rb Posted September 1, 2015 Share Posted September 1, 2015 I'm also starting to get interested at these prices. What's holding me back is that I don't feel like I fully understand the business. It's got so many moving parts. However I do feel that the company has a real franchise that is very valuable. Because I don't fully understand the business it's hard for me to say whether it's cheap at this point. It's definitely cheaper than a year ago. Link to comment Share on other sites More sharing options...
valueyoda Posted September 2, 2015 Share Posted September 2, 2015 Covered my long term short in IBM today. Still think the bulls on the forum are misguided with regard to the upside, as the business transformation will continue to weigh on cash flow generation in the coming 18 months - and potentially beyond. Will probably trade in a trading range, potentially helped by buybacks and additional Berkshire purchases. I would rather own Apple at $107, at 8.5x p/e ex cash but with growing FCF per share, than IBM at 9x p/e with declining FCF per share and estimates that are far too high, over that 18 months period. Link to comment Share on other sites More sharing options...
TheAiGuy Posted September 2, 2015 Share Posted September 2, 2015 Covered my long term short in IBM today. Still think the bulls on the forum are misguided with regard to the upside, as the business transformation will continue to weigh on cash flow generation in the coming 18 months - and potentially beyond. Will probably trade in a trading range, potentially helped by buybacks and additional Berkshire purchases. I would rather own Apple at $107, at 8.5x p/e ex cash but with growing FCF per share, than IBM at 9x p/e with declining FCF per share and estimates that are far too high, over that 18 months period. So, I'm glad you did well on this one, but do you have some crystal ball I can look at? I'd really like to know what IBM is going to do in the next 18 months. Not that appl isn't my fav, it is, but, really? Link to comment Share on other sites More sharing options...
Picasso Posted September 2, 2015 Share Posted September 2, 2015 I think it's better to look at the lifetime earnings of IBM. You're paying $140/share for how much in lifetime owner earnings? Based on their history, I would suspect several multiples of the share price over time. I'm starting to warm up to the current valuation since it allows time to track the business progress. I bet employees of IBM would have a much different view. We're looking at the business without knowing a lot of the inner workings. That part makes me nervous. I can't help but wonder if IBM pushed too hard on the financial engineering and damaged the business. Link to comment Share on other sites More sharing options...
LowIQinvestor Posted September 28, 2015 Share Posted September 28, 2015 IBM's Watson: Making Everything Smarter Soon: Fascinating to think about how many industries can take advantage of the Watson platform. IBM is going for a Revenue share model. I know I know, it doesn't matter..IBM is a financial engineering firm. Link to comment Share on other sites More sharing options...
obtuse_investor Posted September 28, 2015 Share Posted September 28, 2015 If IBM can pull off the revenue sharing model, it would be incredible. I view specialized AI (like Watson) as a utility. In the not too distant future, it would be plentiful and ubiquitous. And if one looks at the history of utlities (like electricity), the generators aren't the ones who made money- it was the ones who sold them parts and services (eg: GE). Obviously, senior people at IBM see this pitfall and are doing things to avoid it. I wish them well. Link to comment Share on other sites More sharing options...
TwoCitiesCapital Posted September 28, 2015 Share Posted September 28, 2015 If IBM can pull off the revenue sharing model, it would be incredible. I view specialized AI (like Watson) as a utility. In the not too distant future, it would be plentiful and ubiquitous. And if one looks at the history of utlities (like electricity), the generators aren't the ones who made money- it was the ones who sold them parts and services (eg: GE). Obviously, senior people at IBM see this pitfall and are doing things to avoid it. I wish them well. Do you think that's a flaw in the business model of a utility or the fact that they're regulated to target a specific level of reasonable profits and nothing beyond? Utilities aren't allowed to maximize profits - I don't see anything standing in IBM's way that would currently prevent them for earnings as much as they can on Watson. Link to comment Share on other sites More sharing options...
