Why IBM Stock Is More Attractive Without Cheap Servers

Last month's $2.3 billion deal to sell its x86 server business to Lenovo is bound to be good for IBM  stock, Fool contributor Tim Beyers says in the following video.

Why? Low-end servers are a tough business, and x86 servers -- based on the famed Intel design but also made by Advanced Micro Devices -- had been the low-end of IBM's business where many customers buy on price.

More broadly, it's arguable whether there's much of a market for entry-level servers when so many of the largest users of x86 or similar servers build their own. Think of Google, which not only has its own designs but takes pride in making them as cheaply as possible. IBM was never going to have much success selling into those sorts of accounts.

Bigger deals may also be harder to come by. IBM's hardware sales plummeted 26% in the fourth quarter, perhaps because customers have taken to purchasing computing as a service via cloud operators such as Amazon.com's Web Services group and Rackspace Hosting.

Do you agree? Please watch the video to get Tim's full take and then leave a comment to let us know whether you would buy, sell, or short IBM stock at current prices

Big returns in small packages
The safe play for most investors is to bet on widely known dividend payers such as IBM. And yet if your aim is to be truly wealthy, your best option is to invest in a groundbreaking company that goes on to dominate a multibillion-dollar industry. Our analysts have done it before with the likes of Amazon and Netflix. And now they think they've done it again with three stock picks that they believe could generate the same type of phenomenal returns. They've revealed these picks in a new free report that you can download instantly by clicking here now.

The article Why IBM Stock Is More Attractive Without Cheap Servers originally appeared on Fool.com.

Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team and the Motley Fool Supernova Odyssey I mission. He owned shares of Google, International Business Machines, Netflix, and Rackspace Hosting at the time of publication. Check out Tim's web home and portfolio holdings or connect with him on Google+Tumblr, or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.The Motley Fool recommends Amazon.com, Facebook, Google, Intel, Netflix, and Rackspace Hosting. The Motley Fool owns shares of Amazon.com, Facebook, Google, Intel, International Business Machines, and Netflix. 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.

Copyright © 1995 - 2014 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Read Full Story