IBM said on Wednesday that it will spend $20bn on acquisitions over the next five years as it reaches for $20 EPS by 2015. Big Blue may need some new products, as the FT’s Lex column writes that the company may struggle to hit its ambitious new targets by relying on internal growth alone.
The question, however, is how much further profitability can be improved for a company unlikely to grow sales rapidly. IBM can tout the benefits of automating processes that currently require human interaction, and an improving economic environment should also help to improve consulting margins for the next two years. But operating margins of 15 per cent in outsourcing and consulting are already better than its US and European competitors.