Aug. 4, 2014, 6:58 PM
- Bloomberg reports IBM offered Globalfoundries $1B in cash to take the company's struggling chip manufacturing unit off its hands, and that Globalfoundries insisted on getting $2B.
- At issue: The unit is reportedly responsible for up to $1.5B/year in losses to go with its employee obligations, and Globalfoundries is said to assign little value to IBM's fabs. Rather, it's Big Blue's chip engineers and IP that mostly interest the foundry.
- Bloomberg previously reported IBM's talks with Globalfoundries broke down over price, but didn't state Globalfoundries was looking to be paid for making the acquisition. It added IBM was interested in a JV agreement that would allow it to retain control of chip design and IP development.
- Analyst Jim McGregor thinks a deal might still happen. "The first rule of negotiating anything is you need to be able to walk away from a deal ... This might just be posturing. You may see this resurrect itself in three to six months."
Jul. 31, 2014, 1:47 PM
- Italy-based CrossIdeas develops identity/access management security software that uses analytics and a constantly-updating data repository to prevent unwanted access to data and apps. IBM hasn't disclosed the acquisition price. (PR)
- The cybersecurity software space has seen plenty of M&A activity this year, as corporate demand from cybersecurity offering rises in the wake of a series of high-profile attacks. IBM plans to integrate CrossIdeas' tools with its existing identity/access management offerings.
- Security has been a bright spot for IBM: Its total security-related revenue rose 20% Y/Y in Q2, helped a bit by last year's acquisition of threat-prevention software firm Trusteer.
- Gartner estimates Big Blue's 2013 security software sales totaled $1.14B (+19.1% Y/Y), giving the company with a 5.7% share of the market (#3 overall)
Jul. 29, 2014, 11:50 AM| 1 Comment
Jul. 28, 2014, 7:22 PM
- 3rd-party servers based on IBM's Power architecture will hit the market in early 2015, says IBM exec Ken King. He adds the first Power systems will be aimed at cloud and high-end applications. They'll run on Big Blue's Power8 CPUs.
- 3rd-party Power CPUs are also expected in time. IBM first announced plans to license Power to third parties a year ago. The company's own Power server sales have been plunging amid a broader decline in UNIX and non-x86 server demand; they fell 28% Y/Y in Q2.
- Early supporters for IBM's effort include Nvidia, Samsung, Micron, and most notably Google, which (like other Web giants) buys huge quantities of Intel (NASDAQ:INTC) CPUs to power its servers. Power8's proponents claim big performance gains relative to Intel's x86 Xeon CPUs; individual Power8 chips can feature 12 cores and support up to 96 threads.
- King says Google, known for its obsession with performance and power efficiency, could be intrigued by the fact Power can support more virtual machines than x86. As with the budding ARM server CPU market, software support will take some time.
- Intel, whose server CPU unit towers over the market and is coming off a strong Q2, is trying to counter the Power/ARM threats both by rolling out new low-power Atom server CPUs, and by expanding its custom chip work for Internet clients. Upcoming products will offer more customization by placing an FPGA and a Xeon CPU in the same package.
Jul. 25, 2014, 3:53 PM
- Bloomberg reports IBM's (IBM -0.5%) talks to unload its struggling chip manufacturing unit to Globalfoundries have ended over differences on price.
- The news service reported in June IBM and Globalfoundries were close to a deal, while adding (citing a source) Big Blue's chip unit has been losing as much as $1.5B/year. Before that, the WSJ reported IBM originally wanted $2B+ for the business, but had seen initial bids closer to $1B.
- The unit's sales fell 18% Y/Y in Q2 amid ongoing share losses to TSMC and other foundry rivals. They fell 16% in Q1, and 33% in Q4.
- Bloomberg states IBM had become interested in a JV arrangement that would allow it to maintain control of chip design and IP development (while ridding itself of manufacturing). Two weeks ago, IBM promised to spend $3B over the next 5 years on advanced chip R&D.
Jul. 18, 2014, 5:24 PM
- IBM's (IBM - unchanged) Q2 hardware sales (-11% Y/Y vs. -23% in Q1,) "delivered meaningful upside" to Cantor's estimates, says analyst Brian White, while reiterating a Buy. Favorable comps and healthy mainframe/storage demand allowed the hardware unit to grow 39% Q/Q, or more than twice historical seasonal growth.
