The return of IBM - Essay Example

It should be noted that IBM enjoyed double digit net annual profit of 10-15% during the 1950-1980. These profitable years were coupled with strong company growth. For a firm like IBM, this was remarkable as profits are ballooning with the company's expansion (Duby 1995). This put IBM on top of other firms and became the most admired corporation in America. IBM is the envy of the corporate world as it enjoys an incredible culture of high performance and excellence. However, the early 1990s saw the downfall of the corporate giant.

Iwata (2005) attributes the seeds of these failures top the big shifts in the Information Technology (IT) market and the key market changes and developments which were disregarded by IBM in the late 1980s. These problems triggered the financial catastrophe which was experienced during the 1990s. The downfall is indicated by the abrupt collapse in the firm's profit margin, stagnation and decline of its revenue and huge net losses. The internal performance of IBM together with the speculations on the firm's future slashed its stock price by almost half.

The company also has to layoff 200,000 employs in four years (Iwata 2005). Amidst all these dilemmas, IBM managed to stand up and recover through various measures. The entry of Louis V. Gertsner, Jr. as the firm's new CEO when it is in the deepest trouble had helped the company to regain its robust performance. This paper will tackle the downfall and recovery of IBM. The succeeding paragraphs will justify the importance of the IBM's case in corporate finance. Another section will highlight the role and implication of innovation and changing technology to the business organization.

In order to fully get acquainted with IBM, this paper will give a brief corporate profile of IBM together with the products and services it provides. The next section is an overview of the technology sector and the major competitors of IBM. A comparison of their financial performance is also shown. This paper will also give light on major issues faced by IBM and their causes. The last section will give a brief outlook for the company. Truly, the case of the Big Blue is very significant in the field of corporate finance.

As with other business entities, the firm had experienced profitable years along with troublesome ones. The only difference that IBM shows is its capability of recovering after a great downfall. As a student, I believe that the downfall and recovery of IBM should become an imperative in a Corporate Finance course as it clearly shows the interdependence of the company's financial health and the firm's overall performance. The case of IBM also shows the mistakes that firms usually make. Through this, students who are trained to become financial executives someday are cautioned and trained on how to better handle decision-making processes.

Another point which is highlighted by the IBM's downfall and recovery is the great impact of a firm's external environment. As mentioned above, the company's downfall was triggered by its disregard of the changing markets and emerging trends. Thus, IBM teaches students that financial policies should take into account a firm's external factors. It is equally amazing how IBM was able to cope and surpass all this financial pitfalls. The case of IBM is also an important