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IBM

The analysis of IBM's (http://www.ibm.com) results is especially interesting when we look beyond the core earnings calculation to the segments of operations. IBM can be compared to Microsoft in the sense that they are both considered part of the computer industry. However, their attributes are quite dissimilar and this is where the comparison becomes interesting.

The IBM segments are dominated by hardware sales, for which gross margin is quite small. In comparison, Microsoft's results were primarily in software, for which gross margin is quite large. When we analyze the segments for each corporation, and when we see how gross varies, it improves our understanding of both corporations. Even if we begin by considering them to be a part of a broadly defined market industry, we come to realize that they are, in fact, two distinct industries: the characteristics of hardware and software are quite different. This is not only true in the sense of how gross margin changes between the two—it goes to the very nature of the business, the investment factors, the way that each corporation dominates in its own market (which of course are not the same markets), and the likely profit margins we project into the future for each corporation.


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