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Speculation grows that IBM could pursue a breakup after steep selloff
An SOTP analysis cited by Stifel values IBM at $257 billion, with Red Hat as the largest component at $62.9 billion.
Yahoo Finance reports that after IBM’s stock crash, some market participants are again raising the idea that Big Blue could be broken up. Stifel analyst David Grossman said in a Monday note there is renewed speculation about a breakup, according to the outlet.
In a sum-of-the-parts analysis, Grossman arrived at an enterprise value of $257 billion for IBM, with hybrid cloud business Red Hat the largest chunk at $62.9 billion. Grossman also said the analysis is imprecise, but it suggests a breakup may be a lower probability outcome because it does not appear to add immediate value.
The renewed chatter follows IBM’s recent earnings setback, with the company announcing preliminary second quarter results on July 14. IBM reported revenue of $17.2 billion, below analyst expectations of $17.85 billion, and non-GAAP earnings expected at $2.93 versus $3.02.
IBM shares fell 25% on Tuesday, the stock’s worst day since 1961, after dropping 23% in a single session in October 1987. With earnings scheduled for Wednesday, Yahoo Finance said executives are likely to face tough questions on the earnings call about what drove the underperformance and how long it may persist.