Will IBM (IBM) make money in the Cloud?

Strangely, IBM (NYSE: IBM); a company many investors dismiss as a dinosaur could be the best investment in cloud-computing.

IBM (IBM) is leveraging Red Hat’s Linux expertise to become a leader in multicloud applications, ZDNet’s Larry Dignan speculates. Multicloud is the use of multiple cloud-computing and storage services to host applications and store data in a single architecture.

IBM’s mutlicloud solutions run can run an app or platform on Amazon Web Services (AWS), Microsoft Azure, and the Google Cloud Dignan claims. Moreover, IBM is accumulating cloud-consulting expertise through acquisitions.

Note I think IBM’s most valuable subsidiary is Red Hat. To explain, Red Hat makes IBM a leader in Linux and open-sourced solutions. Hence, IBM has expertise in the world’s most popular open-sourced operating system Linux. Using open-source makes it easy for IT professionals to install Red Hat and IBM solutions on several clouds at once.

Can IBM Make Money in the Multicloud?

For instance, IBM (NYSE: IBM) has purchased Norcloud, a European cloud integrator, Taos, a cloud-consulting and managing-services provider, and 7Summits, a Salesforce integrator, ZDNet reveals. The consulting expertise could help IBM set up a customer’s platform on several hosting services fast.

A big focus at IBM will be hybrid multicloud solutions. Hybrid multicloud apps operate on several servers at once and can reach people using different operating systems and hardware.

For instance, an IBM hybrid multicloud platform could operate through Apple, Linux, and Windows computers while running on an AWS server. Plus, the same hybrid multicloud can reduce risk by running on an Azure server.

Meet the Multicloud

Consequently, a company’s employees could work on the multicloud using their own computers and phones. Jane could access the company multicloud platform through her iPad while Charley can work on the same platform with his homebrew Linux PC.

Yet, the IBM multicloud can enable the company to maintain security and risk-management for people working on a variety of platforms. One obvious advantage to multicloud is that a company will have to provide hardware and internet connections to employees working from home.

Another advantage is that it can give remote workers instant access to an organization’s platforms without special equipment or connections. Hence, a team will have not have days or weeks of downtime waiting for company computers to arrive. Instead, they can get to work fast.

How IBM can Profit from Coronavirus with Multicloud

I predict demand for multicloud will increase because of COVID-19. To explain, coronavirus has closed many offices and many people are afraid to go to the office because of COVID-19.

The coronavirus pandemic is worsening because of contagious new COVID-19 variants. For instance, Centers for Disease Control and Prevention (CDC) forecasts the B.1.17 coronavirus variant could become the dominant COVID-19 strain in the United States by March.

To elaborate, CDC scientists think the B.1.17 variant could be 50% more contagious than the standard COVID-19 vaccine Science News claims. Thus, coronavirus could affect twice as many people, a situation that will lead to more lockdowns and office closures.

Those closures could create more demand for IBM’s multicloud solutions because more people could work from home with offices closed. Under those circumstances, many organizations will build permanent remote-work infrastructures using multicloud solutions.

Is IBM Making Money?

I consider IBM (IBM) one of the best cloud computing stocks because it makes money.

For example, IBM reported a quarterly gross profit of $8.43 billion, quarterly revenues of $17.56 billion, and a quarterly operating income of $2.268 million on 30 September 2020. Furthermore, IBM reported a quarterly operating cash flow of $4.285 billion and a quarterly ending cash flow of $2.365 billion on the same day.

Therefore, IBM already makes money in the cloud and keeps a lot of that money. For instance, IBM had $154.28 billion in total assets and $15.753 billion in cash and short-term investments on 30 September 2020.

Importantly, IBM reported four quarters of a negative financing cash flow in 2020. For example, IBM reported a quarterly financing cash flow of -$1.689 billion on 30 September 2020. Thus, IBM was paying debts instead of borrowing money in 2020.

However, IBM still has enormous amounts of debt. IBM reported $55.129 billion in long-term debt on 30 September 2020. Notably, the long-term debt fell from $55.449 billion on 30 June 2020 but rose from $54.102 billion on 31 December 2019.

IBM is a value investment in the cloud

I consider International Business Machines (IBM) a value investment in the cloud because of its price.

I think Mr. Market undervalued IBM at $131.65 on 21 January 2021. Unlike some popular cloud stocks, IBM makes money and retains cash.

Moreover, IBM’s share price fell in 2020, making it a bargain. Mr. Market paid $139.17 for IBM on 21 January 2020 and $131.65 on January 21, 2021.

Appealingly, IBM paid a $1.63 quarterly dividend on 9 November 2020. Plus that dividend grew from $1.62 on 7 May 2020.

In the final analysis, I consider IBM a value investment with strong growth characteristics and good income. I advise those seeking a safe investment in the cloud to investigate IBM. I think this stock has a high margin of safety and a cheap price.

Originally published at https://marketmadhouse.com on January 21, 2021.