- White also thinks IBM's Chinese revenue (-11%, hurt by NSA issues) has bottomed out. On the CC (transcript), IBM said it saw "a pretty good sequential improvement" in China and India, though it added other parts of Asia-Pac remained weak.
- Citi's Jim Suva is less enthusiastic than White: He observes a one-time asset gain boosted EPS by $0.10, that Global Business Services outsourcing (-9%) remains weak due to price pressure and contract negotiations, and that services signings are down 33% (partly due to tough comps). He also notes mainframe growth isn't expected to continue.
- Credit Suisse's Kulbinder Garcha, meanwhile, has doubts about "the quality" of IBM's forecast for $20 in 2015 EPS, given "results continue to be driven less by revenue growth and more by non-operational items."
- Some bright spots: 1) With the help of SoftLayer, IBM's "cloud delivered as a service" revenue is now on a $2.8B run rate. That's roughly equal to 3% of total revenue. 2) Ahead of the Apple deal, "mobile revenue" (a nebulous term) is up over 100% YTD.
- Prior IBM earnings coverage.
Jul. 17, 2014, 5:00 PM
- With the help of easier comps, IBM's hardware/chip sales fell 11% Y/Y in Q2, a notable improvement from Q1's 23% and Q4's 26%. Mainframe sales -1%, Power servers (UNIX-focused) -28%, x86 servers (due to be sold to Lenovo) -3%, storage -12%, chips (reportedly on the block) -18%.
- Global Technology Services -1% vs. -3% in Q1. Global Business Services -2% vs. flat Q1 growth. The services backlog stood at $136B, -1% Y/Y after backing out the sale of IBM's customer care outsourcing ops to Synnex.
- Software revenue +1% vs. +2%. OS sales (hurt by server weakness) fell 13%, while key branded middleware rose 1%. Global financing +4% vs. +3%.
- Big Blue spent $3.7B on buybacks, less than the whopping $8.2B spent in Q1. Gross margin rose 40 bps Y/Y to 49.1%. Q2 free cash flow was $3B, less than net income of $4.3B (continuing a recent trend).
- Americas revenue -1%, EMEA +1%, Asia-Pac (weak in recent quarters) -9%. "Growth markets" -7%, and BRIC countries -2%.
- Tax rate was 20%, even with Q1 but down from 22% a year ago. IBM ended Q2 with $9.7B in cash, and $17.1B in non-Global Financing debt.
- IBM now -1.1% AH. Q2 results, PR.
Jul. 17, 2014, 4:10 PM| 15 Comments
Jul. 17, 2014, 7:35 AM
- Pratt & Whitney (NYSE:UTX) has hired IBM (NYSE:IBM) to analyze massive amounts of data from approximately 4,000 commercial aircraft engines in an effort to calculate potential engine trouble before problems arise.
- "Rather than reacting to some sort of an engine event, we are leveraging data from various sources for maintenance, for planning engine diagnostic systems and building predictive models," says IBM VP Jerry Kurtz.
- Due to the new proactive maintenance program, Pratt & Whitney expects to extend engine life by over almost 50% and decrease maintenance costs by up to 20%. A typical engine repair can fetch between $3M to 10M.
Jul. 16, 2014, 5:35 PM
Jul. 16, 2014, 12:24 PM
- The Apple (AAPL +1.2%)/IBM (IBM +2.4%) deal is a "landmark agreement," that gives Apple "enterprise capabilities and credibility at one stroke," says Forrester's Frank Gillett. He notes that while the BYOD trend has bolstered Apple's enterprise presence, the company has until now "resisted servicing enterprises" out of fear of hurting its user experience.
- Endpoint Technologies' Roger Kay: "What [the deal] allows Apple to do is not change its philosophy and lay off to IBM the whole issue of, how do you make iPhones work for IT managers who actually want to be treated like a valued customer."
- Tim Cook: "We’re good at building a simple experience and in building devices ... The kind of deep industry expertise you would need to really transform the enterprise isn’t in our DNA. But it is in IBM’s." He also highlights the value of IBM's 100K+ consultants/sales workers.
