International Business M... Share Discussion Threads

[scripophilist] 31/7/2002 09:30

Looking at proper valuations around $50 is not unreasonable. Even if you can push the envelope out a but you could reach $70-80 but even at that price it is unattractive as a medium term play.

[jl202] 31/7/2002 07:53

New York Times July 31, 2002 MARKET PLACE I.B.M. to Purchase Consulting Group for $3.5 Billion By STEVE LOHR and JONATHAN D. GLATER I.B.M. announced yesterday that it planned to buy PricewaterhouseCoopers Consulting for $3.5 billion. The move will accelerate I.B.M.'s shift from selling just computers and software toward a future of providing information technology to corporate customers as a utility-like service. I.B.M.'s recovery from its deep troubles of the early 1990's has been based on taking advantage of its broad range of products and services to put technology together to solve the business problems of corporate customers. The services group has been the mechanism, and the marketer, for executing that strategy. "I.B.M.'s competitive edge is to integrate technology for customers," said Steven Milunovich, an analyst at Merrill Lynch. "And this acquisition by I.B.M. is another big move in that direction." For PricewaterhouseCoopers, the world's largest accounting firm and a big consulting firm, the deal is a way to separate those two businesses quickly. And in selling to I.B.M., it is also abandoning a previous plan to sell shares in the consulting firm to the public and base the consulting business in the tax haven of Bermuda. For years, some business critics have said consulting and auditing should be separate to eliminate the pressure that auditors might feel in their role as independent accountants of a company's books, if the company was paying the same firm sizable fees for consulting. PricewaterhouseCoopers has been pursuing ways to spin off its consulting business from the accounting firm for two years. Yet the pressure to split intensified in the wake of the Enron scandal, in which its auditor, Arthur Andersen, also collected sizable consulting fees from Enron. "This really is the culmination of our efforts to move out of businesses that we felt were a conflict," said Samuel A. DiPiazza Jr., chief executive of PricewaterhouseCoopers. "It's a huge day for our firm." The planned sale of PricewaterhouseCoopers Consulting leaves just one big accounting firm, Deloitte & Touche, with a large consulting operation. And Deloitte has said it plans to spin off its consulting business by the end of the year. That will end an opposite trend in which accounting firms sought to gain more revenue by offering consulting services to existing customers. With its move, I.B.M. is buying some growth at a time when its revenue is sagging and technology markets are depressed. The consulting and technology services arm of PricewaterhouseCoopers is projected to have revenue of $4.9 billion in 2002. I.B.M.'s shares rose 61 cents, to $71.79, but traded lower after hours. I.B.M.'s services unit has grown steadily over the last decade and is now the company's largest single business, generating $35 billion in revenue last year. Its services unit does everything from repairing customers' computers to supplying some or all of a company's information technology needs — hardware, software, networking, maintenance, even training — for a monthly fee, in a process known as outsourcing. I.B.M. has done well in most areas of technology services, but it has less presence in business consulting, where PricewaterhouseCoopers is strong. As companies increasingly try to use technology to overhaul business processes ranging from procurement to customer relations, the kind of consulting PricewaterhouseCoopers does can generate additional services business and long-term links to clients, analysts say. "I.B.M. needs to move up the services food chain to get growth in that business," said Tom Bittman, an analyst at Gartner Inc., a research firm. To succeed, I.B.M. will also have to overcome the challenge that trips up so many large mergers in which the corporate cultures of two different enterprises must meld and thousands of people must cooperate. I.B.M.'s global services business employs 150,000 people worldwide, while PricewaterhouseCoopers Consulting has 30,000, some of whom are certain to leave. "Strategically, this move makes all the sense in the world for I.B.M.," said David Grossman, an analyst at Thomas Weisel Partners in San Francisco. "But they are buying a people business, taking a private partnership with 30,000 people and putting it into a large diversified technology company." PricewaterhouseCoopers will also inevitably lose some of its current consulting business because some clients are technology companies that compete with I.B.M. John R. Joyce, I.B.M.'s chief financial officer, said the company would like to keep those contracts, but he noted that "the likelihood of that is slim." The talks between I.B.M. and PricewaterhouseCoopers began on July 18 in New York. They were supervised by the Securities and Exchange Commission because I.B.M. is audited by PricewaterhouseCoopers. I.B.M.'s global services group will be audited by another accounting firm for the next three years, but as part of the arrangement approved by the S.E.C., PricewaterhouseCoopers will continue to serve as auditor for the rest of I.B.M. In their talks, Greg Brenneman, the president of PricewaterhouseCoopers Consulting, said the two sides found that their business goals and outlook were closely aligned. Executives for other companies, including Hewlett-Packard, said they had been approached in recent weeks by PricewaterhouseCoopers as well. Indeed, Hewlett-Packard considered buying the consulting arm of PricewaterhouseCoopers in the fall of 2000, in a deal then valued nearly $18 billion. But as talks dragged on and Hewlett-Packard's stock price declined, the negotiations fell apart. Today, in very different economic times, I.B.M. has agreed to pay $3.5 billion — $2.7 billion in cash and the rest in stock and convertible notes. I.B.M. said it would take a charge against earnings of about 30 cents a share in the fourth quarter of this year, mainly to account for the cost of the transaction. In the consulting business, the PricewaterhouseCoopers brand will disappear. "We intend to fully integrate PwC Consulting under the I.B.M. brand," said Douglas T. Elix, the senior vice president in charge of I.B.M. global services. The main reason for buying PricewaterhouseCoopers Consulting was to add its complementary set of skills to I.B.M., said Virginia Rometty, the I.B.M. executive who will manage the consulting business once it is acquired. But she will also be looking for cost savings, including some payroll trimming. "Whenever you bring two sets of organizations together, there is some of that," Ms. Rometty said, without saying how deep the cuts might be.

