fareastwarriors Posted December 24, 2013 Share Posted December 24, 2013 http://dealbook.nytimes.com/2013/12/23/why-older-technology-companies-may-attempt-desperate-deals/ Why Older Technology Companies May Attempt Desperate Deals Link to comment Share on other sites More sharing options...
Liberty Posted December 24, 2013 Share Posted December 24, 2013 I can never understand how people value this. Also dont understand why buffet likes it. Is it because he knows management and trusts them? Seems so complex to analyze this company. As far as I know he doesn't know management personally (not more than what is public about them). I think Buffett sees: -decent moat + decent capital allocation + a size he can work with He probably doesn't understand everything about the business, though probably a lot more than people would give him credit for as he's been reading the 10Ks for 50 years, but from talking to various Berkshire subsidiaries, he seems to be confident that IT departments everywhere have been and will be dealing with IBM for many of their needs for years to come. If he didn't have tens of billions to deploy he probably wouldn't have bought it... I think it works for him because no-cost insurance float is levering up the returns, but for a small investor without leverage, I doubt the results will be as good as what Buffett will get. Link to comment Share on other sites More sharing options...
mcliu Posted December 24, 2013 Share Posted December 24, 2013 I almost think IBM is a very powerful sales pipeline into large/medium-sized corporations. They can afford to make pricier acquisitions of small tech companies and then rapidly scale through their sales network. Link to comment Share on other sites More sharing options...
Palantir Posted December 24, 2013 Share Posted December 24, 2013 IBM isn't that difficult to analyze. I think some of the firms discussed here like BAC & SD are more complicated. Just start talking to people who work in IT. A relative that works for IBM explained to me for example that his unit is a services business that uses India as a labor pool who then deliver projects to customers globally. The key idea is that their clients pretty much never leave, and also that they don't pay their employees huge amounts. They have a deep bench of experienced consultants, and whenever one gets too senior, he can be replaced easily. Link to comment Share on other sites More sharing options...
fareastwarriors Posted December 31, 2013 Share Posted December 31, 2013 http://www.bloomberg.com/news/2013-12-31/ibm-s-revenue-slump-turns-stock-into-dow-s-lone-loser-of-2013.html IBM’s Sales Slump Turns Stock Into Dow’s Lone Loser of 2013 Link to comment Share on other sites More sharing options...
Guest valueInv Posted December 31, 2013 Share Posted December 31, 2013 http://www.bloomberg.com/news/2013-12-31/ibm-s-revenue-slump-turns-stock-into-dow-s-lone-loser-of-2013.html IBM’s Sales Slump Turns Stock Into Dow’s Lone Loser of 2013 Not big enough of a loser IMO ;). Can we get a $150? Link to comment Share on other sites More sharing options...
fareastwarriors Posted January 8, 2014 Share Posted January 8, 2014 IBM Struggles to Turn Watson Computer Into Big Business http://online.wsj.com/news/articles/SB10001424052702304887104579306881917668654?mod=WSJ_hpp_LEFTTopStories Link to comment Share on other sites More sharing options...
nikhil25 Posted January 9, 2014 Share Posted January 9, 2014 IBM to invest $1 billion to create new business unit for Watson http://www.reuters.com/article/2014/01/09/us-ibm-watson-idUSBREA0808U20140109 IBM said the investment includes a $100 million equity fund to boost innovation at its Watson Developers Cloud, which it opened up to external application developers last year. The unit will have about 2,000 employees and will be based in New York City. Link to comment Share on other sites More sharing options...
nikhil25 Posted January 14, 2014 Share Posted January 14, 2014 IBM Sets U.S. Patent Record; Achieves 21st Straight Year of Patent Leadership IBM inventors received more than 6,800 U.S. patents in 2013 http://www.prnewswire.com/news-releases/ibm-sets-us-patent-record-achieves-21st-straight-year-of-patent-leadership-240087321.html IBM's 2013 patent results represent a diverse range of inventions poised to enable significant innovations that will position the company to compete and lead in strategic areas–such as IBM's Watson, cloud computing, Big Data and analytics. These inventions will also advance the new era of cognitive systems where machines will learn, reason and interact with people in more natural ways Link to comment Share on other sites More sharing options...
jwfm1985 Posted January 17, 2014 Share Posted January 17, 2014 http://www.marketwatch.com/story/ibm-commits-12-billion-to-expand-global-cloud-footprint-2014-01-17?reflink=MW_news_stmp Link to comment Share on other sites More sharing options...
fareastwarriors Posted January 17, 2014 Share Posted January 17, 2014 IBM Commits $1.2B to Cloud Stack http://blogs.wsj.com/cio/2014/01/16/ibm-commits-1-2b-to-cloud-stack/?mod=WSJ_business_cio Link to comment Share on other sites More sharing options...