- RBC and Canaccord both think iPhone sales could get a boost; the former is also upbeat about the premium AppleCare service that will be developed. Baird thinks the deal "could help AAPL cement iOS as the preferred platform for enterprise."
- Piper's Gene Munster, however, doesn't see a huge hardware impact. "We note that if half of the Fortune 500 were to each purchase an incremental 2,000 iPhones and 1,000 iPads above what they were planning to purchase ... it would mean about a half a percent to CY15 revenue." He also expects IBM to eventually offer similar Android solutions.
- The deal strengthens IBM's MobileFirst initiative, through which Big Blue is already offering a variety of enterprise mobile apps/services. An IBM exec: "We wanted to focus on creating an absolutely irresistible workflow and processes and a design of apps that can be used by every user."
Jul. 15, 2014, 4:50 PM
- As part of a comprehensive enterprise mobility partnership, Apple (NASDAQ:AAPL) and IBM plan to develop 100+ "industry-specific enterprise solutions," including new iPhone/iPad apps.
- The apps will begin to arrive this fall, and IBM will resell iPhones/iPads containing them to clients worldwide.
- The companies also plan to develop IBM cloud services optimized for iOS. Targeted markets include security, mobile device management (MDM), and big data/analytics. New enterprise-focused AppleCare services will be offered, as will "new packaged offerings from IBM for device activation, supply and management."
- Apple, which maintains an outsized share of enterprise mobile hardware activations, has tried hard to grow its business footprint during the Tim Cook era. Aside from any value provided by the new apps/services, Big Blue's credibility and relationships with Global 2000 firms should provide a shot in the arm for Apple's efforts.
- As for IBM, the deal adds to a mobile software/services push that has already resulted in a string of acquisitions and product launches.
- AAPL +1.4% AH. IBM +2%. BlackBerry (NASDAQ:BBRY) -3.2%, as investors worry about the MDM portion of the alliance. MobileIron (NASDAQ:MOBL) could also be affected by it.
- Update: Tim Cook, discussing the deal with re/code: "We’re good at building a simple experience and in building devices ... The kind of deep industry expertise you would need to really transform the enterprise isn’t in our DNA. But it is in IBM’s."
Jul. 9, 2014, 7:21 PM
- Though its struggling chip manufacturing unit is reportedly on the block, IBM is committing $3B over 5 years to develop new chip technologies.
- Big Blue's efforts will focus on pushing the limits of Moore's Law - whereas transistor widths are currently down to 14nm, IBM will explore ways to bring them to 7nm or less in time - and on commercializing unconventional materials and technologies.
- The materials/technologies in question include carbon nanotubes, silicon photonics, graphene, and quantum computing. Intel, H-P, and Nokia are among the companies exploring one or more of those fields.
- Even if its chip manufacturing unit gets sold, IBM is likely to continue designing chips for its own hardware (for example, its Power server CPUs). The company has also built up a lucrative IP licensing business that partly relies on chip-related IP.
Jul. 7, 2014, 7:26 AM
- IBM (IBM) will partner with Beijing - increasing the monitoring and forecasting capabilities of the Chinese capital to reduce its issues of severe smog. IBM aims to help the city through its collection of real-time emissions data and forecasting expertise, and to help it attain its 10-year Green Horizon initiative.
- Beijing already has an alert system to predict heavy pollution days in advance, allowing it to shut schools and factories when needed, but residents say is not enough.
Jul. 4, 2014, 4:42 AM
- Lenovo's (LNVGF) $2.3B deal for IBM’s (IBM) low-end server business has been approved by the the Chinese Ministry of Commerce's anti-monopoly bureau.
- The acquisition is still awaiting approval in the U.S., as the Committee on Foreign Investment in the United States investigates possible American national-security risks under the proposed deal, including concerns of the Pentagon's use of IBM servers.
Jul. 2, 2014, 1:56 AM
- Lenovo (LNVGF) is still expecting to close the $2.3B deal on IBM’s (IBM) low-end server business this year, although the acquisition is still being investigated by the U.S. for national-security risks.
- One of the main concerns is that IBM's x86 servers are used in U.S. communication networks and in data centers that support the Pentagon's computer networks.
- The company is also attempting to obtain regulatory approval to buy Google's Motorola Mobility, in another multi-billion-dollar acquisition valued at $2.9B.
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