3 Stocks to Watch in a Challenging Technology Solutions Industry

Industry Overview - The Zacks Computer – Integrated Systems industry is facing persistent supply-chain bottlenecks and a challenging macroeconomic landscape characterized by rising inflation, leading to high levels of backlog and concerns about industry prospects [1][4] - Companies are increasing investments in data modernization, analytics, cyber defense, remote work, automation, and supply-chain modernization, which are accelerating growth in digital transformation services [2] Industry Trends - There is a rising demand for integrated solutions across enterprises, driven by investments in IoT, big data, AI, and blockchain technologies, as well as opportunities presented by remote work trends [3] - The adoption of multi-cloud models is expanding the scope for industry participants, with cloud and virtual technologies expected to favor the industry [4] - Supply-chain constraints and delays in customer acceptance are leading to consistent backlog levels, particularly in Compute and Storage segments [4][5] Market Performance - The Zacks Computer – Integrated Systems industry has underperformed the broader Computer and Technology sector but has outperformed the S&P 500 over the past year, returning 46.2% compared to the S&P 500's 33% [8] - The industry is currently trading at a trailing 12-month Price-to-Sales (P/S) ratio of 2.05X, below the S&P 500's 3.97X and the sector's 5.26X [9] Company Highlights - International Business Machines (IBM): Experiencing solid net sales growth in the software segment, driven by hybrid cloud adoption and demand trends across various sectors. IBM is acquiring Software AG's integration platform businesses for €2.13 billion, expected to enhance its data integration capabilities [10][11][12] - Hewlett Packard Enterprise (HPE): Benefiting from strong execution in clearing backlogs and increased customer acceptance. HPE is focusing on higher-margin offerings and has plans to acquire Juniper Networks to enhance its competitive stance [14][15] - Agilysys: Seeing steady demand for cloud-native products and services, with record high services revenues contributing to improved profitability levels [16][17]