obtuse_investor Posted September 28, 2015 Share Posted September 28, 2015 If IBM can pull off the revenue sharing model, it would be incredible. I view specialized AI (like Watson) as a utility. In the not too distant future, it would be plentiful and ubiquitous. And if one looks at the history of utlities (like electricity), the generators aren't the ones who made money- it was the ones who sold them parts and services (eg: GE). Obviously, senior people at IBM see this pitfall and are doing things to avoid it. I wish them well. Do you think that's a flaw in the business model of a utility or the fact that they're regulated to target a specific level of reasonable profits and nothing beyond? Utilities aren't allowed to maximize profits - I don't see anything standing in IBM's way that would currently prevent them for earnings as much as they can on Watson. Perhaps using the word "utility" was a bad choice on my part- it is loaded with connotations. Let me try again: I see specialized AI services as a utility service, only because it will become a commodity. Over the long term, one competitor wouldn't be able to charge more for their brand of specialized AI. By using the word "utility" I didn't mean imply that there would be regulation from the government. As I understand it, governments place various caps on utilities because they are seen as essential services for the common good of society. Maybe in 50-100 years, cloud hosted AI would be in the same category, but I am not forecasting that. :-) Government wouldn't be preventing IBM from maximizing earnings from Watson- the competitive market will. As long as IBM focuses on providing Watson based services to the enterprise and solving their particular problems, they will do exceedingly well. It wouldn't be the AI that would be the bulk of the profits, but the services around it. Which falls perfectly in line with IBM's current business model. Anyway, enough forecasting on my part. It would be harmful to my pocket book. Link to comment Share on other sites More sharing options...
Kiltacular Posted September 28, 2015 Share Posted September 28, 2015 IBM's Watson: Making Everything Smarter Soon: Fascinating to think about how many industries can take advantage of the Watson platform. IBM is going for a Revenue share model. I know I know, it doesn't matter..IBM is a financial engineering firm. Very interesting -- thanks for sharing it. Link to comment Share on other sites More sharing options...
portfolio14 Posted September 29, 2015 Share Posted September 29, 2015 This reminds me of what Wolfram has been trying to achieve to make knowledge "computable". Wolfram approaches this from a different angle. Not AI. He tries to turn knowledge into symbolic mathematical objects which can be queried, re-combined, manipulated and, ulitmately, computed. But the end system has AI-like appearance. I guess Wolfram is a deductive system while Watson is a (statistical) inductive system. Btw, at 4:15, Kelly dodged a very fundamental question: how Watson got its a priori understanding of concepts like "accuracy" or "wikipedia". Trade secrets he didn't want to disclose? Link to comment Share on other sites More sharing options...
Palantir Posted September 29, 2015 Share Posted September 29, 2015 Where is ValueAct when you need them? Make this elephant dance! Link to comment Share on other sites More sharing options...
Jurgis Posted September 29, 2015 Share Posted September 29, 2015 Where is ValueAct when you need them? Make this elephant dance! I'm not sure ValueAct is a solution here. Even Buffett is a wrong person for this. They need someone with a vision - maybe not Steve Jobs - but perhaps Larry Ellison. They are making some right noises, but I am not sure the vision and execution are matched. Link to comment Share on other sites More sharing options...
TwoCitiesCapital Posted October 19, 2015 Share Posted October 19, 2015 http://finance.yahoo.com/news/ibm-reports-2015-third-quarter-200400699.html IBM 3rd quarter results. Continuing slide in income and revenue. Slight beat on expectations, but lowered guidance. Link to comment Share on other sites More sharing options...
Picasso Posted October 19, 2015 Share Posted October 19, 2015 "In the third quarter we again made progress in the transformation of our business to higher value, with strong growth in our strategic imperatives and expanded operating margins,” said Ginni Rometty, IBM chairman, president and chief executive officer. "We are continuing to make significant investments to build platforms around analytics, cloud, mobility and security that lay the foundation for a new era of cognitive business -- where we see long-term value for our clients and shareholders." Strategic imperatives, cognitive business.... What the hell does that crap even mean? It was like Michael Dell went on CNBC to discuss the EMC merger. He kept talking about the "digital transformation." I'm so tired of these vague buzzwords that seem to originate from businesses seemingly lost at sea. Link to comment Share on other sites More sharing options...
