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IBM - Company Profile - Heading for a fall




Indigo Equity Research


23 Jan 2013





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Overview of 2012 Q4 Results - Heading for a fall Mediocre 2012 Q4 results - Revenues remain soft but improved sequentially Revenues remain soft but improved sequentially suggesting that the downturn is over. However, EPS growth may still disappoint (see investment thesis below). Indeed, IBM's guidance is for GAAP EPS growth to continue to slow, to 8% in 2013. In our opinion IBM is heading for a fall; if revenue growth remains soft & EPS growth contracts, valuation multiples will also contract, albeit current multiples are modest. Investment thesis - exceptional performance, but EPS growth is slowing ....... Strong EPS growth of c.15% since 2004 has been driven primarily by higher margins (in Global Services & Software), lower tax rates & share repurchases; as well as modest revenue growth. In our opinion, EPS growth will slow further as key drivers lose steam (or may reverse) ...... Independent, buy-side, fundamental, financial analysis. This report includes: results analysis, investment thesis, recent key events & SWOT analysis. www.indigo-equity-research.com

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