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Why 2014 was a big (black &) blue year for IBM

Traders gather at the post that trades IBM on the floor of the New York Stock Exchange, Oct. 20, 2014.
Brendan McDermid | Reuters
Traders gather at the post that trades IBM on the floor of the New York Stock Exchange, Oct. 20, 2014.

IBM shares tanked in 2014—down some 15 percent—meaning it earned the dubious distinction of being the worst performer in the Dow, and the only company in the index to lose value this year.

CEO Ginni Rometty has said that the company has to reinvent itself, but will investors wait around to see if this transformation actually works?

One big criticism of Big Blue is that it missed just how disruptive cloud technology would be to its traditional businesses. IT managers are moving to the cloud because they prefer subscribing to software accessed over the Internet rather than buying it.

"You have these small cloud players that don't need a lot of infrastructure," said Peter Wahlstrom, a senior analyst with Morningstar. "They offer solutions that cost less. IBM wasn't blindsided, but they were caught off guard."

Rometty is now looking to change course by growing its cloud business organically as well as making acquisitions. That business is scaling quickly, but at $4 billion, it's still a relatively small part of IBM's total revenue.

So, what's the bull case on IBM?

Brian White, an analyst at Cantor Fitzgerald, is telling his clients to buy the stock. He says the stock isn't expensive, trading at about 10 times forward earnings, which is below its five-year average.

Also, the number of analysts on Wall Street rating IBM a 'buy' is now at a 20-year low—a possible contrarian indicator, he said. Finally, White thinks an activist investor could get involved and shake up the company.

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IBM is an iconic global brand, which has reinvented itself in the past. The question now is whether Rometty can execute another transformation. If not, she risks disappointing her shareholders again in 2015.

In response, IBM told CNBC in an email that the company is investing for long-term growth and expects its business to break $7 billion in 2015. The company also said it's data analytics business grew "8 percent year-to-date on a 2013 full-year base of $16 billion," and that its mobile business has more than doubled.