IBM News and Discussion

» Kirk - G-S Research Report on IBM this morning (10/8/02)

G-S Research Report on IBM this morning

IBM will be reporting its September quarter results on October 16. The presentation is scheduled to begin at 4:30 PM EST and will be available on IBM's website at www.ibm.com/investor. We expect no preannouncement and we are generally satisfied that IBM will continue to fare better than most technology companies during the extended slowdown in IT spending, gaining market share and mindshare in a very difficult environment, and having the ability to capitalize on a rebound in demand. Although we are revising our estimates for the December quarter and full-year 2003 downward in the face of ongoing weakness in IT demand, we see the quality of IBM's earnings as improving and IBM as continuing to make headway in its key services, hardware, software, and technology markets. Our conclusions are as
follows:

1. WE ARE REVISING OUR ESTIMATES BUT STILL SEE IBM AS BEING IN BETTER SHAPE THAN MOST TO COPE WITH TODAY'S CLIMATE. We are lowering our EPS estimates for 2002 and 2003, primarily based on expecations that IT spending will remain sluggish at least through the first half of 2003. In addition to weak IT spending, we expect a drop-off in IP trasaction-based royalties as well as incremental pension-related expenses to negatively affect earnings by a total of $0.10 in 2002 and $0.40 in 2003. On the other hand, our revised model shows improved profitability in IBM's microelectronics business and slightly more savings from restructuring, boosting EPS by about $0.19 in 2003. In June 2002, we estimated that restructuring would provide a $0.40 benefit to IBM's 2003 EPS, while an adjustment to IBM's 2003 pension plan return assumptions could reduce earnings by $0.14. The changes that we are making now are incremental to our earlier assumptions. One of our key conclusions is that IBM's restructuring efforts should more than offset changes in the expenses associated with IBM's pension plan. Our new EPS estimates for 2002 and 2003 are $3.90 and $4.30 versus our old estimates of $4.00 and $4.50, respectively. In the table below, we have presented a summary of the effects of each of these factors through the end of 2003, arriving at our new quarterly estimates.

2. ALTHOUGH BUSINESS IN THE U.S. SEEMS TO HAVE GOTTEN PROGRESSIVELY WORSE OVER THE COURSE OF THE QUARTER AND EUROPEAN DEMAND IS DETERIORATING, WE EXPECT IBM TO COME VERY CLOSE TO MAKING ITS NUMBERS. In a quarter that was probably more back-end loaded than usual, many data points indicate that end-of-quarter closings were even more difficult than normal, particularly with large projects. While IBM is obviously a participant in what is a tougher environment than even we would have presumed, it is gradually increasing its inroads in each of its primary areas of focus - services, software, hardware, and technology. Once again, the diversity of IBM's revenue streams should allow the company to outperform its peers. While hardware revenue is likely to be down somewhat year/year, we expect services, software and financing revenues to be flat to up.

3. IBM IS WINNING BY INCHES, PARTICULARLY NOTABLE ON THE HARDWARE FRONT. In the September quarter, we expect hardware to be generally in line with our estimates of around $6.6B, down 3.4% year/year but still notably better than others, with IBM seeing market share gains in Unix servers and storage. Meanwhile, Intel-based server growth, on the back of IBM's scalable, 4-way and 8-way offerings, is strong for the second quarter in a row, in our model up 12-13% year/year.

4. IBM'S SERVICES REVENUES SHOULD ALSO BE OKAY ALTHOUGH BOOKINGS WILL PROBABLY BE IN THE $9.5B AREA. Our modeled services revenues of $8.7B should be okay, flat to up from last year, with the potential for some slight upside variance. Bookings, on the other hand, were undoubtedly impacted by today's climate, with our sense being that signings may have ended up at around $9.5B. Given continued efforts by customers to reduce IT related expenses, we expect IBM's more transactional BIS consulting services to continue to decline (our model shows a decline of 9% year/year) but by a decelerating amount. Highlighting the resiliency and stability of IBM's outsourcing business, we are forecasting mid single-digits year/year growth.

