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by Jörg Lang, Euro am Sonntag
A group is divided into fast and slow. And because the capital market appreciates the fast more than the slow lose, value can be created. In the case of the share of IBM (ISIN: US 459 200 101 4) the euphoria has so far been limited. Big Blue, as US stockbrokers call the tech icon, announced in the fall that they would be divided into two areas. By the end of 2021, the network services business is to be transferred to a separate company and spun off to shareholders. The division generates high cash flows, has a huge order backlog, but revenues are falling and hampering the group. After the spin-off, IBM will concentrate on expanding the Software and cloud business, which promises high growth.
That the course since the announcement despite a gigantic Stock market bull market hardly reacted in the case of technology stocks, is because IBM had to post restructuring costs in the figures for the third and fourth quarters and the pandemic had a heavy burden on the network services business. So every spark of hope was quickly erased. However, whoever got the numbers for that first quarter of 2021 studied, recognizes the turnaround. IBM’s total revenue increased slightly for the first time in many quarters. The business with cloud solutions has sprinted forward quickly. That promises a lot of excitement for the next few quarters when the comparative values for the network area become significantly cheaper. In the end, investors get a cloud sprinter who should achieve a high rating, and a network company that is no longer that slow. It would be surprising if that combined was not worth significantly more than the current prices.
Our columnist Jörg Lang has been dealing with stocks since 1988.
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