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  • IBM: A Strong Buy [View article]
    You do realize that IBM's $20 eps number they trumpet is a non-GAAP number, yes? And the $16.28 in 2013, is non-GAAP as well.

    If you would like to adhere only to GAAP numbers, as a smart investor as you infer, please do so. I will look at reality.

    "smart investors do not rely on the non-gaap information to make their investment decisions". Classic.
    Mar 14 10:29 AM | 1 Like Like |Link to Comment
  • IBM: A Strong Buy [View article]
    IBM is growing their cloud business, and others, buy acquiring companies. That shows a boost in earnings, but no near term associated expense for that new revenue/earnings. Somewhere around $3B a year, avg, is what IBM is spending on net acquisitions. Year after year. (that is the serial part) Their annual R&D is around $6B avg. What if they just decided to cut all R&D, and just purchase other businesses, start ups, and their staff? They all of a sudden have a boost to revenues, earnings, and no associated expense. (the FASB time frame to expense acquisitions is a bit long for a tech company that sells in an ever-changing market, so the small amortization exp annually makes little sense.)

    That is what IBM is doing. When you adjust their earnings, to show their acquisitions as an expense, even on a trailing 3yr period (ie. 1/3 expensed a year), they are getting an earnings boost of something like $2.2B a year, after tax. I am not saying anything is legally wrong with it. But economically, it does not make sense to not factor that into their actual economic earnings. Down the line, the music will stop, and they'll have problems. $98B spent in the last ten years, and you are happy with the incremental sales/income that has gotten IBM?

    http://bit.ly/1fWefjs

    Side note, Worldcom and HPQ did the same thing. One illegally. Not saying IBM is a stock to short, but it sure isn't a huge value, and has a lot of questions you have to ignore to make the bull case.
    Mar 13 04:55 PM | Likes Like |Link to Comment
  • IBM: A Strong Buy [View article]
    You are aware IBM uses not GAAP numbers, right? Your comment just showed the degree to which you understand accounting. Thanks.
    Mar 13 11:23 AM | Likes Like |Link to Comment
  • IBM: A Strong Buy [View article]
    Net income is useful in accounting, but not investing. It can be easily manipulated, and IBM does. IBM paid $1.4B less in 2013 taxes because of an unsustainably low rate. Mgmt has said it will double back to 23%. So net income is an accounting fiction here, and definitely not good for extrapolating.

    Other tech firms expense R&D. IBM effectively capitalizes it through acquisitions. You misunderstood "like they should to COMPARE with other". If you want to compare IBM to other tech companies, make sure it is on the same playing field. Apple innovates. Samsung innovates. Most companies with quality earnings expense R&D. IBM bypasses that expense, and buys innovation. That way they can show higher EPS. Simple accounting.

    How do you explain IBM spending $98B over the last ten years on R&D and net acquisitions, and they have no revenue increase, and their earnings are the same if you treat acquisitions correctly.

    The bull case for IBM always comes back to $20 EPS. That is an IBM adjusted number. The other bull case is that IBM has been around a long time, and innovated in the past. Ok. I disagree. They spent $98B and have little to show.
    Mar 12 01:25 PM | Likes Like |Link to Comment
  • IBM: A Strong Buy [View article]
    In 2013, adj EPS were 16.28. With a normalized tax rate, that would knock off $1.36. If they expensed their serial acquisitions like they should to compare with other tech, adjusted for taxes at the management stated 23%, that knocks off another $2.08. So now you have realistic EPS of $14.79, and are paying 15x for a company that has no plausible growth opportunities to even justify that multiple. IBM has spent $98B over the last ten years on R&D and net acquisitions ($31B acq / $67B R&D). In those ten years, their revenues have increased................ for it............. $3B. Their op income is up ~$7.5B in that time, and can be directly attributed to how they account for acquisitions, rather than spending more on R&D. Capitalizing R&D is not a business model that works. There is zero rebuttal to that, but I am listening.
    Mar 11 03:14 PM | 1 Like Like |Link to Comment
  • IBM: Buyback And Dividend Growth King At 42% Margin Of Safety [View article]
    and as an aside, this is not anything but a question as to where the value is. I don't see it, but am looking for why I may be wrong.
    Mar 4 05:00 PM | Likes Like |Link to Comment
  • IBM: Buyback And Dividend Growth King At 42% Margin Of Safety [View article]
    It is absurd to me that when you correctly account for their serial acquisitions(20% of earnings or plus on trailing 3yr avg) essentially capitalizing R&D, you can come up with anything but EPS of ~$13 in 2013, before using a normal tax rate. Buffett even acknowledged the huge tax boost they are getting, that will not continue. The only business doing slightly ok is software. That won't get you to $20. Accounting gimmicks will though.

