Tuesday, June 17, 2014

IBM's Investor Day Fails to Impress

IBM's   management used its recent investor day to affirm its commitment to its target of $20 in earnings per share by 2015. Usually, this sort of news meets with a favorable response from the market, but the sell-off in the stock indicates that investors have some concerns. Not only does IBM have a lot to do to hit the target, but it's relying on its growth initiatives in areas where it faces increasing competition from rivals such as Oracle and Microsoft. So what do you need to know about IBM's strategy to return to growth?

IBM's skeptics multiply
Investment analysts tend to produce estimates that come pretty close to management's guidance or slightly above it. This fact makes the consensus forecast for IBM's 2015 earnings of $19.81 all the more interesting. As a group, they don't believe IBM will hit the number, and the following points mark why they might be skeptical. I'll start with a breakout of how IBM's segment revenues have grown in recent years.