5. MORE IMPORTANTLY, IBM - WITH SOME LUCK ON ITS SIDE - IS NOW IN A POSITION TO BENEFIT FROM EDS's AND TSMC's CHALLENGES. We expect services bookings strength in the fourth quarter. While we had begun to think that the strength of 4Q bookings would be negatively impacted by IT spending weakness-related pushouts, we think issues at EDS have worked substantially to IBM's benefit. Specifically, a number of the deals where the two companies were going head-to-head now appear to be moving in IBM's favor. Even the well-telegraphed Procter & Gamble order could be back in possible play for IBM, this time with terms more satisfactory than the ones we think IBM initially walked from. For the December quarter, IBM may already be well along in potential signings than where it has been in the past several quarters, with a sufficient number of already-won deals that are in the final contract negotiation stage to be close to total September quarter bookings. On top of that, we would expect IBM to be able to win more competitively than it normally might have, bringing total December quarter signings back up to around $14B-$15B. In addition, IBM's first-to-market copper fab should continue to run at near full capacity through at least the middle of 2003, improving the profitability of IBM's microelectronics business. Much of IBM's success in copper appears to come from a lack of competition, particularly at the high-end, where TSMC and others apparently continue to struggle, rather than a pick-up in demand.

6. THE QUALITY OF IBM'S EARNINGS SHOULD NOTICEABLY IMPROVE ONCE THE PENSION ISSUE IS TAKEN OFF THE TABLE. Over the past several years, there have been multiple non-operational items that have affected IBM's bottom line and which have caused many investors to raise flags about the quality of IBM's earnings. Among these items - the reduction of the tax rate from the mid- to upper-30%s to a current 30% level; share buybacks in which IBM typically has spent $5-6B per year; transactional IP agreements such as the one with JDS Uniphase which added about $0.11 to IBM's bottom line in 4Q01; IBM's overfunded pension which was exceeding expected returns and throwing off incremental earnings as a result, including $0.05/share in 2001; real estate sales; and equity investments. Over the past couple of years, IBM has been gradually weaning itself from these contributors and working its way towards a higher quality of earnings. The last of the big items involves pension expense. In an effort to be more conservative and more in- line with other U.S.-based companies, we expect IBM to lower the assumed rate of return on its pension assets to 8.5% in 2003 from 9.5% in 2002 and 10% in 2001. The reduced return expectation will remove about an additional $0.14 or so in earnings in 2003 (we had already removed $0.14 previously when we moved to an expected rate of return on pension assets for 2003 of 9%) and reverse a trend in the late 90s and early 00s when pension had an incremental benefit to IBM's earnings. Although IBM will probably have to reduce its share repurchases temporarily by about $1B to provide the cashflow to fund its now-underfunded pension, FCF is more than adequate to keep its programs virtually intact.

7. IBM IS NEAR THE LOW END OF ITS HISTORICAL VALUATION RANGE. Weak IT spending and a lack of near-term catalysts continue to weigh on all tech stocks. However, despite continuing to outperform its peers and consistently generating strong earnings and cash flow, IBM is trading at roughly 0.8X the S&P500 - at the low end of its historical range of 0.8X- 1.1X. Using our new revenue and earnings expectations, a discounted cash flow analysis yields a 12-month price target of $75, representing 30% appreciation, versus our prior price target of $90. The prevailing risk continues to be the current IT spending environment and the associated uncertainty of an eventual recovery.

-- posted by Kirk

» Kirk - Low P/E but Low Dividend

<img src=http://cbs.marketwatch.com/charts/int-ad... width=452 height=366>

Since I bought the majority of my shares back in 1993, I doubt I will add more shares now, but the idea has merit, especially when you look at these charts:

<img src=http://cbs.marketwatch.com/charts/int-ad... width=452 height=366>

You can see IBM is at the low end of its P/E range but its measly 0.65% dividend is not too exciting to me compared to HPQ which pays 1.3% and has a similarly low P/E ratio.

<img src= http://cbs.marketwatch.com/charts/int-ad... width=452 height=366>

Hmmmm….

         PERIOD                Kirk  Wilshire5000  Delta
1 Year Return to 12-31-2003    +77%     +31%         46%  
3 Year Return to 12-31-2003    +25%      -7%         32%  
5 Year Return to 12-31-2003   +171%      +2%        169%  

 

Total Return:
                                  Kirk   S&P500+  NASDAQ 
5 Yrs 12/31/98 through 12/31/03  171.0%  ( 3.0%)  ( 8.6%)
Annualized Annual Return          22.1%  ( 0.6%)  ( 1.8%)
 
Click for a free issue of my newsletter 
Suitable for the aggressive growth part of your
  diversified investment portfolio. 

-- posted by Kirk

» Kirk - IBM PC business a money loser for last 3 1/2 years

Posted on Fri, Dec. 31, 2004 http://www.siliconinvestor.com/readmsg.a...

