IBM's Future Looking Bleak: How Does It Compete in the Cloud Computing Era?

By Eric Bleeker and Max Macaluso – Jun 4, 2014 at 8:46PM

NYSE: IBM

International Business Machines

Market Cap

$167B

Today's Change

(1.51%) $2.75

Current Price

$184.65

Price as of April 23, 2024, 12:49 p.m. ET

Hardware giant IBM is facing a rocky transition into the cloud computing and software-dominated world, and not because of its products: The tech world's wild financing structure is world's away from IBM's more traditional methods.

As reported in a fantastic cover story in Businessweek, IBM's (IBM 1.51%) transition into the cloud computing era has been a bumpy one. For instance, IBM recently lost a major contract with the CIA, with Amazon.com (AMZN 0.99%) ultimately winning the deal. But it wasn't because Amazon cut prices so low that nobody could match them -- IBM was actually one-third cheaper than Amazon. It got beat because its products were severely lacking.

In the following video, Motley Fool tech analyst Eric Bleeker and Max Macaluso discuss IBM's difficult transition from being a hardware giant, not only into cloud computing but also in the ways the the tech world operates financially, which is basically not worried about making returns on invested capital or making returns to shareholders in the near term. How will IBM adapt against competitors who basically get free capital without having to worry about making money?

Eric Bleeker, CFA, has no position in any stocks mentioned. Max Macaluso, Ph.D., owns shares of Apple. The Motley Fool recommends Amazon.com and Apple and owns shares of Amazon.com, Apple, and IBM. 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.