International Business Machines Corp. (IBM) Earnings: Taxes, Easter and Lenovo

Western Digital is in a commoditized duopoly business of hard drives with Seagate, as the graph below indicates. Currently it sports a 2% dividend and has an operating margin of over 30%. A company can continue to flourish in an industry that is commoditized, so long as it is able to operate in an oligopoly that keeps margins up. Western Digital has a solid balance sheet with a 0.3 debt to equity ratio, while retaining flexibility of the cash it generates by maintaining a dividend ratio at a very reasonable 25%. As we can see, storage didn’t slow down for International Business Machines Corp. (NYSE:IBM), and this should be a healthy precursor of what we can expect from Western Digital.

Foolish bottom line

IBM still has a strong business model of increasing earnings over the long term, but it is running into some growing pains now. Like Apple Inc. (NASDAQ:AAPL)’s iPhone cannibalizing the iPod’s sales, some of IBM’s off site initiatives (cloud) are taking the place of some corporate servers. International Business Machines Corp. (NYSE:IBM) has some big bright spots for earnings, and it will continue to be a dominant position in the enterprise market. Investors can use this dip to pick up some more shares while they are on sale.

The article IBM Earnings: Taxes, Easter and Lenovo originally appeared on Fool.com.

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