IBM Future Earnings
The prospect of a business performance is determined by the industry factors and effectiveness of its strategies. Further, the past performance of a business can be a good indicator of the trend in its future performance and can be used to inform the investors’ decisions. In that view, determining whether a business is likely to earn more or less in the future entails analyzing its industry prospects and past performance trends (Damodaran, 2010). In that respect, the following is a summary of the analysis regarding IBM’s future earnings.
IBM is a corporation in IT services and products market offering a wide range of products and services. The Company’s product portfolio includes IT hardware, consulting and implementation services as well as enterprise software and systems (Morningstar, 2016).
Regarding the company’s industry factors, IBM operates in a competitive market facing stiff competition from other brands such as Microsoft, HP, and Accenture plc. With that, the business continues facing increasing competition with innovation being the competitiveness driving force (Yahoo Finance, 2016a).
Also, the business model that mainly focuses on hardware products is increasingly deteriorating in performance given the market entry by other firms with diversified portfolios. With that, although the business has been seeking to enhance its performance through diversified portfolio, it has been marked by decreasing sales and profitability that indicates a possibility of poor prospects in the future. Beginning the year 2013, when the business reported consecutive sales’ decline for six quarters; sending its stock price to a two-year low price, the company has been experiencing decreasing earnings (Sarah and Noah, 2013).
IBM Income Statement Items: Values in “000.”
Source: (Yahoo Finance, 2016a)
Given the above data and chart, the company has been experiencing decreasing sales, gross profit, operating profit and net income for the three years beginning 2013 to 2015. With that and considering its business model that faces stiff competition from more innovative brands, IBM can be expected to continue earning less; unless there are innovative measures to enhance its competitiveness.
Works Cited
Damodaran, A. Applied Corporate Finance. 3rd Ed. Colorado: Wiley, 2010.
Morning Star. International Business Machines Corp. Web. 30 May 2016. http://www.morningstar.com/stocks/XNYS/IBM/quote.html
Sarah F. and Noah B. “Buffett Praises IBM Profit Prospects after Share Slump.” Bloomberg October 23, 2013. Web. 30 May 2016. http://www.bloomberg.com/news/articles/2013-10-22/buffett-praises-ibm-profit-prospects-after-share-slump
Yahoo Finance. IBM Income statements. 2016a. Web. 30 May 2016. http://finance.yahoo.com/q/is?s=IBM+Income+Statement&annual
Yahoo Finance. IBM Competitors. 2016b. Web. 30 May 2016. http://finance.yahoo.com/q/co?s=IBM+Competitors
