CA - IBM: Persistent Challenges

2024-05-28 03:00:22 ET

Summary

• IBM's business has struggled to keep up with competitors in the cloud, big data, and AI sectors, hindering share performance.
• The company's revenue growth has been weak, with most segments struggling to generate significant growth.
• Margin trends are unclear due to acquisitions, disposals, and accounting changes, making it difficult to assess the company's financial performance.
• Growing interest costs, a rich valuation, changing accounting, a stubborn dividend policy and consistent shareholder dilution are further reasons to avoid this stock.

Shares of IBM (IBM)(IBM:CA) have stagnated for 14 years. IBM's business has faced structural pressure in its legacy business of mainframe computers and IT while competitors have been able to exploit growth opportunities in cloud, big data and AI better than IBM has. The fact that IBM has been paying $6bn+ dividends per year certainly didn’t help give the business the resources to invest and compete with the likes of Amazon, Google and Microsoft. This has hindered share performance, with the stock significantly lagging major indices, even on a total return basis....

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