nikhil25 Posted January 20, 2014 Share Posted January 20, 2014 Lenovo Said to Be in Advanced Talks to Buy IBM Server Unit http://www.bloomberg.com/news/2014-01-20/lenovo-said-to-be-in-advanced-discussions-for-ibm-server-unit.html Lenovo Group Ltd. (992) is in serious discussions to acquire International Business Machines Corp. (IBM)’s low-end server business, and a deal may be signed within weeks, according to a person with direct knowledge of the matter. Lenovo, the world’s largest personal-computer maker, has completed due diligence, according to the person, who asked not to be identified because the talks are private. The companies failed to agree last year on a price for the assets, estimated to be worth $2.5 billion to $4.5 billion. The person didn’t have details on the current price or structure of the proposed deal. Link to comment Share on other sites More sharing options...
jwfm1985 Posted January 20, 2014 Share Posted January 20, 2014 Lenovo Said to Be in Advanced Talks to Buy IBM Server Unit http://www.bloomberg.com/news/2014-01-20/lenovo-said-to-be-in-advanced-discussions-for-ibm-server-unit.html Lenovo Group Ltd. (992) is in serious discussions to acquire International Business Machines Corp. (IBM)’s low-end server business, and a deal may be signed within weeks, according to a person with direct knowledge of the matter. Lenovo, the world’s largest personal-computer maker, has completed due diligence, according to the person, who asked not to be identified because the talks are private. The companies failed to agree last year on a price for the assets, estimated to be worth $2.5 billion to $4.5 billion. The person didn’t have details on the current price or structure of the proposed deal. Would LOVE to see this! I think the low-end, low-margin server unit has unjustifiably been a big weight on the stock... Link to comment Share on other sites More sharing options...
Palantir Posted January 20, 2014 Share Posted January 20, 2014 Why would Lenovo buy it except for maybe a dirt cheap price? Link to comment Share on other sites More sharing options...
Guest valueInv Posted January 20, 2014 Share Posted January 20, 2014 Nice, they're making the right moves. Link to comment Share on other sites More sharing options...
jwfm1985 Posted January 20, 2014 Share Posted January 20, 2014 Why would Lenovo buy it except for maybe a dirt cheap price? Price would be the key factor. Not a business I'd want to get into, but would of said the same thing when they bought the PC business. The Lenovo CEO is looking for growth outside PCs, he's mentioned servers as a potential avenue before, they know hardware well and are connected in China (where IBM has really struggled recently with servers). Link to comment Share on other sites More sharing options...
Liberty Posted January 20, 2014 Share Posted January 20, 2014 Why would Lenovo buy it except for maybe a dirt cheap price? Empire building? edit: To be clear, I'm really asking the question. I never dug too deep into Lenovo because I don't care too much about their business, so I don't know how good management is. But in general, empire building should be the default assumption whenever a big acquisition is mentioned, because that's how most managements (who aren't big owners, aren't great capital allocators) think about things, even if they won't say it. Great acquisitions that create lots of value are the exception, not the norm. Link to comment Share on other sites More sharing options...
txlaw Posted January 20, 2014 Share Posted January 20, 2014 Why would Lenovo buy it except for maybe a dirt cheap price? Scale and increased presence in the enterprise markets. IBM made their server business much less competitive when they sold off their client devices biz because of the economies of scale working in reverse, and they began to lose market share fairly quickly afterwards. Lenovo, on the other hand, has a huge PC and mobile biz (which is integrated in ways more similar to Samsung than an Apple), and the server biz in Lenovo's hands would be far more competitive. I think they will be able to turn it around, like they have done with the Thinkpad biz. At the same time, Lenovo would be increasing their presence in enterprise, which will be great when they eventually move upmarket with software, services, and content. The Economist on Lenovo's ascent: http://www.economist.com/news/business/21569398-how-did-lenovo-become-worlds-biggest-computer-company-guard-shack-global-giant?zid=293&ah=e50f636873b42369614615ba3c16df4a Interview w/ Yang Yuanqing: http://www.mckinsey.com/insights/high_tech_telecoms_internet/thriving_in_a_pc-plus_world This is a volume industry, a scale industry. If you have the scale, you have the advantage. So, first, becoming one of the leaders is very important from an efficiency point of view. And, second, being a top PC company promotes our brand. Well, on the one hand you can say we are focusing on devices—Internet-access devices. That’s pretty basic. But we know that the future is not just hardware. R&D is critical because we must consider the whole package: hardware, software, services, and content. These guys aren't empire building. They're thinking long term. Link to comment Share on other sites More sharing options...
Guest valueInv Posted January 20, 2014 Share Posted January 20, 2014 Why would Lenovo buy it except for maybe a dirt cheap price? Empire building? edit: To be clear, I'm really asking the question. I never dug too deep into Lenovo because I don't care too much about their business, so I don't know how good management is. But in general, empire building should be the default assumption whenever a big acquisition is mentioned, because that's how most managements (who aren't big owners, aren't great capital allocators) think about things, even if they won't say it. Great acquisitions that create lots of value are the exception, not the norm. http://venturebeat.com/2014/01/20/why-ibm-wants-out-of-the-low-end-server-business-and-why-others-like-it Lenovo successfully turned around IBM's laptop business. While the market has been declining, they've been growing. They probably increased efficiency and reduced costs by moving more of the operations to China. I'm guessing they believe they can do the same to the low end server business. Link to comment Share on other sites More sharing options...
