Janney: IBM Will Return To Growth In The Middle Of 2016

International Business Machines Corp. IBM reported mixed second quarter numbers on Monday following which the company's shares slumped at the open on Tuesday, down more than 5 percent.

Joseph Foresi, Janney Capital Markets, was on CNBC to weigh in on the tech giant's earnings.

Continue To Worry About Core Business

"I think you still need to worry," Foresi began. "They talk about 27 percent, roughly 27 percent of their revenue, growing about 30 percent, but what they don't talk about is the other 70 percent of their revenue which is declining double digits. So, even though you see lower numbers on the top, the core business continues to decline and that's the real issue with IBM."

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He continued, "And so we will continue to worry about that business. It slowly tweaked down. And so it's always nice to highlight the stuff that is growing, but we still see a reasonable decline in that core business and that's why we would be cautious."

Growth Prospects

On when the company overall will start showing signs of growth, Foresi said, "I don't see turning in any particular quarter any time soon. If you run through the basic math, again if you're seeing 30 percent of your business growing 30 percent and you're still not growing that means the other 70 percent is declining at a pretty rapid pace and that decline continues."

"So, they need to stymie the core business before you're going to see some aggregate growth. And given the size of the company, that's a fairly big endeavor to try to take on. So it's going to be a number of quarters. We have them returning into growth sometime in the middle of the next year," Foresi said.