Valuing IBM's Software Franchise
Zero Gravitas • 132 Comments
Zero Gravitas • 132 Comments
IBM's 21st Century Transition Is Failing
Peter E. Greulich • 256 Comments
Peter E. Greulich • 256 Comments
Fri, Jun. 24, 4:24 AM
- Tremors from Brazil's biggest bankruptcy filing are extending far beyond the recession-hit country's borders.
- Oi (NYSE:OIBR) is seeking creditor protection on over $150M of accounts payable to international providers from Nokia (NYSE:NOK) and Ericsson (NASDAQ:ERIC) to IBM and Alcatel-Lucent.
- The fixed-line carrier also owes about $1B to foreign development banks in China, Finland, Canada and Germany.
Fri, Jun. 17, 12:30 PM
Tue, Jun. 7, 7:49 AM
- Emirates has signed a 10-year IT infrastructure services agreement with IBM worth about $300M, enabling the carrier to improve efficiency on its passenger support systems and functions.
- The services will allow Emirates to encrypt data almost in real time, and to build new apps with functionality for other developers, along with improved business-management systems and streamlined airport operations.
- IBM +0.4% premarket
Thu, Jun. 2, 10:56 AM
- Cisco (CSCO +0.4%) is partnering with IBM (IBM +0.2%) to offer joint analytics services for the data generated by IoT devices. IBM's Watson IoT and business analytics offerings will be used to provide advanced data analysis, and Cisco's edge analytics solution to "more deeply understand and act on critical data on the network edge."
- Cisco/IBM say they're targeting "companies operating on the edge of computer networks such as oil rigs, factories, shipping companies and mines, where time is of the essence but bandwidth is often lacking." Bell Canada is an initial partner. The tie-up follows the June 2015 launch of Cisco's end-to-end IoT System, and its $1.4B+ February deal to buy major IoT service provider Jasper Technologies. Amazon, Microsoft, and Google are also going after the budding market for cloud-based IoT services.
- Separately, Cisco has once more restructured its engineering leadership. David Goeckeler, the SVP in charge of Cisco's security products/services, is now also in charge of networking hardware. And three high-profile engineers - Mario Mazzola, Prem Jain, and Luca Cafiero - have been moved to "advisory" roles.
- The engineers were helping run Insieme Networks, a data center switch/SDN startup Cisco funded and later acquired via its traditional "spin-in" strategy. New CEO Chuck Robbins has suggested he's not a fan of spin-ins.
- Two months ago: Cisco restructures 25K-employee engineering unit
Wed, Jun. 1, 9:06 AM
- IBM is acquiring Israel-based EZSource, a firm focused on application discovery, to help speed up changes to mainframe code.
- Terms weren't disclosed. EZSource gives developers a visual dashboard to show which applications have changed in updates.
- The technology will be integrated with current DevOps offerings such as IBM Application Foundation for zSystems and IBM Rational Team Concert.
Fri, May 20, 7:33 PM
- A wave of layoffs that IBM (IBM +1.6%) announced in April continued rolling (quietly) this week, and likely bigger this time than a round in March.
- IBM said today it had more than 20,000 open positions, while employees reached by the WSJ said internal job search listed 7,000-8,000 positions. Total layoffs in this round may come to 14,000, says Sanford Bernstein's Toni Sacconaghi.
- Cuts this week are hitting workers in North Carolina's Research Triangle, New York City, Poughkeepsie, N.Y., and Boulder, Colo., and employees suggested that some jobs are being moved to India and Costa Rica.
- Now read IBM's Next Big Thing - Part 2 »
Mon, May 2, 8:12 AM
- Following the Berkshire Hathaway (BRK.A, BRK.B) annual meeting on Saturday, Warren Buffett is spending the morning with CNBC.
- On IBM: He's still a buyer of the stock, though not aggressively so. His cost basis is a little less than $170 per share vs. the current $146. He's comfortable with the company, he says, or else he wouldn't own the stock. Yes, IBM has tough competition, but it's always been so and always will be so.
- Again defending Coca-Cola (NYSE:KO): It's "illogical" to tax sugar in soft drinks and not all sugar. He says he drinks five cans of Coke a day ... "I can't imagine anyone feels better than I do."
- On American Express (NYSE:AXP): There's no question that "payments" are being attacked on all fronts by some very smart people. Losing Costco was a big deal, but CEO Ken Chenault decided the economics didn't make sense. The company is buying back about 6% of the float each year, raising Berkshire's stake in AmEx without it having to lay out a dime. It's a wonderful business, but it's not a business that's competition-free, nor will it ever be.
- Turning to Yahoo (NASDAQ:YHOO): Obviously, they deteriorated significantly, and something has to change. On Marissa Mayer's $55M golden parachute ... Severance numbers throughout corporate America are a little bit crazy.
