IBM: The forgotten IT veteran

IBM is a dinosaur of the IT industry. In contrast to the giant lizards, the company, also known as “Big Blue”, is still alive. And after many years of unsuccessful repositioning, the cloud business is increasingly promising success.

IBM lettering at the entrance of one of the Highlight Towers

Dhe younger investors are unlikely to know what to do with the nickname “Big Blue”. But it stands for a company that has a history that is more than a hundred years old. IBM – the International Business Machines Corporation.

The American group was one of the best-known and largest IT companies in the world in the 1980s / 90s. While Apple, for example, was on the verge of bankruptcy in 1997 and was thus struggling to survive, IBM was promoting its products with almost legendary TV spots such as “the Niemeyer”. Today you can hardly imagine that in view of the market power and the strong balance sheets of the iPhone company. IBM, on the other hand, has been looking for the way to old success for many years with its more than 340,000 employees.

Once the epitome of the PC

“Big Blue” isn’t as big as it used to be for a long time. While IBM was the epitome of personal computers for many people in the 1980s and 1990s, the PC business was sold to Lenovo in 2005. The group reoriented itself, but could not really advance the new flagship – the business with mainframes and servers – in the past few years.

The IT group is also trying to focus more on high-growth areas such as cloud computing, data analysis and artificial intelligence. But this could not stop the stagnating or declining sales trend of previous years.

Obsolete by other tech values

That is why IBM did not play a major role on the stock market for the past ten years. Legendary investor Warren Buffett can tell a lot about it. Due to a lack of success, he sold the position he had built up in 2011 in 2018. Those who were shareholders for a longer period of time rarely threw the share out of the portfolio, but also earned nothing with it – in comparison to investors in many other high-tech stocks, which repeatedly came up with new records.

A comparison: if you invested 10,000 euros in IBM ten years ago, you have the same amount in this position today. That reflects the business of IBM: You struggled somehow through. Apple shareholders, in turn, made more than 129,000 euros from the same investment amount at the same time. Here, too, Warren Buffett can sing a song, because after IBM he turned to the iPhone manufacturer with great enthusiasm.

Our author Christoph Scherbaum is a stock exchange specialist and works as a financial journalist from Ludwigsburg.
Our author Christoph Scherbaum is a stock exchange specialist and works as a financial journalist from Ludwigsburg. : Photo: Private

Negative run ended for now

But it is well known that as a shareholder you should never give up hope that the trend could turn around. At IBM such a thing might flare up right now. At least the latest quarterly figures give cause for this. The IT group exceeded the forecasts of the analysis houses with a surprising increase in sales in the first three months of the current year. Much more important, however, were the points that the company ended its negative run of sharp sales declines in the previous four quarters and, above all, increased its revenues again.