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the difference here is that, IBM is not wholly owned by Buffett. As such in order for him to get a good deal in the business, he have to buy a business he likes. And for him, it has always been working with great capital allocators or operations people. from the brazilians in the heinz deal to IBM's manangement culture, which for me is a moat not the management.
a good culture self corrects missteps. I wonder if buffett is on the board of ibm. i think not.
for such a large holding in berkshire, and for a decentralized operation like berkshire that proves much autonomy, the manager have to be good.
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(02-05-2013, 10:31 AM)CityFarmer Wrote: but he had never chosen a fool as top management of his invested companies IIRC. 
I guess for listco, he may not have a choice when CEO changes. My comment on Coca Cola is based on what I recalled from his autobiography "The Snowball". There was a period of time when his quote, "You should invest in a business that even a fool can run, because someday a fool will" seems to be describing it.
Found an old news article from CNNMoney dated 10-Jan-2000,
What Really Happened At Coke
The CEO replacement, Douglas Daft, didn't do that well either as his tenure was filled with controversy.
Coca-Cola Chairman and CEO Doug Daft to retire
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Revenue down, but Q2 earnings better than expected at IBM
NEW YORK — International Business Machines (IBM) reported operating earnings for the second quarter that surpassed Wall Street’s expectations, providing some reassurance to investors after a stumble in the first quarter.
But the company’s revenue was weak, down 3 per cent, well below analysts’ forecasts. That suggests that even IBM is grappling with the challenges of a soft global economy and fast-changing technology.
http://www.todayonline.com/business/reve...pected-ibm
“夏则资皮，冬则资纱，旱则资船，水则资车” - 范蠡
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An era when IBM is relatively the cheapest(trailing PE, ttm) in recent history.
a good time to buy.
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freedom, IBM value is the heavy buyback and at this time perhaps its the right thing to do.
top line growth seem to be hit, but that may not be the top line that IBM cares about.
At the end of the day they have a 5 year EPS target, seems it might be challenging to hit this years.
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18-10-2013, 07:27 PM
(This post was last modified: 18-10-2013, 07:33 PM by freedom.)
Let's just assume IBM's earning is not going anywhere, buyback will remove more than 10% shares. With more than $16 EPS in the last twelve months, I don't see much problem to achieve a $20 EPS.
With 14 - 15 PE, $300 is not a dream in the next 2 to 3 years. A solid >50% with low execution risk.
With cloud, social, mobile and big data, I see better future for large IT service companies because large enterprises are going to upgrade their IT infrastructure and systems. Who can challenge IBM's position in IT service? Not Oracle, not HP, not Microsoft, definitely not Amazon(It's funny to even think about it, Amazon is largely a retail/consumer company, just like Apple. They are unlikely to rock IBM's boat.).
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hi freedom, i am not so sure about that. IBM just perhaps lost to Amazon in a large CIA cloud contract if i am not wrong.their position and mindshare is not as strong as we think.
the SEC seem to be questioning how they derive their earnings from cloud as well.
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19-10-2013, 08:22 AM
(This post was last modified: 19-10-2013, 08:24 AM by freedom.)
(19-10-2013, 12:21 AM)Drizzt Wrote: hi freedom, i am not so sure about that. IBM just perhaps lost to Amazon in a large CIA cloud contract if i am not wrong.their position and mindshare is not as strong as we think.
the SEC seem to be questioning how they derive their earnings from cloud as well.
Depends on how you look at it.
Microsoft or Oracle or SAP has better software than IBM. Intel makes cheaper and better-for-money chips than IBM. But they make IBM richer than poorer. Sun creates Java, but it's IBM that makes popular and powerful.
You have to think IBM as an integrated service company other than a hardware/software sale company.
Is IBM late for cloud infrastructure? Maybe. Is IBM late for cloud service? It just started only.