    All of the assumptions people use when buying IBM come down to mgmt saying adjusted EPS will be $20, and they throw a 15 multiple on it. It is the furthest thing from economic reality.
    Mar 4 04:53 PM | Likes Like |Link to Comment
  • IBM: Buyback And Dividend Growth King At 42% Margin Of Safety [View article]
    What about the enormous earnings boost IBM received in 2013 from a lower tax rate? At a mgmt stated normal tax rate of 23%, 2013 eps is $15.60, and they guided to $18 in 2014. Hardware will be flat in 2014, so software and services will be up 15%? Services have been down 7qtrs in a row now. Down 3.5% in 2013. Software was up 2.8% in 2013. How is it realistic to get to $18 with normal tax rates, other than through accounting gimmicks? They capitalize R&D through acquisitions. They have negative FCF because they pay out $15B in div and buybacks. If they are so profitable, why aren't they reinvesting that $15B into those profitable businesses?
    Feb 25 01:09 PM | Likes Like |Link to Comment
  • 3 Reasons To Avoid IBM [View article]
    They don't have the development of new products, so rather than developing them in house with r&d expenses, they buy them. Apple develops their own technology through r&d, and does a few bolt on acquisitions. IBM is spending about 15-20% of their net earnings on acquisitions. It is the magnitude that is an issue, and should be considered part of their business plan. HPQ did the same thing for years, and that turned out less than well for them. Maybe not the same extent here, but it's a flag that brings in question and uncertainty.

    Their software side is the better part. But with software op income growing maybe 5%, how do you pay ~17 times that as a stand alone.

    NOV is a diff business. They aren't innovating to the same extent as a tech company and acquire physical assets.
    Feb 5 05:01 PM | 2 Likes Like |Link to Comment
  • 3 Reasons To Avoid IBM [View article]
    What organic plans? Every segment was down in 2013, other than software that was up 2%. I am trying to understand where the leaps of faith are coming from. If IBM has a normalized tax rate in 2014, they need 15% growth to get to $18eps. Where is 15% coming from? Stock buybacks, continued buying of their growth/r&d, and workforce re balancing. That is organic plans and organic growth?
    Feb 5 04:38 PM | Likes Like |Link to Comment
  • 3 Reasons To Avoid IBM [View article]
    when you buy a cloud company, rather than developing in house, that is r&d. one way to get earnings to $20 is to capitalize r&d, and it's done by acquisitions. IBMs trailing 3yr avg acquisitions is 2 and $3B plus every year. it's an accounting quirk. one or two acquisitions would be fine to capitalize, but when it is part of your operating plan, it is an expense. just because it is GAAP, doesn't mean it's correct

    i'm not saying it's a bad business, but it is a stock that has as much downside as up. that's not an investment i want to make.

    their management also considers a $1.1B tax saving as "modest" in Q4. their Q4 cc is one of the least assuring talks i've ever heard.
    Feb 5 10:39 AM | 2 Likes Like |Link to Comment
  • 3 Reasons To Avoid IBM [View article]
    "2. IBM's FCF is lower than reported because they're capitalizing R&D through increased acquisitions. Which is it? IBM has been the US leader in patents authorized for each of the last 20 years. IBM R&D is doing just fine."

    This is why their earnings are artificially inflated. Adjust the earnings for the R&D capped as acquisitions, or adjust the FCF for continued R&D hidden as acquisitions, and it isn't a sustainable picture. Div and buyback are taking 150% of adj FCF in 2013.
    Feb 4 05:27 PM | 2 Likes Like |Link to Comment
  • 10% Yielding Hi-Crush Partners Too Cheap To Ignore [View article]
    these trade like preferreds....revenue growth is coming from Augusta add on. Not much correct info in above re hash. Mine is below.

    http://seekingalpha.co...
    May 24 02:50 PM | 1 Like Like |Link to Comment
  • Don't Be Fooled By Kohl's Earnings 'Beat' [View article]
    Inventories are high or low depending on what your using as the divisor. On asset base, they are low. Relative to sales, they are on the high side, but not much. When online is becoming 10% plus, availability is a bit more important. The cash flows mentioned though are not an important factor here, because of their use.

    CFPD changes won't be critical. A mgmt that is aware and trying to monetize them is. A handful of 1 and 2% things add up, and are added value when reading an article. Re hash is not adding value in my opinion.
    May 24 11:37 AM | Likes Like |Link to Comment
  • Don't Be Fooled By Kohl's Earnings 'Beat' [View article]
    No mention of IT spend, CFPD regulation change, or that cash flows are expected to decrease when inventories are re built. Good re hash of earnings release.
    May 21 10:31 AM | Likes Like |Link to Comment
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