IBM – International Business Machines – NYSE
Background: IBM (NYSE) is the world’s leading provider of computer hardware and services. IBM (NYSE) makes a broad range of computers, mainframes, and network servers. Over the years, IBM (NYSE) has transformed itself into a software and services company.
Focal Points: IBM (NYSE) has had an interesting revenue story for the past eight years. The company revenues go up and the company revenues go down and sometimes the company revenues stay flat. However, none of the ups and down matter very much in the long term scheme of things because the earnings continue to rise year in and year out. IBM continually focuses on one strategy, which is to leave behind their marginally profitable business models and expand their business in areas which consistently show extreme progress.
Why Invest: Once viewed as a complete giant of the computer industry with a massive intellectual property portfolio but an uncertain and shaky product strategy, IBM has over the past decade, successfully reinvented itself as a powerhouse in the software and services sector. Also, IBM seems positioned to know what will happen next in the Information Technology sector, a fact not lost on HP and other competitors trying to emulate the business model.
Why Not Invest: IBM has garnered a very noticeable amount of the outsourced Information Technology business. Innovation in this area has a tendency to be prompt and disruptive, and margins will sometimes shrink furiously as a result. IBM will have to stay ahead of the game with innovative and compelling products and conservative product strategies in order to assure a steady revenue growth for the coming years.
S&P Rating: AA
Current Yield: 1.7%