How many acquisitions occurred under Ginni's regime and what was the ROI on those?
https://www.bizjournals.com/triangle/news/2020/10/19/ibm-ceo-expect-acquisitions.html
By: Lauren Ohnesorge – Senior Staff Writer, Triangle Business Journal
Oct 19, 2020, 6:25pm EDT Updated Oct 19, 2020, 6:31pm EDT
A week and a half after announcing the pending spin-off of its managed infrastructure services unit into a new, publicly-traded company, Big Blue execs tried to give analysts a preview of what a more streamlined, focused IBM (NYSE: IBM) might look like: A cloud-centered innovator – and an acquisitive one at that.
In its latest quarter, Red Hat made an impact in a big way. IBM reported revenue of $17.6 billion for its third quarter, down 2.6 percent. Its cloud revenue, however, was $6 billion, up 19 percent.
And Red Hat revenue was up 17 percent, according to the company.
“We are managing for the long-term,” CEO Arvind Krishna told analysts late Monday. “We are making strategic decisions, taking action and increasing our investments today to better accelerate our business.”
And that likely means acquisitions in its sweet spots, he said. In addition to spending cash on organic growth, he expects increasing expenses due to future acquisitions.
“We will be allocating more cash to growth going forward,” Krishna said, telling analysts to expect Big Blue to explore deals in areas such as hybrid cloud, data, AI, security and “in emerging technologies such as quantum.”
That’s as the firm will continue to invest in organic growth.
In the meantime, the team is putting a lot of focus toward educating its clients on the deal, which spins MIS out of Big Blue’s Global Technology Services division into a company called NewCo – the real name to be announced later.
Krishna told analysts IBM has spoken to “hundreds of top clients” about the deal, and that he’s personally talked to “dozens.” They are excited, he said.
“The vast majority understand the strategy,” he said.
Krishna said the goal is to create a more focused company, one that can take advantage of the cloud future.
CFO Jim Kavanaugh said the pandemic showed companies the need to modernize their systems “to succeed in this new normal,” presenting a cloud opportunity for the new IBM – and Red Hat, in particular. Not only are the number of large Red Hat deals increasing, their value has doubled over the past 12 months, Kavanaugh told analysts. Red Had closed another 60 engagements in the quarter, including with big name brands such as Delta Air Lines.
Analyst Logan Purk of Edward Jones said execs’ talk of acquisitions did lead to questions.
“It’s, well, if you’re maintaining a dividend, but you want to be acquisitive, are you not buying back stock?” he said after the call.
Despite skepticism around cash flow, Purk says the spin off is the right call.
“I still think they are making the right moves longer-term, so getting out of this slow-to-no-growth business, focusing on cloud and software markets and looking to be acquisitive in those markets, I think that’s certainly putting their pieces on the right places on the board,” he said. “I think really realigning the focus on how that capital should be deployed and trying to get investors focused on an IBM that’s a growth company instead of an IBM that’s a dividend yield company, I think that’s the next hurdle for management.”
Shares dipped 2.8 percent after-hours Monday, trading at $125.52.