IBM's stock fell in afternoon trading on Tuesday as a Credit Suisse analyst downgraded the company's rating, citing concerns over growth from its existing business.
Analyst Kulbinder Garcha lowered IBM to "Underperform" from "Neutral" and reduced his price target to $$175 from $200.
Garcha said in a client note that IBM is losing share to competitors in several of the top software categories, including structured data management software and application server middleware. The analyst is also concerned that the company's exposure to the UNIX and mainframe business is higher than he thought, which means that weakness in those areas will impact its profitability.
While IBM's had success selling off some of its lower-margin businesses, Garcha said the pool of assets available for sale is shrinking. IBM has made 10 disposals and over 45 acquisitions since 2009, according to Garcha.
"We believe the company will be fundamentally challenged to grow revenue organically, as it is faced with a weakening organic revenue base and an increasingly less effective (mergers and acquisitions) strategy," he wrote.
IBM is seen as a good gauge of technology demand because it sells to major companies and governments around the world.
The Armonk, N.Y., company reported last month that its net income fell 17 percent in the second quarter as it absorbed the cost of layoffs. Revenue slipped 3 percent and missed estimates, with services and hardware sales both declining. One bright spot was software revenue, which rose 4 percent.
A representative for International Business Machines Corp. did not immediately respond to an email seeking comment.
IBM shares fell $4.51, or 2.3 percent, to $190.99. The stock has traded in a range of $184.78 to $215.90 over the past year. Year to date, the shares are virtually flat, while the benchmark S&P 500 index has gained 19 percent.
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