IBM PC business a money loser for last 3 1/2 years

NEW YORK (AP) - IBM's personal computer business, which it is selling to Lenovo Group of China, has lost money for the past 3 1/2 years.

International Business Machines Corp. is selling the unit for $1.75 billion. In a quarterly filing with the Securities and Exchange Commission Thursday, the company said the unit had a loss of $258 million in 2003, $171 million in 2002 and $397 million in 2001.

It lost $139 million from the beginning of 2004 through the end of June.

IBM does not usually break out results from the PC division. It is part of the company's hardware group, which includes more profitable servers.

-- posted by Kirk

» SteveT - IBM Invests $300 Million to Help Business Partners Provide IT Se

Press Release Source: IBM

IBM Invests $300 Million to Help Business Partners Provide IT Services and Consulting for Mid-Sized Businesses
Tuesday March 1, 5:42 pm ET
Major Expansion of Company-Wide SMB Initiative

LAS VEGAS, NV--(MARKET WIRE)--Mar 1, 2005 -- IBM PartnerWorld -- IBM today announced it will invest $300 million in new services, programs, consulting and education to help Business Partners increase revenue opportunities in the small and mid-sized businesses (SMB) technology services marketplace. The initiative delivers important enhancements to IBM's company-wide commitment to SMB clients and the Business Partners who serve them.

SMB is one of the largest and fastest growing opportunities in the IT industry. IBM has a long standing commitment to the SMB marketplace with its SMB sales organization delivering more then 20 percent of IBM's revenues. IT analyst group IDC projects that SMBs will spend $360 billion on IT in 2005.

"Analysts are saying SMB services are one of the hottest growth areas in the industry, and at the same time it is a highly competitive and localized marketplace," said Jim Corgel, General Manager, Small and Mid-Sized Business, IBM Global Services. "IBM is making a significant investment to expand its SMB technology and consulting services focus and collaborate with Business Partners around the world to create solutions that help SMBs improve their business performance."

IBM announced that dedicated professionals from IBM Business Consulting Services (BCS) will team with regional systems integrators (RSIs) in the U.S. and Europe to offer SMB clients deep industry insight for their toughest business challenges.

Other highlights of the new services, programs and education for Business Partners include:

BUSINESS PARTNER-LED PORTFOLIO OF SERVICES

IBM Express Managed Services

Called IBM Express Managed Services, the offerings are part of a new IBM business model to address SMB client needs via services for infrastructure management, application management and business transformation outsourcing, sold by IBM Business Partners.

IBM mySAP All-In-One Solutions

Resellers will now be able to sell preconfigured mySAP All In One solutions for SMBs that solve key client problems through a combination of technology, business consulting expertise and services. Leveraging preconfigured components, these offerings are targeted for SMBs that don't have the revenue, time or resources to build a full-scale enterprise application platform. Resellers will have the option of receiving enhanced sales fees or deploying the solution.

BUSINESS PARTNER COLLABORATION

Collaboration With Regional Systems Integrators

This initiative leverages the combined strengths of RSIs and IBM to sell and deliver innovative services to the SMB marketplace. Through localized teaming, RSIs have access to IBM's sales force, can benefit from IBM marketing support, and can leverage IBM's systems integration and industry expertise. RSIs provide market reach and local presence, complementary solution and industry expertise, as well as competitive rate structures. IBM and RSIs collaborate to share sales pipelines and jointly sell, staff and lead client engagements. Pilot efforts underway in the U.S. and Europe will be expanded in 2005.

Sales Agent Program For Hosting

This pilot program enables partners in the U.S. to resell IBM hosting services to SMB clients. Resellers are designated as agents by IBM based on geographic location and area of expertise. Resellers are compensated for IBM's full portfolio of hosting services.

Sales Agent Program For Strategic Outsourcing

This new program allows Business Partners to resell IBM strategic outsourcing services to SMB clients. Business Partners are responsible for identifying and validating outsourcing services clients and sharing sales opportunities, which are qualified by IBM. Business Partners work with IBM on client negotiations. The services will be delivered by IBM.

EDUCATION AND ENABLEMENT

Hosting Services Sales Professional Certification

IBM is now offering education and sales certification training for select IT services. The certification validates that a Business Partner has the knowledge and skills necessary to sell IBM services. Among the first certification programs is Hosting Services Sales Professional Certification.

Financial Management Workshop

IBM is expanding its Financial Management Workshop to include RSI partners. Over the past year, nearly 700 resellers have benefited from the two-day course, that helps Business Partners decide which services to build and offer on their own, and which services to sell in partnership with IBM.

