IBM (NYSE: IBM) stock used to be the darling of Wall Street. For most of our grandparents and even some of our parents, IBM was a staple stock in their portfolio. You could always count on Big Blue to grow revenues, grow its stock price, and pay out a healthy dividend.
But times have changed. Thanks to technology, this tech darling of Wall Street is now a dog. Over the past 5 years, the stock price has dropped by over 20%. Unless things change, IBM is going the way of other great portfolio staples.
So let’s look at what the issues are for Big Blue and whether or not the company can correct them. And if they can, does this make IBM stock a play for value investors?
The History Of IBM
IBM began in 1911 as Computing-Tabulating-Recording Company (CTR) and was then renamed International Business Machines in 1924. The company currently manufactures and markets computer hardware and software as well as offering hosting and consulting services in areas ranging from mainframe computers to nanotechnology.
Surprisingly, IBM has a made a handful of important inventions, including:
In recent years, Big Blue has been shuttering its legacy services like personal computers to more modern business offerings like corporate IT services.
Issues At IBM
Earlier I mentioned that the stock price of IBM has fallen by more than 20% over the last 5 years. What has been going on, you ask? Well for starters, during this period revenues that IBM earns has consistently fallen.
And the most recent earnings report is no exception. While the company beat earnings per share estimates of $2.97 by $0.23, it missed its revenue target of $19.29 billion by $160 million. This was a drop of 5% compared to the prior year.
The issues at IBM are that old technologies just aren’t as valuable any longer. Add that in with smaller companies who specialize in certain niches who are taking away customers from Big Blue.
