IBM will buy its growth
Acquisitions and a bigger focus on software and services will push Big Blue's growth, CEO Palmisano tells analysts.
Updated at 3:45 p.m. ET
So, how does IBM (IBM) see its growth in the next five years? By focusing on software and services and possibly as much as $20 billion in acquisitions, CEO Sam Palmisano told analysts today.
Operating earnings will jump to at least $20 a share by 2015 from $11.35 or more this year, helped by cost savings and software demand, Palmisano said.
Palmisano signaled that his pace of acquisitions may be accelerating, Bloomberg News noted. He spent more than $20 billion on 100 purchases in the eight years since taking over in 2002, partly to focus on the higher-margin businesses of services and software. He has also bought back shares and cut jobs to make up for slowing corporate spending amid the recession.
IBM will keep investing in markets that help customers be more efficient, such as software that helps analyze or predict trends, and cloud computing, which lets them store and access information on shared servers, Palmisano said.
The company is also developing services to monitor highways, electrical grids and other infrastructure so they can be run more efficiently.
The amount set aside for acquisitions will equal about $4 billion a year, Chief Financial Officer Mark Loughridge said at the meeting. The company's projections for 2015 assume about 5% in annual sales growth, he said.
Analysts surveyed by Bloomberg predict revenue growth of 4.3% this year, to $99.9 billion, after falling 7.6% last year. Analysts predict sales growth of about 4% also for 2011 and 2012.
Hewlett-Packard (HPQ), the world’s largest computer maker, is projected to increase sales about 8% this year, helped by purchases such as its $2.7 billion buyout of 3Com and the $13.2 billion takeover of services provider Electronic Data Services.
Oracle (ORCL), which has spent about $42 billion in acquisitions since January 2005, will boost sales 17% this fiscal year, according to analysts’ estimates.
Sluggish growth is one reason IBM’s stock performance has trailed some of its peers. In the past five years through Tuesday, IBM shares had increased 73%, while Hewlett-Packard’s stock had risen 136%. Oracle more than doubled over the same period.
IBM plans to save $8 billion through productivity gains by 2015, while free cash flow should reach $100 billion over that span. The company said it plans to give 70% of the cash flow to shareholders.
Copyright © 2013 Microsoft. All rights reserved.
Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.
[BRIEFING.COM] A solid November employment report translated into a solid day of gains for the major averages. While there was some talk that the encouraging job growth raised the odds of the Fed announcing a tapering at its December meeting, the message of the markets today was either that it didn't believe there would be a tapering this month or that it doesn't fear a tapering this month.
It was just one day, yet there was ample meaning wrapped up in the connection that the 10-yr ... More
More Market News
|There’s a problem getting this information right now. Please try again later.|
LATEST MARKET DISPATCHES
- No more Dispatches; here's where to find market news
- Dow falls 59 as late-day gloom kills a rally
- Stocks held back by fiscal-cliff worries
- Stocks suffer worst weekly loss in 5 months
- Dow off 121 as post-election swoon continues
- Dow slumps 313 after Obama's re-election
- Dow jumps 133 as Americans head to the polls
The Fed may start tapering in just a few months. Here are a few of the likely winners and losers.