[fse] 22/7/2002 10:19

shezzalad... thanks for the information. I am not currently in IBM but it was a stock I was watching for a recovery play in the early stages. Its all pretty depressing stuff. Their largest problem is high end sales to corporate clients. I had though that the rest of the sectors were holding up OK... maybe not.... rgds

[shezzalad] 22/7/2002 09:56

FSE Sorry for my vague statements, but my main reason to short this stock is due to a well informed source who knows IBM have problems that have yet to come to the fore. I'm holding this stock for a few months so I will be able to handle any short-term rally in the share price. The key lies in IBM's sales figures. They are not what they seem to appear on the surface. Any revision to sale figures and forecasts will cause this stock to fall below $60 quite quickly. I had shorted JP Morgan since May when I was told they had severe leverage pressures building up due to their gigantic derivatives exposure. I'm pretty sure the news about IBM will be proved right in the coming months. From a chart perspective, the trend is DOWN since the start of the year. I see that continuing punctuated by rallies in between.

[fse] 22/7/2002 08:49

shezzalad... do you have some basis for your statement? or is it a guess. IBM look well structured for a recovery to me and at this level are IMHO oversold.

[limpsfield chartist] 18/7/2002 14:55

Closed half at 72

[alchemy] 18/7/2002 10:49

And the other biggie folks any views on the TA or fundamentals of MSFT?

[shezzalad] 18/7/2002 10:47

I'll be increasing my DEc Future shorts as the price rises. IBM has hidden problems that are still locked up in the closet.

[limpsfield chartist] 18/7/2002 05:59

Earnings out yesterday I.B.M. Beats Forecasts but With Signs of Weakness http://www.nytimes.com/2002/07/18/technology/18BLUE.html?ex=1034827200&en=00f607b3a606d910&ei=5002&partner=INTUIT Price has held up well this week and looks oversold

[big vern] 11/7/2002 07:49

.....nothing wrong with a bit of cymraeg ! good shout Dai regards bv

[limpsfield chartist] 11/7/2002 00:47

Personally, I would never trust an analyst who works for an American organisation that uses the Cymraeg spelling of "Bank": http://www.quicken.com/investments/news/story/djbn/?story=/news/stories/dj/20020710/ON20020710000354.htm&symbol=IBM "NEW YORK -(Dow Jones)- Banc of America Securities analyst Joel Wagonfeld cut his 2003 estimates on International Business Machines Corp. (IBM, news, msgs) and lowered his price target on the stock, to reflect weak information technology spending. In a research report issued Wednesday, Wagonfeld said IBM, Armonk, N.Y., is " not immune to the persistent widespread weakness in IT spending." The analyst, who lowered his price target to $90 from $100, said the company's exit from the hard-disk-drive business, which it announced last month, will offset his estimate reductions....."

[m.t.glass] 10/7/2002 23:01

jazza - did I say there was one? ;O)

[jazza] 10/7/2002 11:11

IBM have moved losses attributable to it's hard-disk business from the technology segment to the discontinued segment because it is selling it off. Thus improving continued operations (?) Surely this is another enron in the making? :-) These witches don't seem very 'witchy' anymore....

[big vern] 10/7/2002 08:06

...$50 here we go

[jazza] 10/7/2002 06:51

M.T. Glass, Where is the scandal in what IBM has done?

[m.t.glass] 10/7/2002 00:23

We seem to be exhausting the shock headline stage ('Accounting Scandal'... 'Another Accounting Scandal' ...'Yet Another Accounting Scandal') and moving into the 'Today's scandal involves..' like it's already an accepted daily occurrence and no longer a shock. We just look to see who's reporting next and line up the cameras in readiness for the red faces. How long before 'Accounts Found To Be Faultless' becomes the headline that shocks :o)

[m.t.glass] 09/7/2002 21:59

Oh look - IBM tonight having to restate its accounts..

[jazza] 09/7/2002 18:43

Just a little accounting aside.... Today I read my fifth or maybe sixth article about Merck. I read the other four or five on previous days either in print or online. Today's article was the first to state that Merck are not suspected of fraud and that profits are unaffected. The great enronitis-infected-mud-flinging-witch-hunt is off and running and the quality of the "witches" is falling fast. Why haven't we had more scare stories about Vodafone's accounts :-)

[big vern] 09/7/2002 15:41

..I heard clever manipulation with their pension fund ? problems with growth and sales ? I don't know what's going on but the chart looks very weak

[mr euro] 09/7/2002 13:42

This is great, people know more about IBM than I do :-) A little knowedge.....

[shezzalad] 09/7/2002 10:25

UBS would do that wouldn't they. They need to flog "big blue" to unsuspecting investors. IBM is a great short down to $50 at least. Their accounts are hiding real sales problems and considering their high p/e, this stock will hit $50 before the end of the year.

[limpsfield chartist] 09/7/2002 09:57

UBS upgraded them to a strong buy yesterday with a $120 target....they don't mention which decade they expect this target to be reached though

[mightymicro] 09/7/2002 09:55

VS et al: IBM may well lead in patent filings but it is as well to remember that much of this is a defensive measure. When IBM infringe someone else's patent, they usually swap patent rights with the infringee (invented word, but you get my meaning). Money seldom changes hands. So patent filings are a sign of a a large, expensive legal department as much as anything else. Having said that, IBM have twice infringed registered trademarks owned by my company because they failed to do elementary searches before using the marks. Extraordinary, really. MM

[big vern] 09/7/2002 09:29

...nice drop yesterday