About IBM Global Services

IBM Global Services is the world's largest information technology services and consulting provider. Some 190,000 professionals in more than 160 countries help clients integrate information technology with business value -- from the business transformation and industry expertise of IBM Business Consulting Services to hosting, infrastructure, technology design and training services. Leveraging IBM's unequalled scope and scale, IBM Global Services delivers integrated, flexible and resilient processes -- across companies and through business partners -- that enable clients to save money and transform their businesses to be more competitive. For more information, visit www.ibm.com/services.

All trademarks or registered trademarks are property of their respective owners.

Contact:

Press contact:
Scott Sykes
IBM
914-766-4644
sykessc@us.ibm.com

-- posted by SteveT

» Kirk - IBM board oks $5B buyback; 11% dividend increase

Tuesday April 26, 9:42 am ET
By Michael Baron
http://biz.yahoo.com/cbsmb/050426/a7c661...

NEW YORK (MarketWatch) -- International Business Machines said early Tuesday that its board has approved the buyback of up to $5 billion worth of its common stock and authorized a dividend increase of 11 percent. Big Blue plans to pay a regular quarterly cash dividend of 20 cents a share on June 10 to shareholders of record on May 10. The Dow component said the boost of 2 cents per share in the dividend represents the tenth year in a row that it's increased its payout. The buyback authorization is the largest in IBM's history. The stock jumped 2.7% to $76.60 in morning trades, making it the biggest percentage gainer among the blue chips.

-- posted by Kirk

» Kirk - IBM Plans Restructuring - Up to 13,000 jobs to be cut

4:07PM IBM Plans Restructuring Actions, Company Will Take Q2 Charge (IBM) 77.08 :IBM today announced it plans to implement a series of restructuring actions designed to improve the company's efficiencies, strengthen its client-facing operations and capture opportunities in high-growth markets. The actions will accelerate progress toward more globally integrated operations, while addressing profitability in slower-growth regions, primarily in Europe. These actions will also allow IBM to shift resources to higher-growth markets and opportunities such as Business Performance Transformation Services. As a result, IBM estimates that it will record a pre-tax charge of between $1.3 bln and $1.7 bln in the second quarter. The company expects to realize benefits starting in the second half of the year. IBM's restructuring actions include voluntary and involuntary workforce reductions of between 10,000 and 13,000 employees worldwide. The majority of the overall workforce reductions are planned for Europe, and the company has initiated discussions of these changes with local consultation bodies.

-- posted by Kirk

» Normxxx - Sciences and Medicine

By Matthew Herper | 7 June 2005

NEW YORK - IBM has embarked on a quest for the holy grail of neuroscience--the far-off goal of creating a computer simulation of the human brain.

When the first mammals evolved from reptiles 200 million years ago, one of the biggest changes was inside their heads. Their brain cells were structured together into columns, an innovation that could be repeated like a computer chip to make larger and more powerful minds-- from mice to cats and dogs to humans.

"This was the jump from reptiles to mammals," says Henry Markram, founder of the Brain/Mind Institute at the Ecole Polytechnique Fédérale in Lausanne, Switzerland. "It was like discovering a G5 processor or Pentium 4 and just copying it."

Now, Markram is announcing a collaboration with IBM to create a computer simulation of these fundamental neurological units, called neocortical columns. The process will involve building a Blue Gene supercomputer with 8,000 processors that can roar along at 23 trillion operations per second. Each processor will be used to simulate one or two neurons. If finished immediately, the machine would be one of the five fastest supercomputers in the world.

A neurocortical column is a structure half a millimeter in diameter and 2 millimeters long that contains about 60,000 neurons. (The human brain is made of ~10 billion neurons.) The columns were discovered by Nobel Prize-winner Torsten Wiesel of Rockefeller University. They remain similar in different mammals, but the human brain is crammed with more of them. It was the need to fit in more columns that forced the human brain into its crinkly, wrinkled shape.

In Switzerland, Markram has put together a large lab dedicated to studying neurocortical columns in animals. His first effort with IBM will be to simulate a single rat neurocortical column. That alone is likely to take several years, as the computer model is rigorously checked in experiments against neurocortical columns taken from rats.

Once it is clear that one column has been simulated, the project will move on to simulating several such columns, again verifying its results by experiments with real brain tissues. Then, it will be possible to create larger simulations. After a decade or more, it may even be possible to create a model of the human brain. Markram and IBM both emphasize that the project would not create artificial intelligence but a way to study how neurons in the brain interact with one another.

