Another HP? IBM Faces to Another Challenge

IBM x86 servers has sold to Lenovo and this news shocks us by how IBM would manage his business with the rest lines of business in enterprise section.

In the first 35 years of the S&P 500, International Business Machines Corp.IBM -7.66%was among the index’s 10 biggest firms by market capitalization. It’s been in and out of the top 10 since 1992, but has never fallen outside of the top 20.

That streak is now in jeopardy.

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IBM shares slumped as much as 8.4% to $166.69 on Monday, breaking below $170 for the first time in three years. The drop, which came on heavy trading volume, pushed IBM’s market capitalization down by about $14 billion, or roughly the equivalent of Xerox Corp.'sXRX 0.00% entire market value.

With its roughly $168 billion market cap, IBM now ranks as the 19th biggest company in the S&P 500. Oracle Corp.ORCL -0.18%, and its $167 billion market cap, is right behind, followed by Merck Co.MRK +0.06% and Intel Corp.INTC +0.64%, which each have market caps of about $155 billion.

Much has changed in recent years. For much of the 1980s, IBM ranked as the biggest S&P 500 company by market value, according to Howard Silverblatt, senior index analyst at S&P Dow Jones Indices. But it’s market cap has been steadily slipping, a descent that has gained steam in recent years.

IBM has reported falling revenue for 10 straight quarters and on Monday acknowledged it won’t meet a key profit goal, a development that prompted the latest leg lower for the stock. IBM also posted lower earnings in its third quarter and unveiled a deal that would see it pay Globalfoundries Inc. about $1.5 billion to take over IBM’s semiconductor operations and supply it with computer chips.

“We are disappointed in our performance,” Chief Executive Virginia Rometty said.

“We saw a marked slowdown in September in client buying behavior, and our results also point to the unprecedented pace of change in our industry.”

IBM would appear to have some breathing room stay in the list of top 20 biggest S&P 500 companies, at least for now, considering Oracle, Merck and Intel have already issued their latest quarterly results. But further souring of investor sentiment could soon have IBM on the outside looking in.

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