As
one of the leader of commercializing computers from personal use to super
computer fit for giant corporate needs, IBM has established a very solid brand
that is envied by many. Initiating its business mainly in hardware segments,
the company spread its wing further to other ventures such as business
solutions, city planning, cloud drive management and anything you could imagine
when you start a company which requires information technology services. As an
early innovator, IBM gains a lot of experience and come up with a very good
company structure with specific task segregations and specializations as what
we can see from its websites. This is why IBM is still standing strong despite
the rise of various startups and dot com bubbles burst where its expertise is
fit for the practical usage in many companies. IBM further put itself in a very
advantageous position by opening branches all over to world where it can
effectively expand its network and business opportunities. Throughout these few
years, IBM future prospects seems eroded. To me, the potential is still there.
Imagine even when Google conquer the IT world, practical business solutions are
still needed to keep companies’ massive administrative tasks running. ( To me,
wearing glasses and watches simply cannot replace the conventional method isn’t
it? ) For IT company like IBM to fend off its workers, much research and
developments are needed for innovation purposes. Opposing to traditional do it
in your lab method, IBM welcomes more collaboration from other parties in
carrying out more innovations where it is more efficient and cost saving.
When
diversification is overly adapted, a company will lose its focuses and this
will eventually invite unwanted disasters. Cost are reported rising in an
explosive manners in various reports. IBM also sold their server business as
less profitability is generated. These are all resulted from the company
inability to manage such a diversity of products and services even with a large
scale work force. As a matter of fact, IBM has been focusing much more on
restructuring their cost and converging their business with several disposals
along the way.
Based
on the 10 years cash flow, the company has generated a very steady growth of
operating cash flow level with an annual growth rate of 15.27% which is
astounding! Not to mention both ratios performing at a satisfactory level.
Unfortunately, the ratio has dropped for almost 4% for ROA where it record a
decline in net profit. IBM’s debt has been following a consistent pattern where
they pay almost 80% of their debt at the respective year. This indicates a
healthy financing practice. At the same time, the company is also maintaining
its cash at level about $10 billion. As above strong suggestion for the
business’s future prospect, the company intrinsic value is amounted at $196.13
(note that I used the high beta and after a 20% margin of safety) compared to
the current price of $192.27. At time of writing, I am owning the shares of
IBM.
Exchange: NYSE Stock: IBM
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