IBM's 'Big Picture' Strategy

In a report published Wednesday, JP Morgan analysts maintained a Neutral rating on International Business Machines Corporation IBM, while reducing the price target from $173 to 170. The analysts highlighted the company's Big Picture strategy. In the report, JP Morgan noted, "IBM management is aiming towards: 1) differentiating itself from peers in its "Strategic Imperatives", 2) re-inventing its Core Portfolio, and 3) adopting more open platforms and partnerships to create ecosystems around technologies. Strategic imperatives should remain a growth driver, and while Core portfolio could decline over the long term, IBM expects to realign its offerings with clients' requirements and emphasize annuity businesses." "Strategic Imperatives (Cloud, Analytics, and Engagement) could represent a trillion dollar addressable market opportunity by 2018, up from ~$600bn today," the analysts commented, while adding that the company's target of low single-digit revenue growth in the longer term appears "achievable by 2017 as faster growing strategic imperatives become a larger part of the business." The analysts wrote, "We like the strategic direction, and think the bears under-appreciate the heavy lifting IBM has done to date to re-mix the business. However, the journey is a long and risky one, requiring solid execution, and more importantly, discipline in balancing long term returns with near term earnings upside."