With shares of International Business Machines (NYSE:IBM) trading around $187, is IBM an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:
T = Trends for a Stock’s Movement
IBM is an information technology company. The company operates in five segments: Global Technology Services, Global Business Services, Software, Systems and Technology, and Global Financing. Technology products and services are in high demand worldwide, as consumers want to be up to speed and companies always need the latest and greatest to stay ahead of the competition. Cloud computing has been hot in recent times, which has not been good news for IBM. Should the company want to hold on to its market share, it needs to make moves quickly and provide the technology products and services that worldwide consumers and companies demand.
IBM said it would commit $3 billion over five years to semiconductor research. The company said Wednesday that it plans to make microchips with smaller circuitry and more components that are faster and more energy-efficient. The company already spends about $6 billion a year on research and development. IBM hopes to shrink the size of the tiny circuits from 22 nanometers to 7 nanometers, about a thousandth of the width of a human hair. Researchers will also experiment designing chips using some unproven techniques that use quantum physics and that are inspired by the brain. While IBM plans to continue researching and licensing chips, the company signaled its intention to get out of the chip manufacturing business. It’s reportedly looking to sell its chip manufacturing plants in East Fishkill, NY and Burlington, VT to GlobalFoundries.