INTERNATIONAL BUSINESS MACHINES CORP. $193(New York symbol IBM, Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 1.2 billion; Market cap: $231.6 billion; Price-to-sales ratio: 2.1; Dividend yield: 1.8%; TSINetwork Rating: Above Average; www.ibm.com) started up in 1911, which makes it the world’s oldest computer company. IBM now operates in over 170 countries.
The company has long been known as a maker of mainframe computers. However, these products supplied just 18% of its revenue in 2011. That’s because IBM continues to expand into more profitable areas, like designing computer systems and managing them for clients (56% of revenue) and selling software (23%). Its financing division supplies the other 3%.
The company often uses acquisitions to enhance its expertise. In the three months ended March 31, 2012, it spent $1.4 billion buying smaller firms. It’s particularly interested in companies that specialize in analytics software, which helps businesses track consumer purchasing and other data.
The company earned $3.1 billion in the latest quarter, up 7.1% from $2.9 billion a year earlier. IBM spent $3.0 billion on share buybacks during the quarter. Due to fewer shares outstanding, earnings per share rose 13.0%, to $2.61 from $2.31. Without unusual items, mainly costs to integrate acquisitions, IBM’s earnings per share would have risen 15.4%, to $2.78 from $2.41.
Revenue rose 0.3%, to $24.7 billion from $24.6 billion. The company continues to see stronger sales of software (up 5.5%) and computer services (up 0.7%). However, computer hardware sales fell 6.7%.
IBM recently raised its quarterly dividend by 13.3%, to $0.85 a share from $0.75. The new annual rate of $3.40 yields 1.8%.
As well, the stock trades at just 12.8 times the $15.02 a share that IBM will likely earn in 2012. The company aims to increase its annual earnings to $20.00 a share by 2015.
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