IBM’s scale in the systems software space
As of July 26, 2017, Microsoft (MSFT), with a market cap of close to $480 billion, is still the largest software player by market capitalization globally. It’s followed by Oracle (ORCL) and International Business Machines (IBM). SAP (SAP) and Salesforce.com (CRM) are other dominant players in this space.
All these companies are trying to expand and strengthen their positions in the crowded and competitive cloud space, wherein Amazon (AMZN) dominates with a 40% market share.
Enterprise value multiples
Now let’s look at IBM’s EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiple.
On July 26, 2017, IBM’s forward EV-to-EBITDA multiple was ~8.92x. That metric was lower than Microsoft’s multiple of ~11.5x and lower than Oracle’s multiple of ~10.3x. The metric for SAP was 13.5x.
In the next and final part of this series, we’ll see what kind of recommendations analysts are giving IBM after its fiscal 2Q17 results.