https://www.forbes.com/sites/steveandriole/2018/11/01/ibms-post-red-hat-quandary-buy-build-or-dress-up-for-an-exit/#b7f0bb51dcb4
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3eeg. Google wants Redhat. Google also sees that most of IBM’s cloud is just “as a service” of older IBM SW. YES it’s bloatware BUT it’s very profitable bloatware that lends itself to “cloud” where Google has said they want to be a player. Can Google make the equation close of taking Bloatware, leverage Redhat to make an as a service offering that runs in the cloud especially if you remove ineffective management. YOU BET they can. Remember Google lost the bet to buy Redhat. They will not make that mistake again, and if they can leverage IBM’s investments in HW and SW along the way, count them smitten. They are demanding a break up of IBM into old IBM and new IBM, as their price to bid, and IBM management has gladly complied. They want that golden parachute as it’s the brass ring. Remember they will all be long gone before the markets makes their judgement on the merger. It’s at least a 5 year absorption More than enough time for all of the clawbacks to expire
The person that is suggesting that Google buys up parts of IBM is delusional. Beyond the hardware, the majority of IBM offerings are a just bloatware. Watson? Its the laughing stock of the tech industry.
IBM Services is to be sold before the end of Q2, but the real thing is that if IBM’s keeps on going down, I am sure some companies will make an unfriendly takeover. For sure, Rometty and the board are not working on selling the complete company.
2kfn. It’s coming sooner rather than later. IBM is very concerned as to how 4th Q and full year results will be received. If results come in “light” look for an announcement “sooner” as the board and management can’t take the inspection anymore (they are out of excuses and runway). The much larger concern is the political climate. The December results have rattled Wall Street, and there is a sense of “slow” panic, as the unpredictability has caused all of the investment houses to accelerate their 2019 plans. They don’t want to get caught up in a business unfriendly envio. They know there is going to be backlash for the non-investment of the tax breaks, and as such the plans are accelerating.
Bain never works alone. They were sent by another firm to do M&A due diligence. Now the only leaked document on Reddit pertained to Services. If Bain was sent by a PE firm, then they evaluated all business units. But the presence of Bain absolutely indicated that a due diligence was taking place. It does not always mean that businesses are definitely being sold off. It simply means someone was considering buying some/all of IBM. We will only know for sure when we see the SEC filing.
1zuh. You may be right about a fire sale, BUT I don’t think so. WHY. Because IBM has the cash flow to take their time. (they are burning less than 50% of their free cash flow on dividend) They can afford to bid every piece out to 3 or more bidders, and most likely have done so. Ask yourself, have you seen anyone be punished for not “producing”. (Ginni got a 25-40 million bonus, not one board member has been asked to leave, the exec management team continues on). Doesn’t seem like they are worried about fire sales does it??? They also have the money to hire several break up specialists to extract every dollar out of what they have. (you have already seen this with the hiring of Bain). So what is the game plan??? It’s really more of a bean counter exercise. Weigh the value of “new” IBM vs the value of “old” IBM. How do bean counters do that??? They look at cash flow, profit margin, Legacy costs, monopoly status, etc etc. and decide where the money is at, and where it can be extracted. There is a reason they appointed a new CFO who went thru the ATT breakup. He knows the game, and where the yokes are around IBM’s neck. What are the liabilities of old IBM. Low profit margin, high head count costs,and way too many 1st world heads. How do you dump that. Move it out of first world countries to third world countries. It would not surprise me, if IBM over stuffs the sell / spin off with “legacy” (think old retirement plan) folks. Let Bain or whoever gets the “old” IBM deal with it. THIS is where the fire sale price might come in, BUT IBM could also structure a deal where Bain pays maybe 10 billion for 50% of the new company, and takes the head count. They restructure the “old” company into a lean mean company. IBM retains 50% of the “old” IBM and farms the “old” IBM for profit, letting Bain do the dirty work of restructuring. (essentially IBM farms the IP while waiting for the “old” company to go public again). IBM could also then factor the retirement plan