However, all of that could change as the "old" IBM fades away. IBM believes these four segments will make it easier for investors to track the expansion of its higher-growth businesses. Let's review IBM's long-term expectations for the three main segments from to IBM expects its software segment, which includes Red Hat and other hybrid cloud and AI services, to become its core growth engine. It also likely expects the streamlined consulting segment to fare better against nimbler IT services and consulting companies like Accenture and Globant.
IBM's infrastructure business, which includes its old systems business as well as other hardware products and services, will likely remain sluggish.
However, IBM's profit margin forecast suggests it will focus on streamlining the business and cutting costs to boost its margins. IBM believes that after spinning off Kyndryl, it will generate "sustainable mid-single-digit revenue growth" from to IBM likely realizes it's too late to catch up to AWS and Azure in the public cloud market, but it can still leverage its large enterprise customer base and Red Hat's open source software to develop services for the hybrid cloud, which rests between private clouds and public cloud services.
Next month, IBM's investors will receive shares of Kyndryl. If they keep both stocks, they'll initially receive a combined dividend which is equivalent to IBM's current dividend -- but both companies could then cut their payouts.
I believe IBM investors should sell their shares of Kyndryl right away, since it will likely struggle to keep pace with companies like Accenture, but hold on to their shares of the "new" IBM to see if its turnaround plans work. That said, I don't think it's the right time to buy any new shares of IBM. The stock might seem cheap right now at 12 times forward earnings, but it still faces stiff competition from Amazon and Microsoft -- which are both expanding their public clouds into the hybrid market -- and its sluggish infrastructure business could offset the growth of its software and consulting businesses.
Investors should wait for IBM to finish its spin-off and post a few quarters of improving results before believing that a turnaround is actually underway. Until then, they should buy other blue-chip tech stocks instead of Big Blue. Discounted offers are only available to new members. Stock Advisor will renew at the then current list price. Average returns of all recommendations since inception.
Cost basis and return based on previous market day close. Investing Best Accounts. Stock Market Basics. Stock Market. Industries to Invest In. Getting Started. Planning for Retirement. Retired: What Now? Personal Finance. Unfortunately, questions remain about how each balance sheet will look following the spinoff. For one, IBM has not revealed how it will partition the remaining debt load between the two companies. This is important, as an inequitable split could compromise the balance sheet of at least one of the companies.
Additionally, the questions stretch well beyond debt levels and the state of IBM's stockholders' equity. While the company has told shareholders that they will receive some Kyndryl stock, they have little visibility on the number of shares they will receive. Also, IBM has not broken out the portion of revenue, net income, or free cash flow generated by Kyndryl or how that affects stockholders on a per-share basis.
Furthermore, the uncertainty is particularly significant for IBM's dividend-focused investors. IBM has told shareholders the two companies will split the payout. Thus investors cannot precisely measure each company's future income or their ability to maintain whatever portion of the dividend they receive. Despite the unanswered questions, both companies should perform better as separate entities.
As more of a cloud company , IBM's massive growth in this niche should wield more influence over its stock. Moreover, Kyndryl probably has a better chance to turn the massive backlog into rising revenue, with managed infrastructure becoming its only priority.
However, income investors face deep uncertainty since they do not know which part of the business will lend the most support to the payout. For this reason, this class of investors should consider staying on the sidelines until more information comes to light. Discounted offers are only available to new members. Stock Advisor will renew at the then current list price.
Average returns of all recommendations since inception. Cost basis and return based on previous market day close. Investing Best Accounts. Stock Market Basics. Stock Market. Industries to Invest In.
Getting Started. Planning for Retirement. Retired: What Now? Personal Finance. Credit Cards.
0コメント