Is IBM a Good Long Term Investment?

Is IBM a Good Long
Term Investment?
By www.ProfitableInvestingTips.com

http://profitableinvestingtips.com/stock-investing-tips/is-ibm-a-good-long-term-investment
IBM just used part of its cash hoard plus a
lot of debt to buy Red Hat which is a Linux
software and cloud computing company.

The purchase comes on the heels of a weak
quarterly report due to soft software and
server sales.

And, news of the purchase drove the stock
a bit lower.

We have ask, is IBM a good long term
investment?

International Business
Machines

IBM has been around since 1911 and took
the name International Business Machines
in 1924.

The company has been a dominant
presence in the world of computing and
basic research for decades.

Over that time its employees have earns
five national medals of science, 10 National
Medal of Technology, 6 Turing awards, and
5 Nobel prizes.

Inventions from IBM include the SQL
programming the language, automatic
teller machines, bar codes, DRAM (dynamic
random access memory), and many others.

The company holds the most US patents for
any business.

Through the middle of the 20th century
IBM dominated the marker for the large
main frame computers that were necessary
for large businesses and governmental
organization.

But, the company was caught napping by
the advent of the personal computer and
faster and more efficient computer chips
and programming.

In its attempt to catch up with Apple
computer it gave Bill Gates and Microsoft a
start by using its operating system for their
computers.

Gates was quoted as saying that many
billionaires were created by the need to fix
various inadequacies in the IBM personal
computer design.

IBM lost its dominant position in the
computing world is the need for its huge
mainframe computers diminished.

Smaller and networked computers took
over the work of large mainframes and then
cloud computing took away the need for
mainframes in the office.

Part of IBM’s purchase of Red Hat is to
strengthen its position in the world of cloud
computing.

Although IBM with its huge research base
and cadre of brilliant scientists was well-
positioned to develop things like smart
phones and search engine software, they
never did and the lead in these areas went
to companies like Google, Apple, and not-
so-little-any-more Microsoft.

IBM is still an impressive company but does
it have a strong future or is the tech world
passing it by?

Is IBM a good long term investment with is
more than 5% dividend?

IBM Shares

Five years ago in 2013, IBM peaked above
$200 a share.

Today, after a weak quarter and the Red Hat
purchase, it is down to $125 a share.

The company has had its ups and down
over the years but does it have the intrinsic
value to justify long term, buy and hold
investment?

Over the last thirty years, IBM has steadily
rotated out of non-profitable products and
services and into products and services
where it retains dominance and
profitability.

But, there is a sense that it is chasing an
ever-shrinking set of market niches instead
of using its robust research base to create
new niches in which it could reassert its old
dominance.

What Does Warren Buffett See
in This Company?

A major shareholder in IBM is the all-time
king of long term investing, Warren Buffett.

Forbes looks at Buffett, IBM and long term
investing.

There are those that think Buffett’s stake in
IBM is curious, not only because of his
openly cautious approach to tech over the
years but also because of the world’s
continuing shift toward cloud computing–
and the threat it represents to the makers
of computing devices.

But Buffett doesn’t make investments
without having a concrete reasons for doing
so.

In his 2011 letter to Berkshire Hathaway
shareholders, Buffett explained his foray
into IBM as founded on the belief that the
company would deliver benefits in the form
of billions of dollars in dividends and
repurchases over time.

It is useful to recall that when Buffett
started out his investment strategy was
picking companies that were doing poorly,
fixing them up, and then selling after the
stock price went up and before the
company headed downward again.

The strategy was known as the “last puff
from the cigar.”

If this is what Buffett is doing here, we
should watch for when he decides to get
out and then all head for the exit.

The long term problem with IBM is that it
has not used its brain power to develop
new and profitable product lines.

For IBM to be a good long term investment,
this needs to change.

Is IBM a Good Long Term Investment?

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Is IBM a Good Long Term Investment?