Will IBM Top the Dow in 2013?

As December comes to a close, 2013 is just around the corner, and it's a good time to look at the future prospects for the stocks you own. If you don't know where a company's headed in the next year and beyond, then it's impossible to make an informed decision about whether you should add the stock to your portfolio -- or sell it if you already own it.

Today, I'll look at IBM (IBM 0.18%). IBM has been a member of the Dow Jones Industrials (^DJI 0.67%) since 1979, but it was formerly in the average from 1932 to 1939. After a solid 2012, IBM is still on track to reach its long-term goal of $20 in earnings per share by 2015, but how will it keep making progress? Below, you'll see more about IBM's prospects for 2013.

Stats on IBM

Source: Yahoo Finance.

Will IBM keep rising?
Analysts are expecting the good times to keep rolling at IBM, with 10% expected earnings growth translating into about a 15% boost for the stock based on target prices. Yet with revenue growth seen remaining sluggish, IBM will have to go for projects that produce more bang for the buck.

One such idea is IBM's decision to broaden its cloud-computing offerings to include midsized businesses as customers. That'll be a substantial challenge for IBM, as Amazon.com (AMZN 1.49%) already has a commanding market share of 70% with its Amazon Web Services segment, and Salesforce.com (CRM 1.27%) and Rackspace Holdings (RAX) also have a substantial head start. All three companies are also more experienced in dealing with midsized and smaller businesses than IBM, which has traditionally focused instead on large enterprises. Still, with the cloud business growing at 15% annually and making up an estimated $60 billion in sales this year, IBM wants a piece of that growing pie.

IBM also predicts that smartphones will continue to gain traction in the marketplace by going beyond simple applications to become part of a larger "big data" network. With IBM being a pioneer in big data, the company has a real chance to take advantage of growing smartphone adoption by pushing forward with initiatives that don't just ride the smartphone's coattails but actually pull the mobile revolution forward.

IBM has consistently impressed investors by reinventing itself to avoid some of the big pitfalls that other tech giants have fallen into. 2013 gives Big Blue another chance to shine.

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