Wells Fargo Cautious On IBM, Notes Low Visibility And Transition Concerns

Maynard Um of Wells Fargo on Friday lowered his price target on shares of

to a range of $155 to $170 from a previous $167 to $177 due to the belief that the company's transition will likely take some time. “IBM is experiencing transformational, market, and secular growing pains – faster legacy business declines, pricing pressures, transition costs, currency, macro issues, and misexecution,” Um wrote. “While IBM is taking the right steps to transform by divesting low profit businesses and investing in newer growth areas, we believe the transition will take time.” Um adds that until the market gets a better sense of when IBM's business will bottom out, it is difficult to get “more constructive.” The analyst adds that the company does have some unique advantages when it comes to vertically focused solutions, but legacy issues may outweigh the benefits of the new businesses. Um also notes that currency issues will become a greater headwind during the fourth quarter 2014 and will continue in to the first quarter 2015. All the major currencies (Euro, Pound, Yen) declined in the quarter more than previously estimated.