Mon, May 2, 7:56 AM
- April monthly performance was: -0.42%
- $0.06 in dividends were paid in April
- Top 10 Holdings as of 3/31/2016: Coca-Cola Co (KO): 4.27%, Microsoft Corp (MSFT): 3.51%, Altria Group Inc (MO): 3.33%, Apple Inc (AAPL): 3.31%, AbbVie Inc (ABBV): 2.67%, International Business Machines Corp (IBM): 2.38%, McDonald's Corp (MCD): 2.09%, Cisco Systems Inc (CSCO): 1.95%, 3M Co (MMM): 1.84%, Home Depot Inc (HD): 1.81%
Fri, Apr. 29, 3:43 PM
- With the help of "security experts, cryptographers, hardware experts and researchers," IBM (IBM -0.8%) says it has created a slew of cloud services meant to enable secure blockchain networks, along with cloud apps leveraging them. Financial services, healthcare, and government clients are among the firms being targeted.
- BNY Mellon is an initial user of the service - the bank plans to create "a unique application for securities lending, using a blockchain network to trade and transfer assets." IBM promises its cloud platform will "allow production blockchain networks to be deployed in minutes," while supporting Docker containers (alternatives to server virtual machines that run on Linux and feature little overhead), data dashboards, and analytics tools.
- While the hype surrounding Bitcoin (COIN, OTCQB:BTCS) has cooled some, corporate interest in the blockchain - the distributed/encrypted ledger technology that powers Bitcoin and other cryptocurrencies - for enabling cheap and secure transactions remains high. JPMorgan, Goldman, and other i-banks unveiled plans last year to create standards for using blockchain in the financial industry. In March 2015, Reuters reported IBM has held informal talks with central banks about creating a system for enabling blockchain-based transactions that don't require a bank or payment processor.
- IBM exec Jerry Cuomo: "We love blockchain technology because it holds the promise of supporting a very wide variety of industries ... But if you are building a blockhchain that deals with health records or shipping logistics, financial data, or any reference data about products, there are rules regulatory rules and security you have to address." He asserts IBM's solution was designed with those security/compliance issues in mind.
- Online retailer Overstock (OSTK -2.1%) has also been making big blockchain investments; it's eight months removed from buying financial order-routing firm SpeedRoute to provide an infrastructure for its t0 blockchain software.
- Now read IBM's Next Big Thing
Wed, Apr. 27, 8:49 PM
- IBM has launched three new all-flash storage arrays: The A9000, the A9000R, and the DS8888. The A9000 targets cloud service providers and mid-sized businesses. It features a scale-out architecture (preferred by many cloud providers) that can support up to 144 nodes, and automatically adjusts when more capacity is added. (press release)
- The A9000R targets enterprises and large service providers. It uses a more traditional rack architecture, and can feature up to 1.8PB (1,800TB) of capacity, 12 controllers, and 8 nodes, with each controller able to connect to each node. Also launched: The DS8888, a flash array meant for mainframes.
- Micron (NASDAQ:MU) is supplying the high-performance flash memory that goes into IBM’s systems, thanks to a multi-year alliance between the firms. Big Blue touts a low minimum latency of 250 microseconds for its systems even with various data services turned on, the inclusion of cloud-friendly features such as multi-tenancy, and a storage cost as low as $1.50/GB thanks to data-reduction features.
- Also: IBM says it plans to launch a flash system in Q3 that’s aimed at big data/analytics workloads (it’s being developed in partnership with SanDisk), and that it will offer a version of the A9000R that can scale out to multiple racks.
- The products stem from a commitment (announced in 2013) to invest $1B in flash R&D. IBM, a top player in the flash array market along with EMC, HP Enterprise, and Pure Storage (NYSE:PSTG), is clearly taking flash storage seriously, as a growing number of enterprise and cloud app workloads migrate to SSDs. However, rivals are as well. EMC’s DSSD unit recently unveiled its first flash array, while listing impressive throughput (IOPS), bandwidth, and latency figures. Around the same time, Pure Storage launched a scale-out system called FlashBlade that promises a cost of less than $1 per usable capacity.
Tue, Apr. 26, 9:37 AM
Mon, Apr. 18, 4:44 PM
- IBM's official Q1 tax rate was -95.1%, thanks to a $1.2B benefit related to a $1B refund of previously-paid U.S. taxes. That yielded official tax payments of -$983M, and helped EPS beat estimates in spite of a 170 bps Y/Y drop in gross margin to 46.5% and $1.5B worth of expenses related to "workforce transformation, real estate actions, and actions in Latin America."
- Segment performance: IBM has revised its segment reporting structure. Cognitive Solutions (solutions software + transaction processing software) revenue fell 1.7% Y/Y to $4B, with op. margin dropping to 21.8% from 32.6%. Global Business Services revenue -4.3% to $4.1B, with op. margin dropping to 4.5% from 13.2%.
