Cloud Computing: 2014 Will Be a Big Year For IBM
January 3, 2014
Grazed from MotelyFool. Author: Timothy Green.
2013 has not been kind to IT giant IBM . The company’s stock has been declining since hitting highs last March, with disappointing earnings and a collapse of the hardware business in emerging markets largely to blame. IBM was the only stock in the Dow Jones Industrial Average to decline in 2013, even after a significant end-of-year surge.
2014 will be a year of challenges for IBM, but the company should continue to make progress toward its long-term goals. Hewlett-Packard managed to win some market share from IBM in the server business in 2013, and the general trend toward cloud computing will continue to pressure IBM’s hardware business and the server industry as a whole. Meanwhile, Amazon’s aggressive expansion of its cloud services has put IBM in the position of playing catch up, with at least one high-profile private cloud contract going to the retail giant instead of Big Blue in 2013. There’s certainly plenty to worry about going forward for IBM, but many of these worries seem overdone…
The shifting server market
IBM’s strategy over the past decade has been to continually shift out of low-margin businesses into high-margin businesses. By 2015, IBM expects to generate at least 50% of its profit from software, a business that carries extremely high margins. The recent weakness in IBM’s server business, then, doesn’t matter very much in the grand scheme of things. Unlike competitor HP, IBM derives most of its profits from software and services…
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