LC Posted January 21, 2014 Share Posted January 21, 2014 IMHO they also tuned down one of the high quality components of old IBM made Thinkpads. The newer Lenovo ones are not as durable. Link to comment Share on other sites More sharing options...
fareastwarriors Posted January 21, 2014 Share Posted January 21, 2014 4Q IBM reported quarterly earnings that beat analysts' expectations on Tuesday, but revenue came in below street expectations. After the earnings announcement, the company's shares fell 2.4 percent. (Click here for the latest after-hours quote.) The company posted fourth-quarter earnings excluding items of $6.13 per share, up from $5.39 a share in the year-earlier period. Analysts had expected IBM to report earnings excluding items of $5.99 a share on $28.25 billion in revenue, according to a consensus estimate from Thomson Reuters. Revenue decreased to $27.70 billion from $29.30 billion a year ago. This is the fourth straight quarter that the company's revenue has fallen short of analysts' targets. "In view of the company's overall full-year results, my senior team and I have recommended that we forgo our personal annual incentive payments for 2013,'' Chief Executive Ginni Rometty said in a statement. Sales from its system and technology unit, which includes servers and storage, fell 26.1 percent to $4.26 billion. Revenue from global technology services, its largest business, fell 3.6 percent to $9.92 billion. Software revenue was the only bright spot, growing 2.8 percent to $8.14 billion. IBM has been moving steadily into higher-margin businesses such as software and cloud computing as it is struggling to sustain growth through its emerging markets business. Looking froward, IBM forecast current-year adjusted earnings of at least $18.00 per share vs. $17.97 expected by Wall Street analysts. Net income for the fourth quarter rose to $6.2 billion, or $5.73 a share, from $5.8 billion, or $5.13 per share a year earlier. Link to comment Share on other sites More sharing options...
gfp Posted January 21, 2014 Share Posted January 21, 2014 $5.8 Billion in share repurchases in the quarter Link to comment Share on other sites More sharing options...
Palantir Posted January 21, 2014 Share Posted January 21, 2014 Does IBM Love or Hate Itself? Look deeper at IBM and dozens of mature U.S. companies, and you can sketch a different, more ominous, story: That CEOs are in fact stuck, reluctant to build new plants, launch products or pursue an acquisition. By rote and by fear, they are pitching their billions into buybacks, nearly $1 trillion from the 100 largest companies in the S&P since 2008. In the 12 months ending in September, the total dollar amount of all corporate buybacks increased by 15% from a year earlier, according to S&P Dow Jones Indices. http://online.wsj.com/news/articles/SB10001424052702304027204579334081811064124?mg=reno64-wsj&url=http%3A%2F%2Fonline.wsj.com%2Farticle%2FSB10001424052702304027204579334081811064124.html Broadly, I agree with this. Link to comment Share on other sites More sharing options...
fareastwarriors Posted January 22, 2014 Share Posted January 22, 2014 http://www.ft.com/intl/cms/s/3/4d502ace-82ed-11e3-8119-00144feab7de.html#axzz2r3OVB2Vc IBMquarterly results practically write themselves now: dreadful revenue growth accompanied by cost controls, share buybacks and dividends that combine to make the technology legend look somewhat less worse than the top-line would suggest. Tuesday’s fourth-quarter results fit nicely into that narrative. So in the absence of any dramatic changes – a spin-off of the hardware business or the tapping of a new chief executive to replace current boss Ginni Rometty – investors now should reflect less about IBM’s strategic choices and more on a basic question: are the company’s battered shares finally priced at a decent value? IBM reported fourth-quarter earnings per share were up 14 per cent yet total revenues fell 5 per cent. Hardware revenue was down a whopping quarter, but its closely watched software segment saw sales up 3 per cent. Overall for 2013, EPS rose 7 per cent despite revenue falling 5 per cent. The tepid revenue comes on news that IBM may be close to unloading its commodity x86 server business, possibly to Lenovo. IBM peaked at $215 a share in March. But from a year ago, its shares are down about 5 per cent, closing at $188.43 yesterday. Add in dividends, and total shareholder return is about flat. IBM still claims that it will grow to $18 a share in non-GAAP earnings in 2014 (as well that it will reach its $20 target for 2015). That leaves it valued at roughly a 10 times multiple. A year ago it traded at 12 times. Cisco, whose growth difficulties have mirrored IBM’s, trades at nearly 12 times currently. So for 11 per cent EPS growth, IBM trades at a fair 10 times earnings. It still generated $15bn in free cash flow in 2013 and thus has plenty of firepower to invest in growth areas while still placating shareholders with dividends and buybacks. Ms Rometty probably has another year to draft a better story. Link to comment Share on other sites More sharing options...
ERICOPOLY Posted January 22, 2014 Share Posted January 22, 2014 $5.8 Billion in share repurchases in the quarter That's about a 13% "dividend" yield at that pace (including the actual 2% dividend yield). Link to comment Share on other sites More sharing options...
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