In 2013 Warren Buffett told Berkshire Hathaway shareholders that IBM stock should languish the next few years, and then start to rise in 2017 as the company reinvented itself. He said this would be a good thing, as IBM were in the middle of buying back shares and the lower stock price would be beneficial.
Buffett has been ‘on the money’ so far — the IBM stock did languish, and fell from over $200 a share to the $130’s, as the company sold off divisions and products, and bought new technology products — shifting its business to Big Data with Video, Artificial Intelligence (Watson), Blockchain, Internet of Things (IoT — a term IBM coined), and of course Security which it already had.
Today, IBM’s stock has risen to over $180 a share and is rising still. On the positive side:
- IBM is establishing itself as a leader in Blockchain — and has one of the best learning experiences for trying out Blockchain — a technology which promises to revolutionize the world more than the internet did.
- IBM has become a leader in offering API services on its Platform as a Service (PAAS) Bluemix offering — still behind Amazon and Microsoft but doing better than Oracle and others.
- IBM is a leader in artificial intelligence with a good brand name in Watson, which they have bulked up by buying technologies such as that of the Weather Channel — but they need to make it more successful and profitable.
- IBM is behind Amazon and Microsoft in cloud offerings — but in this field there probably won’t be one or even two winners — companies do not want to put all their eggs in one cloud basket, so being #3 may be ok for IBM.
- IBM has a premier name in Security, a trusted name in Enterprise Software in general, and is a leader in IoT and things like agile software delivery aka DevOps.
On the negative side:
- Turbulence continues at IBM as layoffs and selling off of older products continues, and the company moves toward a leaner, younger workforce.
But from a stock and growth perspective, the company looks to be in a good place. Warren Buffett may have won the day again.