Palantir Posted October 19, 2015 Share Posted October 19, 2015 Down 5% after close. Ouch. Link to comment Share on other sites More sharing options...
portfolio14 Posted October 20, 2015 Share Posted October 20, 2015 Strategic imperatives, cognitive business.... What the hell does that crap even mean? The IBM Watson thing, I'm wondering how many IBM can sell. How many businesses will rely on a blackbox as an input in their decision making? When an initiative fails, how do you, as a CEO, explain to the shareholders it is because of Watson's output of which the reasoning is intraceable? Link to comment Share on other sites More sharing options...
AzCactus Posted October 20, 2015 Share Posted October 20, 2015 Anyone starting to get interested around these levels? It's not often Buffett buys a stock, has been holding for 4-5 years and has lost a little money (on paper), while the market is up 75%. Link to comment Share on other sites More sharing options...
KCLarkin Posted October 20, 2015 Share Posted October 20, 2015 Anyone starting to get interested around these levels? It's not often Buffett buys a stock, has been holding for 4-5 years and has lost a little money (on paper), while the market is up 75%. You need to buy despite Buffett not because of him. In other words, you need the courage of your own convictions. This is not an easy stock to own right now. Link to comment Share on other sites More sharing options...
scorpioncapital Posted October 20, 2015 Share Posted October 20, 2015 I think a more interesting observation is the size of his bet. It's huge. At 13 or 14 billion, this would be the biggest public stock fumble ever. After all, if he wasn't as sure or certain of whatever he is sure or certain of, he would have taken a smaller position like in Walmart or Tesco. Having said that he did point out when asked about IBM that he could be wrong on any given stock. There are no guarantees of success or being correct even for the best. I hope it works out. Link to comment Share on other sites More sharing options...
Palantir Posted October 20, 2015 Share Posted October 20, 2015 Does Warren know enough to decide if he is right or wrong? This is so far outside his curve of competence. Link to comment Share on other sites More sharing options...
AzCactus Posted October 20, 2015 Share Posted October 20, 2015 KC---I understand what you are saying. All I'm saying is that for him this is a huge conviction bet. Management is buying back shares pretty aggressively and I can't think of anytime Buffett has made a position as large as 12% and ended up not making money although I could be wrong. Link to comment Share on other sites More sharing options...
scorpioncapital Posted October 20, 2015 Share Posted October 20, 2015 I think his bet on IBM hinges on some very non-tech facts. 1. The management is very shareholder friendly. He loves stocks with huge buybacks and IBM is one of the biggest net share buyers of any company of giant size. 2. In receiving data from his conglomerate empire (sort of like the Fed receiving data about the economy!), he sees that his many businesses are clients of IBM and that they give IBM lots of their money. This view on the business cycle and spending, convinces him that IBM makes money off of many businesses he owns. It becomes a kind of vertical integration to own IBM. I don't know if he is thinking much about the cloud or Waston. Those may just be free options but not necessary for his thesis. In The SnowBall, the author relates that he asked Gates 20 years ago what he thought of IBM vs Microsoft. Gates told him to buy Microsoft stock. He bought neither but now we see him go with IBM :) Link to comment Share on other sites More sharing options...
Guest notorious546 Posted October 20, 2015 Share Posted October 20, 2015 FCF yield at 8-9% based on a sell-side report i read looks pretty good, unfortunately there's too much i don't know here for me to step in. Good luck to all! Link to comment Share on other sites More sharing options...
Jurgis Posted October 20, 2015 Share Posted October 20, 2015 1. The management is very shareholder friendly. He loves stocks with huge buybacks and IBM is one of the biggest net share buyers of any company of giant size. Buying back shares in declining business does not make management shareholder friendly. IBM needs vision and business execution, not more financial engineering. Link to comment Share on other sites More sharing options...
scorpioncapital Posted October 20, 2015 Share Posted October 20, 2015 Apparently according to Motley Fool by 2035 IBM will have 1 share outstanding. I'm not sure I understand how this works in practice vs theory. It seems like a singularity at the centre of a black hole. I am pretty sure way before we get to 1 share, say when we get to the event horizon of perhaps 10 million shares , the stock price will be sky high as someone has to be bought out and there won't be many holders left. I strangely perceive Buffett as being one of the last holdouts, perhaps 1 of the remaining last 2 shares! By that point, each of the 2 shares will be each worth $70,000,000,000/share assuming no increase in valuation from today. Link to comment Share on other sites More sharing options...
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