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
Apr. 10, 2014, 11:36 AM
- IBM (IBM +1.1%) is acquiring Silverpop, a developer of cloud-based marketing automation software to 8K+ clients, for an undisclosed sum.
- Big Blue praises Silverpop's ability to enable personalized interactions with potential clients, and to provide "sophisticated automation capabilities more commonly applied in lower volume B2B scenarios to complex B2C environments."
- Its software will be leveraged by IBM's 140 Ready for Smarter Commerce marketing partners, and integrated within a new IBM cloud marketing suite - details for the latter are due in May.
- Silverpop competes to varying degrees against Oracle-acquired Eloqua and Responsys, Salesforce-acquired ExactTarget, and Adobe's Marketing Cloud platform. It also competes against Marketo (MKTO -7.5%) and Constant Contact (CTCT -4.5%), which are selling off hard today amid a tech rout. Both companies have been lifted by M&A speculation in the past.
- The companies are all looking to profit from a shift in IT spend towards CMOs. IDC has observed IBM's efforts in this area could lead it to face off more against ad agencies such as WPP and Omnicom.
- Past marketing-focused IBM acquisitions: DemandTec, Xtify, Unica
Apr. 3, 2014, 4:43 PM
- Private Globalfoundries is "the lead candidate" to acquire IBM's (IBM -0.4%) struggling chip manufacturing/foundry ops, sources tell the WSJ. Market leader TSMC (TSM -0.5%) is said to have dropped out of talks, and though Intel is said to be involved, Globalfoundries is showing more interest.
- Sources add a deal isn't imminent, and that price remains an issue: IBM originally wanted $2B+ for the business, whose sales tumbled 33% Y/Y in Q4 (evidence of share loss) and is in the midst of seeing layoffs, but initial bids have only been north of $1B.
- The business was first reported to be on the block in early February. Bernstein has estimated it had 2013 revenue of $1.75B, and an op. loss of $130M.
- Though presenting integration challenges, acquiring IBM's chip unit would give Globalfoundries more scale as it battles against TSMC, which is estimated to have nearly 50% of the foundry market and claims a long list of blue-chip clients.
- TSMC shares slipped yesterday after Globalfoundries announced a wafer supply deal with ex-parent AMD that includes GPU and console processor manufacturing (thus far handled by TSMC). Nonetheless, Digitimes has reported TSMC's capacity is booked through the end of Q3 thanks to strong mobile/PC chip demand.
Mar. 10, 2014, 4:32 AM
- IBM (IBM) CEO Ginni Rometty tells it like it is, acknowledging in a letter to investors that the company "did not meet our expectations."
- IBM will continue to alter its focus to cloud services and data analytics while modifying its hardware products. "While we continue to remix to higher value, we must also address those parts of the business that are holding us back," said Rometty.
- Declining demand for hardware and soft sales in growth markets have hit revenue for almost two years, prompting IBM to offload assets and reduce staff.
Mar. 7, 2014, 5:52 PM
- After falling 3.5% Y/Y in Q3, external disk storage system sales rose 2.4% in Q4, says IDC. The growth came even though sales of the servers that interact with these systems fell an estimated 4.4%.
- Total disk storage sales, which include storage subsystems found within servers, rose 1.3% in Q4 after dropping 5.6% in Q3. IDC attributes the turnaround to "traditional year-end budget flushes, improved economic sentiment, and a strong desire to address long-standing storage infrastructure inefficiencies."
- Market leader EMC, which posted strong Q4 numbers to go with light guidance, saw its external disk share rise 220 bps Y/Y to 32.9%, and its total disk share rise 200 bps to 25.8%. The gains largely came at the expense of restructuring IBM, whose shares respectively fell 190 bps and 200 bps to 13% and 14%.
- H-P's (HPQ) external disk share rose 30 bps to 9.6%, and its total disk share 40 bps to 16.3%. NetApp (NTAP), which delivered nearly in-line revenue and soft guidance last month, saw its external share fall 10 bps to 11.5%, and its total share stay flat at 9%. Private Dell's total share fell 140 bps to 9.9%.
- Hard drive/assembly suppliers: STX, WDC, HTCH
Feb. 28, 2014, 12:36 PM
- A source tells CNET IBM's (IBM +0.3%) layoffs involve up to 25% of employees in its hardware/chip unit (i.e. the Systems & Technology Group).
- The division saw a 26% Y/Y sales drop in Q4, bleeding share to rivals ranging from from H-P to EMC to TSMC. Since then, IBM has announced it's selling its x86 server business (sales -16% in Q4) to Lenovo for $3.2B, and the WSJ has reported Big Blue is thinking of unloading its chip manufacturing ops (believed to be losing money).