IBM is not going to compete with Amazon to provide the cheapest infrastructure as the margin is too low for any good commercial company(Amazon is not trying to make big bucks from anything, but HP, Oracle, VMWare, IBM or Microsoft does try to make money from cloud infrastructure as well as service). Amazon could well be a future vendor of IBM to provide basic cloud infrastructure. The high margin business is to put client's cloud needs into those cloud infrastructure such as Amazon's. That's what IBM is good at.
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19-10-2013, 02:23 PM
(This post was last modified: 19-10-2013, 02:24 PM by Clement.)
(19-10-2013, 08:22 AM)freedom Wrote: (19-10-2013, 12:21 AM)Drizzt Wrote: hi freedom, i am not so sure about that. IBM just perhaps lost to Amazon in a large CIA cloud contract if i am not wrong.their position and mindshare is not as strong as we think.
the SEC seem to be questioning how they derive their earnings from cloud as well.
Depends on how you look at it.
Microsoft or Oracle or SAP has better software than IBM. Intel makes cheaper and better-for-money chips than IBM. But they make IBM richer than poorer. Sun creates Java, but it's IBM that makes popular and powerful.
You have to think IBM as an integrated service company other than a hardware/software sale company.
Is IBM late for cloud infrastructure? Maybe. Is IBM late for cloud service? It just started only.
IBM is not going to compete with Amazon to provide the cheapest infrastructure as the margin is too low for any good commercial company(Amazon is not trying to make big bucks from anything, but HP, Oracle, VMWare, IBM or Microsoft does try to make money from cloud infrastructure as well as service). Amazon could well be a future vendor of IBM to provide basic cloud infrastructure. The high margin business is to put client's cloud needs into those cloud infrastructure such as Amazon's. That's what IBM is good at.
Hi freedom, you seem very knowledgeable about the enterprise technology sector. Here are a few things to worry about. 1) ibm has been stuck with terrible top line growth and is pursuing cost cutting and repurchases to grow eps. This might be a good short term strategy but I am wondering whether it will lead to loss of institutional knowledge and capabilities. 2) The cost/head count cutting measures might lead to poor staff morale and difficulty in attracting top talent. This is a field in which talented staff adds significant value. 3) For your last point, I am not sure systems integration without producing and the software or hardware can produce a sustainable economic moat.
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19-10-2013, 03:08 PM
(This post was last modified: 19-10-2013, 03:08 PM by freedom.)
A few things impact the top line for IBM. New technology trends are emerging such as Mobile, Cloud, Social and Big Data. These new trends will impact spending on IT because the enterprises can't make up their minds yet about what to do with these emerging trends. But thinking longer term, Enterprises have to spend their money on technology to improve productivity and profit. The spending is delayed, not eliminated. Secondly, large enterprises spend quite some money during the crisis. They don't spend like consumers, buying a new smartphone every year or two years.
However, the good thing about enterprises is that they are sticky and they don't change overnight unlike consumer technology. Large enterprises don't anyhow change vendors. It's very costly. And IBM has a great brand. There is a saying that "No one got fired for choosing IBM". Plus, who really can compete with IBM in IT services? HP? SAP? Oracle? Microsoft? Yes, they all compete with IBM, but none has the depth or breath of IBM. So all only point to a better future for IBM.
Cost and headcount cutting is unavoidable in IBM's case. The company has changed its business strategies one or two decades ago. IBM is just trying its best to smooth the cut. The future of IBM will be a lean and very profitable enterprise.
Hardware and software are commodities. Service is where the money is. Is there a huge difference between some IBM server or HP servers or Dell Servers? Not so much. They all base on Intel server chips. The architecture is similar and the part vendors are just the few. They are mostly assembled in China or Asia. Software? IBM's software is normally not the best. Oracle has better database and PeopleSoft. Microsoft has a lot of good enterprise software which IBM does not have similar ones. SAP has SAP. IBM is a large customer of all the above mentioned software companies. Plus, software is just software only. Most of the time, they are useless without good user cases. That's where IBM comes in and take the profit, by bridging the software and the enterprise requirements.
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