to a prudential to service what remains of the old retirement plan, and POOF it’s off the books. Would IBM tell old retirement plan eligible employees you either move to the joint venture, or have a new retirement plan. You bet they would!!! Would Bain take the heads, and do the dirty work??? (it’s what Bain does best). So legacy head count and services are now gone. What happens to HW??? System Z is a monopoly, so it gets exploited asthat’s what FANG companies do best. Power (legacy) and DASD get sold. Power design and DASD SW get rolled into new IBM. Whoever gets the legacy HW gets a deal for the design going forward via the labs. So what’s left. NEW, young, strategic IBM and a pile of patents along with SW as a service, and LINUX. Just what a bean counter can have 3 bidders bid on at an aggressive price (just look at EMC, DELL, VMware). Can one of the FANG or investment houses understand that. YOU BET they can. Like I said, it’s not about product anymore but about a financial exercise where you exploit your position in the marketplace. So what drives this in 2019 vs 2021. It’s all about politics and what the market will take. Everyone on Wall Street is nervous due to the Democrats romping in Nov. They all know regulation of business is coming, so this has to happen faster rather than slower. The fastest one of these deals can happen is 8 months. More typical is 10-12. Doing the math says something has to happen within the next 6 months. ALSO why did IBM announce a bridge loan when they announced Redhat?? They knew this was a multi-step process that will take a little time. ALL IN ALL, they need to go faster for no other reason than they want to get this past the regulators sooner rather than later. Once announced and agreed to, they can let the bean counters figure out the cash flow, and final terms. As I said it’s a bean counter exercise where beans rule.
This guy had me rolling on the floor laughing when in the first paragraph he mentioned Oracle buying Accenture. That being said, the only accurate prediction is in the last line:
“Private equity groups might also be intrigued by the possibilities which include breaking it up and re-selling the parts to private and public markets. (Or maybe IBM breaks itself up.) Then it’s finally over.“
While it’s nice to imagine a world in which Google, Microsoft, Accenture, or other big brands buy up pieces of IBM, it simply isn’t going to happen. All of those firms have hired enough ex-IBMers to know better. I know this personally from several high ups at our competitors. If IBM management had just treated our people better, we might be looking at a big acquisition in our favor. Instead we are facing an ugly Private Equity fire sale.
Best of luck to all fellow IBMers.
Let’s look at IBM and Google and where they would cooperate
Redhat. IBM wonthe bidding. Google was the second place finisher. Does Google want Redhat. You. Bet they do
HW. Google loves the idea of “enterprise” framed around System Z (1 trillion in legacy SW stack). They see way too much potential here. Power systems. Google already licenses and uses Power. System Z “legacy” dovetails nicely with LINUX front ends.
Services (legacy, outsourcing, Application management) essentially anything that has been moved to India. Google could care less about
Services (strategic). Google is very interested as they see that as the future of allocations and offerings.
Cloud. Google has already stated they want to grow this to compete with. Amazon and Microsoft. The two choices are IBM, or Alibaba
As a service (SW). Google sees this as an extension of the cloud
Cognative/analytics Google sees this as an extension of AI and dovetails nicely with Z and Power performance vs Intel
Labs/patents. Google already licenses a boatload of these from IBM. They love the idea of cutting edge research that can be turned into products and offerings quickly. Google sees potential where as current IBM management sees costs
Google would love to wait for 2021, BUT the politics of acquitions will not allow that. Google understands they will have to make their play this year if they expect the congress and the financial sector to approve it. As such Google will insist on a very quick spin off of IBM India. Most likely the spinoff will be very much like HPE and CSC where they will issue new stocking under a separate company. This way they can farm the previous IBM investments going forward without having to balance sheet the head could. Call it farming the IP
selloffs or spinoffs are best choices and chances！
2019 is the time for IBM to step down from the stage of history.
Don't be sad, it the best ending.
Come on Google. Pull the trigger. You know you want all of it EXCEPT IBM INDIA Cut the deal with Bain, and get on with it