- IBM expects to record a $1B workforce rebalancing charge in Q1.
- Previous: Major IBM job cuts reportedly set to start
Feb. 27, 2014, 7:07 PM
- With enterprise server sales under pressure and the cheap white-label servers used by the Googles and Amazons of the world gaining more ground, IDC estimates global server revenue fell 4.4% Y/Y in Q4, a decline steeper than Q3's 3.7%. Gartner estimates revenue fell 4.5%.
- IDC thinks market leader H-P (HPQ), which posted relatively healthy enterprise hardware numbers for its January quarter, saw its share rise 260 bps Y/Y to 26.9%. #2 IBM, whose hardware ops had a brutal Q4, saw its share drop 910 bps to 26.8% in what's typically a seasonally strong quarter for the company.
- #3 Dell is assigned a 14.5% share (+30 bps). #4 Cisco (CSCO), whose UCS server unit remains a bright spot, is given a 4.5% share (+130 bps). Following many quarters of share losses, engineered systems growth allowed #5 Oracle's (ORCL) share rose 10 bps to 4.1%.
- White-label server sales, referred to by IDC as ODM Direct, soared 47% Y/Y, and now make up 6.4% of industry revenue. "Density-optimized" server sales, which include white-label gear and OEM offerings, soared 70%. H-P has a 34.9% share.
- A positive for Intel (INTC): x86 server sales rose 7.8%, up from Q3's 2.8% clip. A positive for Red Hat (RHT): Linux server sales rose 14.4% vs. 5.6% in Q3, and now make up 28.5% of industry revenue. Windows server sales (45.7% of revenue) were nearly flat, Unix sales (13.6% of revenue) fell 20.2%.
Feb. 25, 2014, 11:32 AM
- Citing sources within the company, IBM (IBM +0.1%) workers group Alliance@IBM says the IT giant will begin notifying employees affected by a major round of job cuts tomorrow.
- Big Blue has already said it expects to record a $1B workforce rebalancing charge in Q1, as it tries to improve its cost structure in the face of ongoing revenue declines.
- Bernstein's Toni Sacconaghi thinks it costs IBM ~$70K, on average, to let an employee go. He previously forecast at least 13K of the company's 434K employees could be laid off.
- IBM, still maintaining a 2015 EPS goal of $20, has promised to keep 3,100 jobs in its home state of New York through 2016. That's up from a prior pledge of 2,350.
Feb. 24, 2014, 11:36 AM
- IBM (IBM +1%) is acquiring Cloudant, provider of a distributed cloud database platform for app developers. Terms are undisclosed.
- Cloudant's customer base includes Samsung, Microsoft, Adobe, and Fidelity. The company already relies on IBM-acquired SoftLayer's cloud infrastructure platform to deliver its services, which compete against Amazon Web Services' DynamoDB and solutions based on the open-source MongoDB.
- All three solutions rely on NoSQL, a database architecture that differs from the age-old SQL (used by IBM's DB2, as well as ORCL's bread-and-butter database) through its support for semi-structured and unstructured data.
- This feature, along with NoSQL's superior performance and scalability for certain apps, is leading the technology to be widely adopted for handling Web/cloud services and big data projects.
- Separately, IBM is promising to invest $1B to bolster SoftLayer's cloud software/app platform offerings. Last month, Big Blue, increasingly looking to cloud services to halt its ongoing revenue declines, said it would invest $1.2B to build 15 new data centers for SoftLayer.
- IBM/SoftLayer rival Rackspace (RAX +2.4%) owns a piece of Cloudant.
Feb. 12, 2014, 2:40 PM
- Reuters reports IBM (IBM +0.3%) CEO Ginni Rometty is traveling to Beijing to meet with government officials in an effort to "restore trust with Chinese regulators and reverse slumping sales."
- Like many U.S. enterprise IT peers, IBM's sales to the Middle Kingdom (and more broadly, to the Asia-Pac region) have nosedived; they dropped 23% Y/Y in Q4. All signs suggest the NSA spying uproar is a major culprit.
- Also hurting IBM in China: Its sales within the country disproportionately depend on a hardware business that saw an eye-popping 26% Y/Y global revenue drop in Q4.
- Big Blue recently partnered with data center owner 21Vianet (VNET +1.5%) to begin offering cloud infrastructure services within China.
Feb. 7, 2014, 4:38 AM
- IBM (IBM) is considering a sale of its semiconductor manufacturing operations, which produces chips for its high-end servers and for external customers, the WSJ reports.
- However, IBM would keep its chip-design operations; alternatively, according to an earlier FT article, IBM could keep the whole business and seek a partner with which to create a joint venture. The FT reported about the prospective sale but didn't distinguish between the production and design parts of the division.
