IBM Leads the Dow Jones' Decline Today

IBM is today's worst stock on the DJIA as the company holds its investor day.

May 14, 2014 at 1:30PM

IBM (NYSE:IBM) is leading the Dow Jones Industrial Average (DJINDICES:^DJI) down as the company holds its investor day. As of 1:30 p.m. EDT the Dow was down 51 points to 16,665. The S&P 500 (SNPINDEX:^GSPC) was down three points to 1,895.

IBM is holding its investor day in New York City today; investors who didn't make it can watch through the company's live webcast. CFO Martin Schroeter reiterated IBM's target for 2015 of at least $20 in earnings per share, up from this year's expectations of $15 per share. Schroeter said, "Quite frankly, we are seeing very good growth out of software, good growth out of services, but challenges in hardware."

"Challenges" is an understatement, as the company's hardware business dropped 20% in the first quarter after a 20% drop in the fourth quarter of 2013. While CEO Ginni Rometty believes the drop in the server business is cyclical, some are not so sure, as there is fallout worldwide from Edward Snowden's disclosures last year of U.S. tech companies helping the U.S. government spy abroad.

So where will the $5 increase in EPS come from? Schroeter expects an additional $3.25 through higher-margin services, and another $2 through increased share repurchases. IBM is focused on a few main areas, namely, cloud computing, data, mobile, social, and security. The most high-profile of these efforts is the company's Watson cloud computing project. IBM has been investing heavily in it since 2006 and gave its first real public demonstration through its performances on Jeopardy! in 2011.

The company has expanded the Watson project and the technology behind it into fields that require large data-processing capacity and real-time solutions, namely the financial-services sector and the health care sector. Also coming out of the project are spinoffs such as the new technology revealed this week: "elastic storage." The company claims the technology will allow for up to a 90% reduction in storage costs by allowing customers to use cheap servers together to form a data center and add servers one at a time instead of buying massive arrays for storage.

While many investors are sullen on IBM's prospects, Warren Buffett has taken the long view on the company, and his Berkshire Hathaway is now IBM's largest shareholder. With a 103-year history and a CEO with a long time horizon, IBM should continue to be an innovator and a major presence in the technology world for years to come.

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Dan Dzombak has no position in any stocks mentioned. The Motley Fool owns shares of International Business Machines. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

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That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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