Tech Services & Cloud Platforms revenue -1.5% to $8.4B; op. margin dropped to 3% from 13%. Systems (hardware) revenue -21.8% to $1.7B (the mainframe upgrade cycle played a role); op. margin dropped to -0.5% from 11.3%. Global Financing revenue -11.2% to $410M; op. margin fell to 43.1% from 49.2%.
- Other details: 1) Unlike in prior earnings reports, IBM hasn't broken out its geographic performance or services backlog, or broken out sales growth for various hardware and software businesses. 2) "Strategic imperatives" revenue (cloud, analytics, and "engagement") rose 14% Y/Y to $7B (compares with a 5% drop in total revenue to $18.7B). 3) The annual "cloud delivered as a service" revenue run rate (boosted some by M&A) rose 42% Y/Y to $5.4B. 4) Mobile revenue rose 88% Y/Y, security 18%, and analytics 7%. 5) Forex had a 300 bps impact on revenue growth (-5% vs. -2%).
- Financials: $900M was spent on buybacks. Thanks partly to the aforementioned expenses, SG&A spend rose 12% Y/Y to $6.01B, and R&D spend 12% to $1.46B. That contributed to a drop in op. margin to 5.5% from 15.3%. Free cash flow was $2.3B, up from $1.1B a year ago. IBM ended Q1 with $14.9B in cash and $18.8B in non-Global Financing debt.
- IBM -2.6% after hours to $148.50.
- IBM's Q1 results/2016 guidance, earnings release
Mon, Apr. 18, 4:12 PM
- International Business Machines (NYSE:IBM): Q1 EPS of $2.35 beats by $0.26.
- Revenue of $18.68B (-4.6% Y/Y) beats by $400M.
- Maintains guidance for 2016 EPS of "at least" $13.50. Consensus is at $13.54.
- Now expects 2016 free cash flow to be at high end of $11B-$12B guidance range.
- Shares +1.2% after hours.
- Press Release
- Update: IBM finished after hours trading down 5.1%. More details on the Q1 report can be found here.
Mon, Apr. 18, 7:59 AM
- Barclays recommends investors trim their IBM (NYSE:IBM) stakes ahead of this afternoon's earnings report.
- Shares are +26% over the past 60 days. "We do not expect IBM’s long-term revenue growth struggles to dissipate, which could pressure the stock after the recent “hope rally.”"
- "Do not be swayed by any headline EPS beat: IBM’s results stand to benefit from a Japan-based tax credit of ~$1B, which our model excludes. Fx headwinds could moderate as well, given currency movements in the last month. Meanwhile, our conversations with industry participants indicate that IBM is pursuing a fairly aggressive cost take-out program to adjust for cloud-related pressures on operating margin."
- But what really matters is... "It is all about software growth. Currently, we do not expect the middleware business to exhibit signs of recovery, based on conversations with industry participants. If middleware declines Y/Y at constant currency for the third quarter in a row in Mar-Q, investor sentiment could reset lower."
- Firm's price target is $125. Implied downside 18%.
- Now read IBM's 21st Century Transition Is Failing »
Sun, Apr. 17, 5:35 PM
Thu, Apr. 14, 1:36 PM
- Morgan Stanley identifies 30 stocks for investors to snap up and hold until 2019.
- The investment firm narrowed its list by focusing on strong brands/franchises with distinct competitive advantages, while also scoring strong on pricing power, cost efficiency, and growth.
- The MS list includes Accenture (NYSE:ACN), Alphabet, Amazon.com, Apple, Blackstone Group (NYSE:BX),Comcast (NASDAQ:CMCSA), Constellation Brands (NYSE:STZ), CVS Health (NYSE:CVS), Danaher (NYSE:DHR), Dollar General (NYSE:DG), Estee Lauder (NYSE:EL), Facebook, First Republic Bank (NYSE:FRC), HCA Holdings (NYSE:HCA), International Business Machines (NYSE:IBM), JPMorgan Chase, L Brands (NYSE:LB), Mettler-Toledo (NYSE:MTD), NextEra Energy (NYSE:NEE), Nike (NYSE:NKE), Panera Bread (NASDAQ:PNRA), Philip Morris International (NYSE:PM), Public Storage (NYSE:PSA), Ross Stores (NASDAQ:ROST), SBA Communications(NASDAQ:SBAC), ServiceMaster (NYSE:SERV), T-Mobile (NASDAQ:TMUS), Visa (NYSE:V), WhiteWave Foods (NYSE:WWAV), and Zayo Group Holdings (NYSE:ZAYO).
International Business Machines Corp. is an information technology company, which provides integrated solutions that leverage information technology and knowledge of business processes. The company operates its business through five segments: Global Technology Services, Global Business Services,... More
Industry: Diversified Computer Systems
Country: United States
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