EPS gains due to layoffs and one-time charges, low free cash flow generation, minimal sales growth... IBM drops today to its lowest price since April (also an earnings-related drop then, I think). All because an analyst may have read my SA article on IBM written just after earnings were released (just a joke!). The title was IBM and the Media Attempt to Obscure Its Declining Business Results.
A Credit Suisse analyst wrote:
"We believe the company will be fundamentally challenged to grow revenue organically, as it is faced with a weakening organic revenue base and an increasingly less effective (mergers and acquisitions) strategy," he wrote.
A different report quoted him as also saying:
Organically we believe IBM is effectively in decline ... we estimate that overall IBM core organic growth will be -1.8% for 2013, and that software will grow at 1.9%. ... To be clear, we believe the company will deliver on the $20 EPS roadmap; despite this, we downgrade to an Underperform.
This writeup also brings in its own negatives about the company:
...IBM is laying off thousands of employees. Plus, IBM told some employees in its hardware divisions that they would have to take a week off of work with reduced pay, Bloomberg's Sarah Frier reports. Executives in the division will not be paid during the week at all, Frier reports.
My take is that Big Blue should sell closer to 1X revenues than its current approximately 2X.