Why We Downgraded IBM
We lowered the company's moat rating to narrow from wide because we have concerns about its long-term competitive position and the future economics of pricing and margins.
Andrew Lange: We have decided to lower IBM's economic moat to narrow from wide. IBM's moat continues to be based upon its intangible assets and customer switching costs, but we have concerns over the duration of these moat sources.
We expect the company's core business to most likely buoy its industry position and returns on invested capital for the next 10 years, with the firm managing the margin and cash flow of these flatlining businesses.
Andrew Lange does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.