What Makes IBM One of America's Best Companies

The 25 Best Companies in America
The 25 Best Companies in America

IBM is the original information-technology company. Its roots date back to the late 1800s, and IBM has undergone many successful strategic transitions throughout its life, from a purveyor of early calculating machines to a modern business-focused software provider. Today, IBM is dedicated to creating and advancing innovative technologies to, in its own words, "make the world work better."

The case for IBM
IBM's over 400,000 full-time employees have not been shy about offering their opinions of the company on Glassdoor, but the results are a bit mixed. The company earns a middle-of-the-pack rating of 3.1 stars out of five from nearly 7,000 employees, with 59% of respondents saying they'd recommend the company to a friend seeking a better job. However, as befits a high-tech company, the salary of virtually every position Glassdoor lists at IBM exceeds the 2011 U.S. median household income of $51,400. On LinkedIn, IBM is the 74th most in-demand employer in the world. It's also consistently rated as one of the most diversity-friendly companies in the world, which no doubt flows in part from the direction of CEO Virginia Rometty, who earns a 79% approval rating on Glassdoor.

IBM was once seen as a hardware dinosaur, but it's since become the model of successful tech transitions in a software-dominated world. The year before IBM sold its PC division to Lenovo in mid-2005, it generated 32% of its revenue from hardware sales and had an 8.8% net margin. Seven years later, in 2011, IBM earned about 18% of its revenue from hardware -- none of it consumer-focused -- with an overall 14.8% net margin.

IBM has rewarded shareholders over the past five years with a 110% return, and during this period its dividend yield has ranged from about 1.5% to nearly 2%. Over the same time frame, IBM's revenue has grown 30% and its net income has grown by 49%, indicating a mastery of the profit margin. In the same time period, the Dow Jones Industrial Average to which IBM belongs has only gained 14%, which means that investors in IBM have enjoyed two-bagger performance above the index -- or a roughly 80% outperformance relative to the Dow's total return when accounting for the dividends of its components.

IBM has made a concerted effort to be a good global citizen. It was ranked No. 1 overall in Newsweek's "America's Greenest Companies" for 2012, earning high marks for its Smarter Planet initiatives. IBM has also developed energy- and water-management software solutions for its customers, leaving a green imprint far beyond its own walls. IBM has a number of positive social initiatives on its plate, from research on advanced solar technology to Innovation Awards that support the application of technology to the classroom. IBM ranks second on Corporate Responsibility's list of the 100 Best Corporate Citizens of 2012, earning the top rank for environmental initiatives.

Areas for improvement
No company is perfect, and even one as well-run as IBM has its shortcomings. IBM took flak over changes stealthily made to its employee pensions and 401(k)s late last year, which moved the company to a one-time matching payment at year-end rather than the per-period matching payments. Any employee leaving before December 15 for non-retirement purposes won't get their yearly match, which could cost employees thousands if they decide to leave for greener pastures. IBM has also slimmed its American workforce by about 30,000 employees while shipping many thousands of jobs overseas, and its old reputation as a place to build a career seems all but wiped out.

After analyzing all the available factors, we believe that IBM's benefits to the world -- and its employees -- far outweigh its recent negative actions toward those employees, and it is indeed among the best companies in America.

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The article What Makes IBM One of America's Best Companies originally appeared on Fool.com.

Fool contributor Alex Planes has no position in any stocks mentioned. The Motley Fool recommends LinkedIn. The Motley Fool owns shares of International Business Machines and LinkedIn. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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