Thoughts?
10 replies (most recent on top)
Wrong!! The debt on acquiring Red Hat will drag them under
Red Hat will float them through. They are the only innovation in the company.
The CEO and CFO both emphasized in the 1st q analyst call that they were going to address “stranded” costs. That means layoffs, PIP’s or spin-offs. They even announced they would be using the WH revenue to address these stranded costs. They couldn’t be any clearer as to what is going to happen, and in fact if they don’t implement something, the analysts will pile on for not being able to execute their stated plan. Could the plan change? Of course, BUT right now given current course and speed IBM has to get skinnier and the real question is how much “future” revenue are they willing to sacrifice to get down to fighting/competitive weight. 88.5k heads cost IBM 19 billion in revenue. To get where the street wants IBM to be will take another 7-10 billion of revenue or approx 30 - 40k worth of heads
There 3 things certain in life:
Taxes, death and ibm layoffs.
Ibm execs will use any excuse to layoff and increase their bonuses.
IBM doing incredible in important areas. We hire 3 per month, getting raises. In last yr I got 30% and bound for more this year. Plenty going on here, just gotta know where to go.
There were massive layoffs starting in 2009 the last time there was a recession.
Nothing new there as IBM has been in a recession for a decade. Usual move is to RA til revenue start growing again. Then RA some more to improve margin and pay exec bonus. Only reason RA isn’t happening now is bec ibm can’t attract qualified people.
As goes revenue so goes headcount. Any recession will just accelerate this trend. There is one other way out of this, and that is partnerships. They share costs while preserving markets. IBM has said they will continue to pursue them, so perhaps the new CEO has a different vision vs the previous management
The folks at Market Watch have some thoughts on this very subject:
Why IBM is one of few tech giants that are actually gaining through the selloff --
https://www.marketwatch.com/story/why-ibm-is-one-of-few-tech-giants-that-are-actually-gaining-through-the-selloff-11655146869
By: James Rogers
Last Updated: June 14, 2022 at 7:43 a.m. ET
First Published: June 13, 2022 at 3:01 p.m. ET
International Business Machines Corp., unlike many other tech giants, has been able to buck the sector’s selloff in recent months.
Shares of IBM IBM, +0.13% are up 1.60% year-to-date, compared to 12.52% and 25.89% declines, respectively, at rivals Hewlett Packard Enterprise Co. HPE, -0.69%, and Oracle Corp. ORCL, +9.24%
In the broader sector, shares of tech heavyweights Apple Inc. AAPL, -0.02% have slumped 24.78% while Microsoft Corp. MSFT, +0.13% is down 27.21% over the same period. Meta Platforms Inc. shares META, -1.28% have plunged 50.30% in 2022.
For a spell on Monday IBM and Aspen Technology Inc. AZPN, -3.02% were the only two gainers among the 204 equity components in the SPDR S&P Software and Services ETF XSW, -0.61%.
Despite its long history of providing technology hardware to corporate offices and data centers, other parts of IBM are helping the company outperform the sector. Strong performance in its software and consulting businesses, for example, fueled IBM’s better-than-expected first-quarter results. Investors also responded positively to news that news that IBM’s 2022 revenue growth will be at the high end of its prior forecast.
BofA Securities, which has a buy rating on IBM, said that Big Blue’s consulting revenue growth is outgrowing the market in a note to clients Monday. The firm’s software growth is also being driven by mid to high-teens growth from its Red Hat business, it said. IBM acquired Red Hat for $34 billion in 2019 in an effort to ramp up its cloud offerings.
BofA noted that IBM Chief Financial Officer Jim Kavanaugh expects the company “to show greater resilience versus other tech hardware companies in uncertain macro conditions,” citing its operations in 170 countries and 17 different industries.
This means that a diversified IBM is operating in countries with different economic curves and a broad range of markets that would perform differently even in a recession, according to Bank of America. Crucially, 50% of IBM’s revenues are recurring, with 80% of its software a high value, annuitized revenue stream, BofA added.
Earlier this year IBM was cited by Morgan Stanley as a “defensive play” in an uncertain macro environment. Only 20% of IBM’s revenue is directly tied to hardware and related operating system revenue, said Morgan Stanley analyst Erik Woodring, in a note to clients. However, more than half of the company’s revenue comes from “more defensive recurring revenue streams,” he said.
Of 20 analysts surveyed by FactSet research, seven have a buy rating on IBM and 11 have a hold rating.
Well, there will be RAs. And reorgs. AK will claim we’re just finding us. Marketing will put out another boldest campaign in a decade. Everyone will need to write up what they’re doing. Projects will be pulled right in the middle. Quality will suck and magically get worse. Then more RAs, except for hr, execs and attorneys. In short, no impact at all.