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IBM - The Good The Bad The Ugly

International Business Machines (IBM) is the subject of many negative articles now. Indeed, in the last 10 articles on SA, one has been bullish, three have been neutral, and seven have been bearish or very bearish. Furthermore, Wall Street is largely neutral on the stock. Many investors are taking a wait and see attitude toward the new CEO and his restructuring plans. IBM has disappointed many investors over many years since its peak in 2012 and no one wants to be early. To put this in context, IBM has had a total return of 2.9% in the past decade compared to 264.3% for the S&P 500. IBM is a company in transition. Whether IBM’s Hail Mary pass of the Red Hat acquisition followed by spinning out some declining businesses and 25% of revenue works is the subject of much debate. For those of us that are long, the over 5% dividend yield provides some relief from the wait. However, I think that IBM now has a relevant and compelling vision, which is good, but there is also the bad and the ugly for IBM. Overall, though, I think the good has greater weight and I view the stock as a long-term buy.

IBM – The Good

New CEO and New Vision

The arrival of a new CEO, Arvind Krishna, brought about much needed change. Granted, Arvind Krishna is a long time IBM veteran, but he has made a bold move into hybrid cloud as the driving force for the Red Hat acquisition in 2019. The new CEO has a vision of IBM being a leader in hybrid cloud and AI. He engineered the acquisition of Red Hat and followed that up with a plan to jettison a declining business in Managed Infrastructure Services. It certainly was different than before he became CEO when the strategy was seemingly to sell the money losing hardware businesses and focus on Watson and Cognitive software…

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Prakash Kolli is the founder of the Dividend Power site. He is a self-taught investor, analyst, and writer on dividend growth stocks and financial independence. His writings can be found on Seeking Alpha, InvestorPlace, Business Insider, Nasdaq, TalkMarkets, ValueWalk, The Money Show, Forbes, Yahoo Finance, and leading financial sites. In addition, he is part of the Portfolio Insight and Sure Dividend teams. He was recently in the top 1.0% and 100 (73 out of over 13,450) financial bloggers, as tracked by TipRanks (an independent analyst tracking site) for his articles on Seeking Alpha.

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