Dividend Growth Investing, Retirement Income, Stock Market Investing, Uncategorized

IBM: Cyber-Security Warrior

Another good word about IBM from yet another analyst, which was sent my way:

“Clearly, at all but the very highest levels, cyber-security is more of a commodity than a unique and proprietary technology. But corporations and governments will always need the highest levels of cyber assistance. So as our Internet-based systems become ever more complex, their safeguards must become correspondingly complex, requiring ever greater expenditures to develop. If complexity is truly the enemy of reliability, then companies willing and able to provide reliability with enhanced security will profit handsomely.

Opportunity at one company stands out in particular. A first cyber-security play is good, old IBM (IBM).

A search of the company’s website for that term “cyber-security” surprisingly produces thousands of hits. U.S. computer users have experienced 354 million privacy breaches in the last five years alone, IBM reports in a segment of its massive site devoted to “smarter
security and resilience.” IBM is an outsourcing and information technology giant, putting this company just as much at the forefront of the burgeoning cyber-security business. The company offers huge growth potential in this area and will probably disproportionately
benefit.

But crime, IBM notes, is only part of the problem. Other “business-driven risks include audits, new product rollouts, financial risk, fraud and even failure to comply with government standards.” Additional, “event driven risks” like natural disasters, regional power outages, acts of war and economic downturns can all “be minimized if you anticipate threats and plan accordingly.”

Some of the need stems from rising efforts to cut costs. But IBM has much to contribute in that arena, as one of the nation’s largest
providers of collaborative business solutions, software design and cloud computing. All three of these computer industry fronts also
comprise important components of the cyber-security business.

The company is an important player in just about every major IT segment, including services, servers, storage, semiconductors, and software. As testimony to the company’s success, the shares in recent years exceeded levels reached in 1999-2000, despite a steady
reduction in the number of IBM shares outstanding since then.

Also IBM is an excellent investment entirely irrespective of its vast potential in the cyber-security trade. The company is in superb
financial shape with mountains of cash on its balance sheet. With annual revenues of more than $90 billion, IBM generates over $18 billion in operating income annually, more than $12 billion in net income; and free cash flow to equity exceeding $13 billion a year. The geographically well diversified company maintains more than half its business in Asia and Europe (with double-digit growth in Brazil, Russia, India and China) and consistently expands markets in its cloud, business analytics and outsourcing businesses. With roughly two-thirds of IBM’s total operating income recurring, most of it under multiyear contracts, future growth seems reliable.

IBM, moreover, has a long history of returning cash to its shareholders, with an annualized 3-year dividend growth rate of 13.6 percent. The company has also made more than $50 billion in share repurchases since 2010. IBM offers investors excellent value and future growth potential.”

 

Hey, I didn’t say it… I’m only reporting from one analyst who did! IBM doesn’t look well, according to its chart, but I continue to share the optimism of those analysts who say that IBM will successfully complete that business remake and turn-around that it has been engaged in, and that when those reforms begin to seriously take hold and appear on their top and bottom lines, its share price is going to take off. I intend to hold on and experience that when it does. In the mean time, I add shares as opportunity affords itself. Speaking of which, I think I will be writing of that next… as, the market would appear to be approaching that place where sufficient risk may have left. If only we could get some more downside, accompanied by fear and big volume.

Here’s to your successful investing!
Harold F Crowell

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