NEW YORK (TheStreet) -- IBM Corp. (IBM) - Get International Business Machines (IBM) Report has hired advisors to help deal with the possibility of attacks from activist investors looking to making changes to the company as a result of the company's 11 consecutive quarters of declining revenue, Reuters reports.
Some of the tech company's top investors are looking for help from activist investors, but sources told Reuters that they have been turned down by both Pershing Square and ValueAct.
IBM is said to be worried about a possible attack from prominent activist hedge funds and has started working with two investment banks in order to come up with a defense strategy.
"IBM is continuing to execute on our strategy-making investments in growth areas such as analytics and cloud, reinventing our core franchises, and returning capital to shareholders. We are managing the company for the long term," IBM told Reuters.
Some IBM shareholders are trying to convince prominent activists to build up positions in the company and work on ways to increase value, the sources added.
Shares of IBM closed at $160.45 on Thursday afternoon.
Separately, TheStreet Ratings team rates INTL BUSINESS MACHINES CORP as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
"We rate INTL BUSINESS MACHINES CORP (IBM) a HOLD. The primary factors that have impacted our rating are mixed-some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its notable return on equity and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and generally higher debt management risk."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the IT Services industry and the overall market, INTL BUSINESS MACHINES CORP's return on equity significantly exceeds that of both the industry average and the S&P 500.
- The gross profit margin for INTL BUSINESS MACHINES CORP is rather high; currently it is at 58.23%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 22.73% is above that of the industry average.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 20.1%. Since the same quarter one year prior, revenues fell by 11.9%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
- Net operating cash flow has declined marginally to $6,059.00 million or 7.18% when compared to the same quarter last year. Despite a decrease in cash flow INTL BUSINESS MACHINES CORP is still fairing well by exceeding its industry average cash flow growth rate of -17.72%.
- Reflecting the weaknesses we have cited, including the decline in the company's earnings per share, IBM has underperformed the S&P 500 Index, declining 18.16% from its price level of one year ago. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- You can view the full analysis from the report here: IBM Ratings Report