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April 24, 2014
MW Commentary
For IBM, Growth Remains Elusive
Last week, IBM (NYSE:IBM) issued its quarterly report. Earnings were in line with analyst estimates, but revenue was below expectations due mostly to a decline of almost 25% in both hardware and systems storage revenue.
The report marked the fifth consecutive time IBM had missed its revenue expectations, and serves as a reminder that the company is still progressing through its long transition to become a cloud-oriented software and services provider.

Before the earnings report was released, Marty Wolf looked back on IBM's performance over the last ten years to get a better sense of how successful this transition has been thus far and where it's going next. He found that though net income has doubled in the past ten years, revenue has risen just 3.6% - and the market demands growth from its elite stocks. 

IBM has been good to its investors with its aggressive buyback program, but this $140 billion initiative has consumed almost 80% of the company's total cash from operations and dwarfed the amount spent on acquisitions in the same period ($30.1 billion). A major consequence of this, mostly ignored, is that this program has resulted in IBM's tangible net worth going negative in 2008 and continuing to decline since.

The company's latest headlines have been centered on its massive investments in the cloud services space, which is in hot demand and has the potential to help IBM attain the growth that it needs going forward. Expect more such commitments as their transition continues-and as investors demand revenue progress instead of just earnings growth.

For more detailed analysis, click here to read the complete report published on Yahoo!. 

About martinwolf    


             San Francisco, CA                                                Bangalore, India

With offices in San Francisco and Bangalore, India, martinwolf is a leading middle market M&A Advisory focused on companies with services-based business models. Since 1997, our team has completed more than 115 transactions in nine countries. We are a five-year member of the Merrill Lynch PS Referral Network, and are a strategic partner of the Enterprise Advisory department of CICC, China's first joint-venture investment bank.


The firm is also a presenting sponsor of the Global IT M&A Forum.   


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"The last thing IBM needs right now is a vision."


Lou Gerstner, July 1993