Part 1. Qualitative Analysis3
1. Company Profile3
2. Analysis of the Company’s Accounting Policies10
Part 2: Quantitative Analysis of Financial Statements
1. Scope of the Analysis17
2. Examining Credit Worthiness of IBM17
2.1.1. Short Term Paying Ability17
2.1.2. Long Term Solvency22
3. Examining IBM Stock as a Investment Opportunity
Part 3: Conclusion25
Appendix 1: Calculations for Financial Analysis28
Part 1: Qualitative Analysis
International Business Machines Corporation (IBM), founded in 1911, is an American multinational technology and consulting corporation, with headquarters in Armonk, New York, United States. IBM manufactures and markets computer hardware and software, and offers infrastructure, hosting and consulting services in areas ranging from mainframe computers to nanotechnology. In 2012, IBM was ranked the ninth most profitable and the nineteenth largest firm in terms of revenue. It employs approximately half a million employees worldwide. Globally, the company was ranked the 31st largest in terms of revenue by Forbes magazine in 2011 (Forbes, 2011). IBM has 12 research laboratories worldwide and, as of 2012 it has generated more than 47,000 patents effectively extending IBM’s leadership for the 19th year in terms of the most U.S. patents. IBM has over the years acquired 130 companies, in strategic areas of software and services (IBM, 2011, 6). Famous inventions by IBM include the automated teller machine (ATM), the floppy disk, the hard disk drive, the magnetic stripe card, the relational database, the Universal Product Code (UPC), the financial swap, SABRE airline reservation system, DRAM, and Watson artificial intelligence.
a.The company’s principle line of business
The company’s major operations consist of three main business segments: i) Services, ii) Software, and iii) Hardware/Financing, which are further sub-divided as follows: i)The Services segment (also called Global Services) segment has 2 divisions namely Global Technology Services and Global Business Services:
•The Global Technology Services division primarily provides IT infrastructure services and business process services including strategic outsourcing, process, integrated technology, and maintenance services, as well as technology- and process-based services. The services provided range from comprehensive IT outsourcing, superior service management via cloud computing as well as analytics and virtualization, to the maintenance of IT infrastructure.
•The Global Business Services division offers consulting and systems integration, and application management services. It delivers innovation to clients through solutions which take full advantage of industry and business-process expertise. The wide array of services provided in this segment include consulting and system integration, cloud application security to name a few.
ii)The Software segment offers middleware and operating systems software. IBM’s extensive software capabilities includes: i) WebSphere software which allows clients to integrate and manage business processes across their organizations; ii) Information Management Software that enables clients to integrate, manage and use their information to gain business value via business analytics and advanced data base management; iii) Tivoli Software which helps clients manage their assets by providing visibility, control and automation across their organizations; iv) Operating Systems software for advanced computers.
iii)The Hardware/Financing segment is sub-divided into two divisions:
•The Systems and Technology segment provides clients with business solutions requiring advanced computing power and storage capabilities. Systems and Technology provides leading semiconductor technology, products and packaging solutions for IBM’s own advanced technology needs as well as for external...