International Business Machines Corp. (IBM): Buying and Selling at This IT Giant

HP’s revenue fell sharply in the last quarter, ended in April, compared to 2012. The major reason for this drag is the approximate 20% fall in the demand for personal systems, which contribute 25% to its revenue. The sales in the personal computer segment are expected to shrink further, so we don’t see any improvement in this section for HP.

The company has lagged behind its peers in developing cloud computing and tablets. HP has realized this mistake, and has invested heavily to develop technology for data analysis. Recently the company unveiled its HAVEn software for its data analysis unit.

The company has also taken steps to reduce costs and to improve operational efficiency. The company has planned to cut 27,000 jobs by October. This will result in $1.2 billion of cost savings. We believe that the investment in emerging technology like cloud, analytics and mobility will help increase its revenue and margin in the coming quarter. At the current price we believe that the stock is worth buying.

Oracle Corporation (NASDAQ:ORCL)’s fourth quarter fiscal year 2013 sales were below the consensus estimate. The company reported revenue of $10.95 billion against the consensus estimate of $11.12 billion. There was a small increase of 1% and 6% in revenue from new licenses and renewal of licenses, but the hardware products and support fell by 13% and 3% year-over-year from fourth quarter 2012.

The revenue from the service business has also dropped by 9% year-over-year. However, the company showed a remarkable 45% growth in Exadata, Exalogic, Exalytics, SPARC SuperCluster and 50% growth in cloud.

In the coming quarter the cloud and analytics will help the company increase its revenue and margin, whereas its software license and renewal of license will improve as the macroeconomic condition is showing signs of improvement. At the current price, the stock looks worthwhile to have in the portfolio.

Conclusion

International Business Machines Corp. (NYSE:IBM)’s initiative in developing technological expertise in emerging technology has helped mitigate the revenue slump in its business units. The current initiative by the company to divest the low margin business and the resource reallocation exercise will have short term impact on revenue. We believe that the company’s focus on high margin business will drive the future growth and help it achieve its EPS target of $20 by 2015. We are bullish on this stock.

The article Buying and Selling at This IT Giant originally appeared on Fool.com and is written by Lalit Kumar.

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