Wall Street Is Valuing IBM
Wall Street Is Valuing IBM- Wall Street should begin to pay more attention to IBM’s emerging business and less in its mature business.
Wall Street values IBM as a technology company in the mature hardware business, characterized by sluggish sales and price and profit erosion.
That’s why it has shunned the company’s stock, which has underperformed the overall market in recent years.
IBM vs the S&P500KOYFIN
While IBM was primarily in the mature technology business a decade ago, it isn’t these days. Thanks to several strategic initiatives, IBM’s old mature business counts for less than 50% of its overall sales. The remainder is coming from fast growing emerging technology segments.
Like cloud and Internet security.
In the 2Q, IBM’s revenue from strategic initiatives was up 15%, and accelerated to 13% at constant currency. Revenue performance in 2Q was led by security and cloud. Security revenue was up about 80% in 2Q – driven by growth in integrated software and services business. Cloud revenue was up 20%, or 18% at constant currency, driven by Software as-a-Service (SaaS) offerings.
Most notably, IBM exiting the second quarter with a SaaS annual run rate of over $11 billion, which is up about 25%.
SaaS is a business model that stores software centrally and licenses it on a subscription basis. It has been successfully tested by several technology companies, including Adobe Systems.
Adobe “wrote the book” on SaaS says Tien Tzuo, author of Subscribed. Back in 2012, the company got rid of its software disks and upgrades by moving its Creative Suite software to the cloud, and charging customers a monthly access fee.
Saas provided Adobe with a steady revenue from its software, and low sales transaction and monitoring cost. “In three years, Adobe Creative Cloud went from almost no subscription revenue to a virtual 100 percent subscription model,” says Tzuo.
The post Wall Street Is Valuing IBM The Wrong Way appeared first on Statii News.
source http://news.statii.co.uk/wall-street-is-valuing-ibm-the-wrong-way/
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