A Global Leader in the Information Technology Industry
Ryan is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
A SWOT analysis is a look at a company’s strengths, weaknesses, opportunities, and threats, and is a tremendous way to gain a detailed and thorough perspective on a company and its future. Fresh off paying a record quarterly dividend to its shareholders, I would like to pinpoint on a global leader in the information technology industry, International Business Machines (NYSE: IBM).
- Solid Revenue Growth: In 2006, IBM reported $91.4 billion in revenue; in 2011 the company reported record revenue of $106.9 billion, representing year over year annual growth of 3.18%; growth also looks solid going into the future, with projections putting 2016 revenue at $115.2 billion
- Net Profit Margin: Currently IBM possesses a net profit margin of 14.83%, displaying a company that is strong and profitable
- Dividend: Currently the company pays out a quarterly dividend of $0.85, which annualized puts the dividend as yielding 1.76%
- Reasonable Valuation: IBM at the moment trades with a 13.98 price to earnings ratio, a 2.06 price to sales ratio, and a 11.17 price to book ratio, which all except the price to book ratio point to a company that is trading with a reasonable valuation, and as is seen below, the company is valued at a 10 year low in terms of the price to earnings ratio
- Sheer Size and Diversity: Currently IBM as a company is valued at $218.55 billion, has been in business for nearly 125 years, and operates 5 segments of the information technology sector, giving investors a great deal of security and certainty as they know big blue is not going anywhere
- Patent Portfolio: IBM has for 19 years led as the top US patent recipient, and over the years has built a massive portfolio of intellectual property, which is very valuable
- Debt: At the moment, IBM possesses $22.86 billion in long term debt, and as the chart below displays, this debt over the past years has done nothing but rise
- Price to Book Ratio: IBM holds a price to book ratio of 11.17, which is well above the average for the S&P 500, which for 1981-2010 was just below 3, and valuation metric shows a company that is slightly overvalued
- Sheer Size: The company operates in more than 170 countries, leaving little to no room for further geographical expansion as the company is one of the most established and prominent in the world
- Acquisitions: In October, IBM acquired Texas Memory Systems, and since 1999, the company has acquired more than 100 companies, and further acquisition are highly likely and should fuel future growth
- Dividend Growth: Since implementing the dividend program in 1916, IBM has consistently raised its dividend, and this trend is highly anticipated to continue into the future
- Product Innovation: IBM has a long and storied history as being one of the most innovative companies in the world, with the company revolutionizing several industries over the decades, and with $6 billion being poured into research and development, the next ground breaking innovation is just around the corner
- Competition: There is a huge amount of competition in the information technology industry, and this fierce competition could be detrimental to IBM’s business
- Stagnant Global Economic Landscape: The products and services IBM sells to its customers, mostly businesses, cost money, and in times of economic stagnation and uncertainty as is now, companies are less willing to invest in their company as they are unsure of their future
- Supply Chain: IBM has to put a massive amount of trust in its long list of suppliers, and if anything ever happened to one of these companies, IBM would face a challenging situation, as many make specialized pieces
Major publically traded competitors of big blue include SAP (NYSE: SAP), Oracle (NASDAQ: ORCL), EMC (NYSE: EMC), and NetApp (NASDAQ: NTAP). SAP also offers technological services and products to businesses, and is valued at nearly $100 billion on the market. SAP pays out a dividend yielding 1.19%. Oracle is a global provider of software and computer hardware products and services to businesses, and is valued at about $160 billion. Oracle pays out a dividend yielding just 0.71%. EMC also operates in the information technology sector, however pays out no dividend. NetApp is a smaller, however still is a prominent player in the information technology industry, and because of this is only valued at around $12 billion on the market. NetApp pays out no dividend.
The Foolish Bottom Line:
IBM has been in business for nearly 125 years, possesses solid revenue growth, and a growing dividend. Big blue is a global leader in the information technology industry, and is unmatched in its track record in innovation. IBM is in all ways a solid company that an investor can rely on for decades of solid growth.
makinmoney2424 has no positions in the stocks mentioned above. The Motley Fool owns shares of EMC, International Business Machines, and Oracle. Motley Fool newsletter services recommend International Business Machines. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!