"We believe that we will be able to capture the heart of the information process," says Markram. "Not just the column but how the information [is] formed in memories and retrieved."

The project could lead to new understandings of various diseases such as schizophrenia, autism and attention deficit hyperactivity disorder.

[Normxxx Here:  Not until they learn how the 'affective' system works and how it interacts with the cognitive system, memory, and retrieval. And, the subtle interplay of the endocrine systems with the neural systems. ]

Degenerative diseases such as Alzheimer's may turn out to be more difficult to model because they involve the failure of more than just brain cells, Markram says.

For IBM, the project represents one of several initiatives in its Blue Gene program, which involves building supercomputers based on a powerful new computer architecture. The most powerful of these units, at Lawrence Livermore National Laboratory, is 16 times more powerful than the one Markram is using and will be used to simulate the intricate ways that proteins fold--one of biology's big mysteries. Other efforts exist in astrophysics, atmospheric modeling and financial modeling.

[Normxxx Here:  Watch out! IBM will try to control the world yet!

What are the ethics here, if IBM were to develop a model that could allow them to accumulate most of the money in the world? Should they use it-- or be permitted to use it? ]

The contents of this letter/report does not necessarily reflect the opinions or viewpoint of normxxx. They are provided for informational/educational purposes only.

The content of this message is not to be construed as constituting market or investment advice. It is intended for educational purposes only. Individuals should consult with their own advisors for specific investment advice.

-- posted by Normxxx

» Normxxx - IBM: 14,000 jobs to India

By Rex Crum, MarketWatch | 25 June 2005

SAN FRANCISCO (MarketWatch) -- International Business Machines Corp. shares dipped into the red Friday as a published report said the technology giant would hire more than 14,000 new employees in India this year while cutting a similar number of jobs in the U.S. and Europe.

IBM executives wouldn't directly confirm or deny the report, which first appeared in the New York Times, which cited an internal IBM document given to the Washington Alliance of Technology Workers, a group that tries to unionize tech employees.

IBM, already in the process of cutting between 10,000 and 13,000 jobs in the U.S. and Europe, is beefing up in presence in developing markets. The company said sales in India grew 45% in 2004, and it employed about 23,000 there at the end of the year. IBM also has five software development centers in the country.

Growth in what IBM calls "business transformation services" is behind much of the company's efforts of late, according to Ed Barbini, an IBM spokesman.

"There's a growing demand [for services] in India, throughout Asia, and all over the developing world," Barbini said. "IBM is investing locally and globally in the skills necessary to bring business-transformation services to our clients."

Many of the new hires are expected to be software developers and programmers, and such actions would fall in line with recent IBM moves in India. Last week, IBM opened its newest Indian software-development center, in Hyderabad, with plans to hire about 1,000 programmers this year.

When IBM reported first-quarter results in April, Chief Financial Officer John Loughridge said the company was showing "continuing strong growth in emerging countries," with combined sales in India, China, Brazil and Russia reaching $1 billion in the period.

Shares of IBM, a Dow Jones Industrial Average component, fell $1.40 in Friday trading to close the week at $74.01.

The contents of this letter/report does not necessarily reflect the opinions or viewpoint of normxxx. They are provided for informational/educational purposes only.

The content of this message is not to be construed as constituting market or investment advice. It is intended for educational purposes only. Individuals should consult with their own advisors for specific investment advice.

-- posted by Normxxx

» Bill_Duffy - Re: IBM: 14,000 jobs to India

With stories like this appearing every day, it does make one think that the NPV of an engineering education must be a negative number.

-- posted by Bill_Duffy

» Normxxx - Re: Re: IBM: 14,000 jobs to India

Well, thus begins a vicious circle. If Hi-Tech outfits cannot find engineers here, and cannot 'import' them, they will go where they are much more easily found (and cheaper). If leading edge technology moves away from the U.S., can all of the attendant manufacturing jobs be far behind?

By the time we get to fight WW III, we will proably have to 'buy' our technology and weapons from the ex-SovEmpire and Chindia. We are already buying the boots and clothing for our fighting personnel in Iraq from China.

Is that how it all ends? Chindia take over the world, because noone else has the skills or manufacturing capabilities to build the weapons of war? Remember, China is much more subtle and patient than the U.S.S.R. ever was.

In a similar time of "slowdown" in the American engineering community, JFK invented 'the race to the moon,' and incidentally trained several generations of engineers (an engineering 'generation' is only about four years).

I'm afraid that that vision is lacking today.

-- posted by Normxxx