IBM and other large cap tech companies are in a "quicksand situation" as customers transition to cloud computing, and the only escape may be mergers and acquisitions, FBR Capital Markets' Daniel Ives said Tuesday.
"It really comes down to M&A. If they went big on big data, cybersecurity, cloud that's the only — in our opinion — solution to put fuel in the tank for growth. It's not going to happen organically," FBR's senior analyst told CNBC's "Squawk Box."
Shares of IBM were down more than 4 percent in premarket trading after the company on Monday posted a bigger-than-expected drop in revenue for the fifth-straight quarter and lowered its full-year profit forecast, due to a strong dollar and the sale of low-margin businesses.
IBM is shifting from making hardware to cloud computing and, like established rivals such as Oracle and Microsoft , is striving to boost Internet-based software and services sales to compete with Salesforce.com and Amazon.com 's Web software unit.
According to Ives, IBM and its cohort should consider picking up big data firms like Splunk and Tableau, cybersecurity outfits like Fortinet and CyberArk, and enterprise software companies like Workday and NetSuite.
Big cap tech is "in a horse and buggy in the right lane and all these companies are passing them in the Maseratis and Ferraris in the left lane," Ives said.
He pointed to Dell's announced takeover last week of EMC , the largest in tech tie up ever, saying EMC CEO Joseph M. Tucci would not have had to sell had he made acquisitions sooner.
Ives said the legacy tech companies have become accustomed to blaming their results on currency headwinds, but in the end, earnings come down to core execution and mature products offerings.
Armonk, New York-based IBM gets more than half its revenue from overseas. The average value of the dollar against a basket of currencies in the third quarter was about 17 percent higher than the same quarter last year.
Even adjusted for currency and divestitures, the company's revenue fell 1 percent.
—Reuters contributed to this report.
DISCLOSURE: Neither the analyst, nor his family owns shares of IBM. FBR Capital Markets does not hold a greater than 1 percent share in the stock, and does not provide investment banking services to IBM.