stock market is still crazed with growth , hence , the big money is ignoring Big Blue .. part of that dynamic is
some do not recognize growth potential in large companies ... once the "new reality " sinks in , they will be
back for more Big Blue shares ....
until these guys realize that the game is not only about revenues , but how a company is managed and that
it's more pracical to swap some rev for much larger margins , then you can expect that p/e to go lower before
it goes higher , thus keeping a lid on share price ... at some point the p/e will expand .. it will be good to own
a bunch of Big Blue by then .. this means that we are in an excellent accumulation phase .. no big hurry though ,
so a dollar cost average over the next 2 years will return very well ... add a little sugar , like increasing the
div and BIg Blue is an excellent long term investment at this tme .. garce
I have been thinking of 20*14 = 280 for a long time.
However, Profit / Revenue have been detached for too long. Sooner or later this needs to be resolved.. Cost cutting is a passive way to handle this issue.
When we can see the proactive action from increasing revenue point of view?
I think 13-14x for this size of company would have to include the G of GARP in it for revenue. They gave grown earnings, but market won't pay up for zero revenue growth. It's now a value stock story, period. I thought the miss on revenue was pretty miserable, but if you look at EMC, they missed revenue by a similar percentage of sales. Growth in revenue organically is tough for their size and business model.
So, I basically agree with you, that they do need some revenue growth. That has not been the model though. I see some of the revenue likely going the other way -- getting rid of some of the X series servers, etc. Going the opposite direction, revenue wise, on hardware.
That said, maybe a larger than normal acquisition (though this seems out of character with their stated goals of 20 B on buy backs, 20 B on company purchases). We could speculate:
Hardware: EMC? AMD (unlikely), something in networking (CSCO - ha! too big). Flash outfit(s)?
Software: SAS? SAP too big, too pricey. Maybe one of the bigger analytics firms? Would fit their bent right now.
Services: could buy bolts ons all over the industry for that. I would not even speculate, at this point. Probably smaller ones in verticals they want to develop. Smarter planet stuff, etc.
I kinda doubt the above, I think they stay the 2015 plan course. I don't think you see any PE expansion unless they have really good alignment of P and Z cycles next year, and maybe Pure Systems takes off. They need to get their stuff together in storage too. EMC would give them that, and VMware. That'd be a big bite, but it would sure get the industries attention.