International Business Machines Corp. (NYSE:IBM) has been one of the most disappointing companies of 2013. The firm’s stock has been flat since the first of January, despite huge growth in wider indices. The slump in the company’s fortunes has been blamed for the big shake up in the DJIA, announced this morning. Analysis from Barclays sees positive signs for the company through the year end, however.
Ben A. Reitzes, the lead analyst on the report, sees significant factors in favor of International Business Machines Corp. (NYSE:IBM) in the current quarter. At least some of those factors should continue benefiting the company through the end of the year. The stock puts a Neutral rating on IBM shares with a target price of $215.
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IBM quarter ahead
The Barclays report—which looks most closely at trends this quarter in order to predict the International Business Machines Corp. (NYSE:IBM) earnings report for Q3—highlights some major changes that will add to the company’s performance. The main three in terms of importance are: the loss in value of the Rupee, cost cutting starting to show, and an improvement in signings with the company in Global Service.
International Business Machines Corp. (NYSE:IBM) has a large cost base in India. The 10 percent depreciation of the rupee in recent weeks means that cost should come in lower in the current quarter and through the end of the year, if the situation remains the same. In terms of cost cutting, the company has made efforts to slash costs, and analysts believe that will show in the company’s coming earnings reports.
Analysts also expect Global Service revenue to increase for the first time in several quarters in the next International Business Machines Corp. (NYSE:IBM) earnings report. The segment is responsible for 60 percent of IBM revenue, and a boost to it in the next quarter could go a long way towards improving confidence in the company.
IBM sell off
International Business Machines Corp. (NYSE:IBM) announced today that it was selling off its customer care outsourcing business today for around $500 million. The move is part of an overall strategy at IBM to cut costs and get rid of businesses that are under-performing on margins.
The strategy is one that International Business Machines Corp. (NYSE:IBM) is intent on following, and one that the market seems to be happy with. Stock in the company rose by around 2 percent after the move was announced today.