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IBM was the only Dow company to fall in 2013, and yet …

Dan Weissmann Jan 2, 2014
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IBM was the only Dow company to fall in 2013, and yet …

Dan Weissmann Jan 2, 2014
HTML EMBED:
COPY

IBM finished last year with a sad-sounding distinction:  Its stock was the only one on the Dow Jones Industrial Average to lose value in 2013.  The average as a whole was up 26 percent—IBM’s share price went down 2 percent. 

But some say Big Blue, the company, looks a lot healthier than its stock’s performance.  IBM made money and paid dividends. And in the fast-changing tech world, it retains some big advantages. 

One of the biggest advantages is… being big. And being one of the companies big companies can rely on to take care of all their IT needs. Chief Information Officers for Fortune 500 Companies?  Not big risk takers. 

If I’ve got IBM, I’ve got a guy.

And, I have one throat to choke,” says Grady Burkett of Morningstar. “So if my guy messes up, I know exactly who to call.”

All that integration means that for IBM’s customers, switching to another vendor isn’t a consumer’s choice to switch from PC to Mac.  It’s more like getting a divorce.

IBM does its best to keep its customers happy by staying current, and playing catch-up when it needs to— sometimes by buying smaller, younger companies that have developed new technology.

For instance, cloud computing—which allows customers to rent server space instead of buying servers from vendors like IBM—is eating into sales. So last year IBM bought a company called Softlayer that specializes in providing cloud services. 

Andrew McAfee, a professor at MIT’s Sloan School of Business and author of Enterprise 2.0, thinks IBM’s star turn on TV a couple of years ago—as the builder of Jeopardy champ Watsonwas a good sign.  “IBM did not build Watson just to play Jeopardy,” he says.

Instead, IBM built Watson to compete with Google search, Apple’s SIRI, and other I-can-answer-that-question-for-you applications.  “Think about it applied to troubleshooting, applied to customer service, applied to medical diagnostics,” he says. “The potential uses for a Watson-style technology are all over the place.”  The company’s website for Watson reflects these ideas.

The company’s stock is likely to come back over time, according to Edward Jones analyst Josh Olson. “We think that over that longer horizon these fundamentals will shine through more, and that will be reflected in the stock price,” he says.

In other words, the fast-moving stock market may yet catch up with this big, mature company.

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