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International Business Machines Corporation Message Board

  • kohighbloodpressure kohighbloodpressure Jan 20, 2012 9:30 AM Flag

    IBM missed Revenues why up ?

    I.B.M.’s revenue rose 2 percent to $29.5 billion, but it fell short of analysts’ forecast of $29.7 billion. Analysts expect that the faltering economy in Europe and the stronger dollar will curb reported sales for major technology companies like I.B.M., who derive the majority of their revenue from abroad.

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    • did just a bit more research

      2006-2010 EPS growth was driven 24% by share buybacks

      2009-2010 EPS growth for full year was driven 30% by share buybacks

      4th qtr EPS growth 2010 44% of EPS growth was driven by share buybacks

      so again concerning EPS growth driven by buybacks is like this:

      2006-2010 - 26%
      2009-2010 - 30%
      2010-2011 - 43%

      2010 4th qtr - 44%
      2011 4th qtr - 56%

      Looking back to the investor meeting in March-2010 they predicted that the buybacks would drive 33.5% of the EPS growth over the 5 year period 2011-2015. they also predicted they would use $50B to make this happen, they used $15B of that already. I didn't listen to the investory meeting again and the slides don't seem to indicate they would rely on the buyback program more in 11 than 15 so I'm not sure if this $15B in 11 was planned or if they pulled the buyback up to cover a miss for the year

    • I posted this else where but reading this well thought out string I thought I'd throw it to you guys. Does this bother anyone. BTW, someone posted double digit profit growth - not accurate read their press release that has real GAAP numbers 4th qtr up 4% and 2011 7% growth (not bad for big company like IBM but not double digit)

      56% of EPS growth in 4th qtr was driven by stock buy backs
      43% of EPS growth for YE was driven by stock buy backs

      Their plan has always been to drive a portion of that EPS with buy backs but the big bump in 4th qtr is a little concerning

      also for the short term, on the call they indicated EPS growth will be more rapid in second half of 2012. Thats not what I see in the estimates, hopefully the analysts will tweak their estimates so we don't get dips if the 10-11% growth rate isn't met in the first 2 qtrs of 2012. Overall they are announcing a .03 beat for 2012 so by the end of the year it won't matter if they hit the numbers

    • BECAUSE ziggy, we learned the lessons of out lives Jan 18!!!

      Ha! You maroon.

    • Because they did some something very strategic talking about 2015. The market is forward looking but their tactics in a way foiled typical market psychology which relies on quarter lag or at most 2 quarters. By talking about 2015 and offering very detailed numbers on how they will get there the market basically "accepted" them and status quo was reinforced.

      However this is a one time tactic and they have used their trump card so to speak. Other companies trying to imitate them will likley be punished or come under suspicion.

      The market isn't rational and IBM got smart - very smart.

      My guess is that a major MM or hedge pressured them too as in SEC pressure but that's unknown. No books are squeaky clean and (sorry you don't get the rest)....

    • I also question the quality of IBM's earnings, being they sold hard assets (patents to Google) that are irreplaceable, just to pump up slumping earnings.

      Europe's austerity cuts have not fully kicked in, even though the politicians promised (?) to make cuts. I'm now expecting Europe's austerity cuts to fully impact IBM in this first quarter. They should miss on both top and bottom next quarter (uless they dump more patents).

      Greek should default this weekend and trigger a credit event. CNBC had said that private investors are refusing to go along with the deal. Private investors are balking at taking a 70% hair cut, because their 100% insured. That's the stalemate.

      If private investors accept the 70% hair cut they lose their 100% insurance policies. Why would anyone accept the 70% hair cut when you could walk away with 100%.

      That's why Greece threatened to quickly pass a law forcing private investors to accept the hair cut. To me that grounds enough to trigger a credit event.

      If you still have puts on IBM wait till Monday cause the market might plummet over this weekend.

      CNBC just said that there's still no greek deal yet. (after 3 days of deliberation).

      • 1 Reply to quickmovesmiles
      • what laugh

        people have been questioning IBM's quality of earnings for
        decades .. i guess that they were wrong , eh ????

        why do you guys continuously bash and discredit IBM , instead
        of learning ????

        you listen to soundbites from analysts and reporters and
        such and try to apply them , where they don't fit ...

        the big investors keep on eye on the service bookings and
        want to see some level maintained and growth over time ..

        after that , there is a little bit about hardware sales ..

        leveraging their patent portfolio is a strategy that IBM
        finally adopted about 10 yrs ago ....

        way back in the day , IBM used to give away crown jewels
        because they couldn't use them themselves without having
        the Treasury Dept in their pants ... they finally got smart
        and decided to sell / license intellectual property for
        gain ...

        whatever they sold to Google is either 1) something that
        they choose not use or 2) currency to build a partnership
        with Google that will benefit IBM ....

        Intel , by anyone's account has been a very successful
        company .. back in the early 80's INTC was struggling and
        was in danger of loosing the processing game , probably
        to MOT , IBM wound up owning 25% of the company and sent
        teams of engineers to INTC to get their processor chip
        game going ... IBM could not have bought the company , or
        face antitrust

        instead , IBM helped to develope INTC , which was great
        for the overall computer field .. garce

    • analysts are bad at predicting the future?

    • "Analysts expect that the faltering economy in Europe and the stronger dollar will curb reported sales for major technology companies like I.B.M., who derive the majority of their revenue from abroad"

      There are several reasons to believe IBM will at least hit it's own target of $14.85 Operating EPS this year. They are: 1. IBM hedges currency on a short term basis to avoid large swings in currency materially effecting IBM earnings,2. IBM added a new chart and analysis to yesterday's conference call -- a new Backlog Chart predicts how much of IBM's revenue in 2012 is projected to come from existing contracts, in addition to selling new product/service to IBM's existing base and new customers. IBM thinks 73% of total 2012 revenue will be simply the backlog of $144 bil rolling forward per the contracts with the remainder 27% of 2012 revenue from new sales to the existing base and new sales to new customers. I don't know how the 27% breaks down but I would not be surprised if 90% of IBM's projected sales are already on the books. There's an advantage to being 100 years old and still having the most valuable brand in world IT, 3. people forget that IBM sources so much of what falls down to IBM's bottom line as expenses from other countries and other currencies -- so while reported revenue suffers there is an offset in expenses. IBM's supply supply chain is thru China and a lot of its own back office is in Brazil, manufacturing in Singapore...and so on.

      So IBM has its fundamentals as a tailwind against a currency headwind. And IBM won't be as effected as operations like ORCL & MSFT because IBM's gross margin is just approaching 50% while ORCL & MSFT are usually 20% - 30% higher. Not that a higher gross margin isn't highly desirable, but the higher the gross margin the higher the effect of a strong dollar on earnings. So in the one particular aspect of currency effect it pays to be a tortoise -- the rabbits run faster but they also slow down faster.

    • 2% revenue growth ?

      • 2 Replies to kohighbloodpressure
      • IBM has changed the mix of the products they sell to businesses from commodity ones to higher value, higher-margin ones over time. That is why the revenue can rise by 2% and profit rise by double-digits.
        Over time products like disk drives, PC's, memory sticks become commodities with lots of competitors and small profit margins. That is why a decade ago IBM gradually got out of those products and the consumer business in general and concentrated on the products and services where they could add Value.
        Your revenue concept is not working for HPQ where they sell printers & ink cartridges and PC's into a cut throat consumer market at ever diminishing returns.

    • Projected growth. That is why. IBM even in these tough times is growing and exceeding their projections. If entire market does not crash that will continue.

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