. Kavanaugh said three months ago that “as we enter this year, I think it's prudent to expect the low end of the mid-single-digit model.” IBM maintained guidance for $10.5 billion in 2023 free cash flow.
Although 2022 was also a year to forget for big tech, with Nasdaq closing out its worst year since 2008, IBM stood out as a recession-resistant, less volatile exception.
Its margins are expanding and its cash flows are rising
Its pre-tax income margin also rose to 7.4%, up from 4.4% in the year-ago period, as IBM laid off thousands of employees and reined in its spending. As a result, IBM expects its free cash flow (FCF) to rise from $9.3 billion in 2022 to about $10.5 billion in 2023.
The IBD 50 simply highlights today's growth stocks that are most strongly showing those same characteristics. The IBD 50 is an objective, computer-generated list, based solely on time-tested, fact-based criteria.
IBM's dividends are normally paid on the 10th of March, June, September and December. The dividend record date normally precedes the dividend payment date by approximately one month. As a registered stockholder, you are entitled to receive any cash dividends paid by IBM on the shares you hold on a record date.
IBM Think® 2023 will be held at the Universal Loews Resort in Orlando. The resort features three hotels: Royal Pacific, Sapphire, and Aventura. The Think event will be centralized throughout the connected meeting centers of both Royal Pacific and Sapphire.
The 2023 IBM Power strategy is designed to accelerate digital transformation while focusing on enhanced security, flexible consumption models, increased energy efficiency and cost reduction.
Apple's brand is ranked #6 in the list of Global Top 100 Brands, as rated by customers of Apple. Their current market cap is $2.11T. IBM's brand is ranked #106 in the list of Global Top 1000 Brands, as rated by customers of IBM.
In a new collaboration, NASA and IBM are creating AI foundation models to analyze petabytes of text and remote-sensing data to make it easier to build AI applications tailored to specific questions and tasks.
Bill Gates parlayed that breakthrough into industry dominance, proving his theory that software would be more valuable than hardware, so that by the end of 1999 Microsoft's market value was three times that of IBM's.
This was a 2 for 1 split, meaning for each share of IBM owned pre-split, the shareholder now owned 2 shares. For example, a 37500 share position pre-split, became a 75000 share position following the split. IBM's 8th split took place on November 04, 2021.
IBM. Another surprise is that Warren Buffett technically still owns a stake in one of his most disappointing tech investments of all time: IBM (NYSE: IBM).
What do IBM, Walmart, JPMorgan Chase, and DuPont have in common? Although they are in different sectors, they are all known as blue chip companies. Blue chip companies are the mature firms that represent the stalwarts of an industry. These stable, profitable, and long-lasting companies are relatively safe investments.
International Business Machines's next quarterly payment date is on Mar 09, 2023, when International Business Machines shareholders who owned IBM shares before Feb 08, 2023 received a dividend payment of $1.65 per share. Add IBM to your watchlist to be reminded of IBM's next dividend payment.
You may sell Computershare Investment Plan shares held in book entry on the records of the Program Administrator by calling Computershare at 888-IBM-6700 or 781-575-2727, or by sending notification to Computershare.
IBM stock (symbol: IBM) underwent a total of 5 stock splits. The most recent stock split occured on November 4th, 2021. One IBM share bought prior to May 29th, 1973 would equal to 20.92 IBM shares today.
IBM makes money from cognitive solutions, tech services, cloud platforms, global business services, systems, and global financing. These are the primary revenue streams for IBM.
Key Points. IBM reduced its guidance for free cash flow, which creates concern for its high-yield dividend. Despite economic headwinds, the company's shift to hybrid cloud solutions is proving successful. IBM's remaining business is growing, which drove second-quarter revenue up 9% year over year.
The most popular company on our list of monthly dividend stocks, Realty Income (O) has been in business since 1969 and is one of the best recession-proof stocks with dividends.
Desktop Metal Inc quote is equal to 6.910 USD at 2023-04-26. Based on our forecasts, a long-term increase is expected, the "TRNE+" stock price prognosis for 2025-12-08 is 21.185 USD. With a 5-year investment, the revenue is expected to be around +206.58%. Your current $100 investment may be up to $306.58 in 2028.
After the spin-off transaction, IBM will remain in the Dow Jones Industrial Average, and S&P Dow Jones Indices will apply a price adjustment to IBM and an adjustment to the index divisor.
Do stock splits benefit investors? – It's nice to own more shares after a split, since the reduced per-share price might mean there's room for greater potential price growth. But investors shouldn't buy a stock simply because they hope it'll rise in price after a split.
Splits are often a bullish sign since valuations get so high that the stock may be out of reach for smaller investors trying to stay diversified. Investors who own a stock that splits may not make a lot of money immediately, but they shouldn't sell the stock since the split is likely a positive sign.
While a split doesn't actually make your investment any more valuable in and of itself, a lower share price and the resulting increase in trading liquidity can certainly attract additional investors.
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