International Business Machines Corp. (NYSE: IBM) has a market cap of $132 billion. Analysts rate the stock at Hold and have a price target of less than the current share price. IBM continues to have the position it has held among tech companies for years. It was the decades-long leader of the industry that then fell on hard times and never recovered.
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IBM was number eight on the Fortune 500 in 1980. None of the current mega-sized tech companies were anywhere to be seen. IBM had been America’s leading tech public corporation for decades. Today, it is not even part of the club. Its market cap is 10% of Microsoft’s.
IBM missed several opportunities and missed them badly. It gave up a chance to be the primary personal computer (PC) operating system. Instead, it clung to its position as the mainframe leader. It is not fair to say that IBM missed the chance to be a top consumer technology company. It was never in businesses that looked anything like Amazon or Apple. IBM did set a deal with Apple in 2014 to create and distribute apps for enterprises. The plan died early.
IBM’s biggest miss was cloud computing. Amazon first used the cloud to promote a service for its third-party sellers. Amazon Web Services was founded in 2006 and has become the industry leader. IBM ranks in the second tier of cloud companies behind Amazon and Microsoft. Its cloud business is about the same size as Google’s. IBM’s business will always lag behind the leaders.
IBM’s revenue and net income make it small in the big tech industry. It had revenue of $15.5 billion in the most recent quarter. Its net income was $1.4 billion. In Apple’s most recent quarter, its net income was $20.7 billion, much larger than IBM’s total top line.
Finally, Wall Street’s opinion of IBM’s future is that it will not be much better than its recent past. According to Yahoo! Finance, of the 25 analysts who cover the company, 15 rate it at Hold. The average price target among analysts is about $142 while IBM trades near $148.
There is no debating. IBM’s best years are long behind it.
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