- There was no word on the value of the business, although Bernstein reckons it earned revenue of $1.75B in 2013 and made $130M in pretax losses.
- The reports come after IBM said last month that it had agreed to sell its low-end server division to Lenovo for $2.3B.
- Evisioneering analyst Rick Doherty said he'd be "shocked" if IBM did sell the semiconductor operations. "Take away the Silicon part, and IBM may not be the tech giant it is 10 years from now," Doherty said.
- However, the business has become a less important part of IBM’s operations in recent years, as the company has expanded its software and services activities.
Jan. 31, 2014, 9:37 AM
- Twitter (TWTR -1.2%) has bought 900 patents from IBM (IBM -0.9%) for an undisclosed sum. The sale, along with an attached cross-licensing agreement, ends an IP dispute between Twitter and IBM related to patents the latter believed the former was infringing.
- In prior years, IBM has sold 750 patents to Facebook, and over 2K patents to Google. The company has consistently topped U.S. patent grant rankings for two decades, and is believed to generate ~$1B/year in patent licensing revenue.
- The deal shores up Twitter's relatively paltry IP portfolio, a portfolio that some have considered a business risk. Twitter, through its Innovator's Patent Agreement, has promised it won't use patents created by its own engineers/designers for "offensive litigation" without their creators' consent.
Jan. 28, 2014, 4:01 PM
- Sources tell re/code IBM (IBM -0.5%), fresh off selling its x86 server unit to Lenovo, is thinking of selling its software-defined networking (SDN) unit.
- Big Blue is reportedly asking for as much as $1B, a figure one exec calls "pretty optimistic." The company is said to have informally approached Cisco, Dell, H-P, Juniper, and Fujitsu "to gauge interest." Cisco, Juniper, and H-P have each already launched a slew of SDN-related products.
- SDN, a relatively new technology/concept. shifts network intelligence and provisioning capabilities to software-based controllers. By doing so, it aims to improve provisioning times and resource efficiency, and allow proprietary switches to be replaced with commodity/white-label gear; that last feature has many Cisco investors on edge.
- Back in 2012, VMware paid ~$1.2B for Nicira, widely considered the early leader in the SDN software space.
Jan. 28, 2014, 12:46 PM
- International Business Machines Corporation (IBM) declares $0.95/share quarterly dividend, in line with previous.
- Forward yield 2.15%
- Payable March 10; for shareholders of record Feb. 10; ex-div Feb. 6.
Jan. 24, 2014, 7:27 AM
- What was the CEO of a company you're an owner of up to this week? An index of companies whose execs regularly attend Davos has vastly underperformed the market since 2009.
- Attendance at the gathering tends to be dominated by the financials, with GS, C, HSBC, JPM, LAZ, MS, SCBFF, BAC, ITUB, and UBS leading the way to prove their bona fides as thought leaders. Also spotted were the heads of DOW, and PEP.
- Notably absent: Buffett (BRK.A, BRK.B) , Tim Cook (AAPL) (Jobs never attended either), Jeff Immelt (GE), and Virginia Rometty (IBM). Google's (GOOG) founders and Mark Zuckerberg (FB) stopped going a couple of years ago.
Jan. 23, 2014, 4:10 AM
- As flagged, IBM (IBM) has agreed to sell its low-end x86 server business to Lenovo (LNVGY) for $2.3B, of which $2B will be in cash and the rest in stock.
- IBM and Lenovo will also form a partnership that will include a global OEM and reseller agreement for various IBM products, including its entry and mid-range Storwize disk storage systems.
- Around 7,500 IBM employees will be offered jobs at Lenovo.
- "This divestiture allows IBM to focus on system and software innovations...such as cognitive computing, Big Data and cloud," says IBM's Steve Mills.
- The deal comes after IBM's hardware division suffered another wretched quarter in Q4, with x86 sales dropping 16%.
- The question is whether U.S. security concerns will cause a delay to the transaction or cause it to be blocked. (PR)
Jan. 22, 2014, 7:58 AM
- "Disappointing" is the theme as the sell-side comments on IBM's Q4 results from last night.
- "No near-term relief" is the title of Deutsche's note (and Deutsche is a bull on the stock). The company is likely to remain in the "penalty box" until it can show evidence of stability in hardware and improved execution in emerging markets and China.
- Investors will likely mull over whether IBM will need to reset the 2015 Roadmap this spring, says JPMorgan, expecting shares to be under pressure near-term and lowering the PT to $175.
- Credit Suisse reiterates its Sell rating and $160 price target on the weaker-than-expected numbers.
- Shares -3.2% premarket
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Industry: Diversified Computer Systems
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