Finance: 284 Dr. Liaw St. John’s University
International Business Machines Corporation (IBM)
Angelines Jover Dominic Maglione Jason Ocharsky Ahmad Sony Nedra Regis
TABLE OF CONTENTS
Executive Summary Company Description
Corporate Mission Organizational Breakdown Management Officers’ & Employees Company Holdings Breakdown Analyst Estimates Analyst Opinion Key Business Strategies Financial Details Industry Overview Ratio Analysis – IBM Ratio Analysis – Competitors Correlation With Stocks In The Portfolio Dividend Discount Model Valuation Risk associated with IBM
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Why IBM is a buy! 1) Favorable Industry Trends • Global Competition is forcing companies to be more productive leading to growing demands for internet based applications allowing companies outlets to reduce cost and improve customer service. • The evolution of internet platforms will result in increased demand to expand existing computing infrastructures and to investments in hard-ware with self management features. • By 2005, 60% of the profits in the $1 trillion high-tech industry will come from software and services. (S&P Research). We believe IBM is very well positioned to benefit from these industry trends through the development of its e-business services and software offerings. IBM’s Global services unit has been growing at an average double digit rate over the past five years, and in 2002 IBM had a service backlog of $112B, pointing to future healthy growth. 2) IBM remained profitable during the IT industry slowdown with earnings in 2002 totaled $5B despite unfavorable market conditions. IBM also managed to grow its share of the market in its hardware, services, and software segments throughout the technology spending downturn, these increases should result in higher future earnings. 3) IBM has a leadership position in e-business services, and the annuity like stream of revenues which this business provides gives the company a stable earnings base during uncertain economic times. We expect IBM to continue to expand its strategic outsourcing and small/medium business market segments over the next several years through the acquisition of additional IT outsourcing contracts and increasing its IT share of the $300B small/medium business market by helping its business partners generate sales.
COMPANY DESCRIPTION International Business Machines Corporation (NYSE: IBM) New Orchard Rd. Armonk, NY 10504 (Map) Phone: 914-499-1900 Fax: 914-765-7382 Toll Free: 800-426-4968 http://www.ibm.com
Corporate Mission: At IBM, we strive to lead in the creation, development and manufacture of the industry's most advanced information technologies, including computer systems, software, networking systems, storage devices and microelectronics. We translate these advanced technologies into value for our customers through our professional solutions and services businesses worldwide. About IBM: International Business Machines Corporation (IBM) uses advanced information technology (IT) to provide customer solutions. The Company operates primarily in a single industry using several segments that create value by offering a variety of solutions that include, either singularly or in some combination, technologies, systems, products, services, software and financing. Organizationally, its major operations are comprised of a Global Services segment; three hardware product segments, Systems Group, Personal Systems Group and Technology Group; a Software segment; a Global Financing segment, and an Enterprise Investments segment. The segments are determined based on several factors, including customer base, homogeneity of products, technology and delivery channels. Below is a breakdown of the operating segments: Corporate Segment • IBM is the world's largest information technology company, as well as the world's largest business and technology services provider ($36...
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