Will Recent News Hurt IBM’s Stock?

With shares of International Business Machines (NYSE:IBM) trading around $184, is IBM an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

IBM is an information technology company. The company operates in five segments: Global Technology Services, Global Business Services, Software, Systems and Technology, and Global Financing. Technology products and services are in high demand worldwide, as consumers want to be up to speed and companies always need the latest and greatest to stay ahead of the competition. Cloud computing has been hot in recent times, which has not been good news for IBM. Should the company want to hold on to its market share, it needs to make moves quickly and provide the technology products and services that worldwide consumers and companies demand.

The Chinese government is reviewing whether domestic banks’ reliance on high-end servers from IBM compromises the nation’s financial security, people familiar with the matter said, in an escalation of the dispute with the U.S. over spying claims. Government agencies, including the People’s Bank of China and the Ministry of Finance, are asking banks to remove the IBM servers and replace them with a local brand as part of a trial program, said the four people, who asked not to be identified because the review hasn’t been made public.  The review fits a broader pattern of retaliation after American prosecutors indicted five Chinese military officers for allegedly hacking into the computers of U.S. companies and stealing secrets. Last week, China’s government said it will vet technology companies operating in the country, while The Financial Times reported May 25 that China ordered state-owned companies to cut ties with U.S. consulting firms.

Harriet Ip, a Singapore-based spokesperson for IBM, referred questions to IBM in the U.S. Sean Tetpon, a U.S.-based spokesperson for IBM, didn’t immediately respond to a phone call or e-mail requesting comment. “Security trumps everything,” said Duncan Clark, chairman of BDA China Ltd., a Beijing-based consultant to technology companies. “China doesn’t need the U.S. companies in the way it did for the last few decades.”