S&P Likely To Downgrade IBM

After dealing with slow sales for consecutive sixteen quarters, International Business Machine Corporation have received a warning from Standard & Poor’s that it is likely to be downgraded by the firm. The news affected the trading session of the company after S&P analysts slashed down their outlook to negative.

The once rapid pace of the tech industry has now declined and in the current year, the company stood at the bottom line of the index.

The enthusiasm of the investors had curbed after the tech giants including Apple, IBM, Alphabet, and Twitter posted disappointing results. The only company who stood at top is the social networking giant, Facebook.

The ratings have been demoted after the company’s years-long strategy to transition to higher-margin businesses failed to turn the company around. The Big Blue has invested a lot in the cloud computing businesses but it has been behind the strong competitors like Microsoft and Amazon.

An S&P credit analyst, John Moore cited, “The negative outlook reflects the company’s protracted negative operating trends and pressures to restore operating growth as it addresses shifting client needs and the increasing market prevalence of cloud-based technology solutions.”

For the latest quarter, the company’s sales declined 5% in comparison with the year earlier and stood at $18.7 billion while the profit fell 13%. Back in 2012, IBM landed on double A minus rating after having a single A plus rating for over a decade.

After the outlook was slashed down, the shares of the tech company fell 1% which accounted for a totaled 13% decline in the share value over the past year.

But the Big Blue opined that it has potential to sustain its position as a strong investment-grade organization. It further said that the company has exhaustive financial flexibility in order to effectively carry out its strategy and capital allocation plans.

According to FactSet, in the first quarter, the tech sector earnings are anticipated to shrink about 7% bearing a 5% decline in sales as the market narrowed down to its record high.

Recently, on Tuesday, the oil giant, Exxon Mobil, has faced demotion in its long-held credit rating of “triple A.” Similarly, a lot of other companies who have been at the high end of its current credit cycle will likely be under the axe of the company’s downgrading.

The McGraw Hill financial unit, S&P, historically downgrades more than four organizations for every group which it has upgraded in the first quarter.

All in all, at the market which closed on Wednesday, IBM stock stood at a price of $150.5.