Posts Tagged ‘IBM’

Why Microsoft and IBM Jumped

July 21st, 2014

It was generally a good week for the S&P 500, which edged 11 points higher as earnings season has been generally positive so far. S&P tech giants Microsoft and IBM were worth a closer look this week. Outsourcing29

Job cuts and Intel results driving enthusiasm for Microsoft
Microsoft, the software giant well known for its Windows operating system and Office productivity suites, announced that it will lay off up to 18,000 of its 127,104 employees. Approximately 12,500 of these positions will be from the software giant’s freshly acquired Nokia handset division.

Investors were pleased with this announcement, driving shares up by as much as 3.7% during Thursday’s trading session. Note, however, that Bloomberg reported these rumors on July 15 and Nomura’s Rich Sherlund had issued a note on July 11 claiming that layoffs were imminent, so this headcount reduction may have already been baked to some extent into the stock.

Further, chip giant Intel reported results that showed strength in the business PC space as well as the datacenter. This bodes well for Microsoft, as it is not only exposed to the PC side of things with Windows and Office, but it is also exposed to the datacenter with its multitude of server- and cloud-based products, such as Windows Server, SQL Server, and Azure.

Microsoft is slated to report its third-quarter results after the close on July 22.

IBM still a cash-generating machine
Technology giant IBM reported its earnings results after the close on Thursday. Revenue came in at $24.36 billion, edging out analyst consensus by $230 million. Earnings per share was $4.32, beating consensus by $0.03. Full-year earnings per share of at least $18 was reiterated, pushing past the $17.87 consensus.

While revenue growth for the technology giant has been elusive, with revenues down 2% in the most recent quarter (1% excluding the company’s divested customer-care outsourcing business), the company managed to drive diluted earnings-per-share growth of 42% year over year and net income up 28%. This net income growth appears to be driven by lower operating expenses (down 14% year over year) and slightly higher gross profit margins. Earnings-per-share growth outpaced net income growth, as the share count dropped 9% from the year-ago period because of buybacks.

Though IBM will eventually need to return to revenue growth if is to drive net income up meaningfully in the longer term (cost-cutting only takes you so far), the stock isn’t exactly priced for growth at just under 11 times this year’s expected earnings. Further, the consistent and aggressive buyback program will help drive earnings-per-share growth even if net income remains flat.

IBM’s shares finished the week up 2.4%.

Leaked: Apple’s next smart device

Apple recently recruited a secret-development “dream team” to guarantee that its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are even claiming that its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts that 485 million of these devices will be sold per year. But one small company makes this gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors.


IBM Needs to Rev Up Revenue

July 21st, 2014

We maintain our Neutral rating on IBM as the fundamentals behind the business remain challenged. Our fair-value estimate is $190, lowered from $202, based on 9.5 times our fiscal 2015 non-GAAP earnings-per-share estimate.Outsourcing28

IBM  has struggled to grow over a number of quarters. The pattern of revenue deceleration puts added pressure on margin-expansion, a key factor in hitting long-term earnings targets. A return to consistent revenue growth and execution (solid footing) will be necessary to justify multiple-expansion from present levels.

Second-quarter results were slightly better than expected. Revenue came in slightly above consensus driven by better-than-expected hardware, which was down 12% year-over-year as System z, System x and Storage declines decelerated. Services grew 1% year-over-year excluding the Business Process Outsourcing (BPO) sale and including 1% growth contribution from SoftLayer while backlog was down 1% year-over-year (signings down 33% year-over-year attributed to difficult comp with signings expected to grow in the third quarter). Application outsourcing was down 9% year-over-year (consistent with last quarter) reflecting pricing pressure and a reduction in projects which contributed to Global Business Services (GBS) margins declining and an overall margin miss. Traditional package application implementation was a headwind for services. Software revenue was flat year-over-year with management guiding to mid-single-digit growth over the next two quarters. The negative results in Services are company-specific with IBM’s renewals being broken up into smaller pieces.

For fiscal 2014, GAAP EPS guidance remains at least $17.00 and non-GAAP EPS guidance remains at least $18.00. For fiscal 2015, management continues to expect at least $20.00 in non-GAAP EPS. Management guided to single-digit EPS growth in the third quarter and double-digit EPS growth in the fourth quarter. For fiscal 2014, we lowered our non-GAAP EPS estimate to $17.82 from $18.05 which reflects a lowered non-GAAP pretax margin estimate (23.0% lowered from 23.5%) on the miss versus our estimate in the second quarter partially offset by a lowered share-count estimate. For fiscal 2015, we lowered our non-GAAP EPS estimate to $20.05 from $20.21 on a lowered non-GAAP pretax margin estimate (24.4% lowered from 24.8%).


IBM wins six-year outsourcing contract from Janalakshmi

July 15th, 2014

International Business Machines Corp.’s (IBM) India business has signed a $100-million outsourcing contract with microfinance company Janalakshmi Financial Services Pvt. Ltd, which is promoted by social entrepreneur Ramesh Ramanathan, to manage back-office projects. This deal comes months after Bharti Airtel Ltd renewed its landmark outsourcing contract with IBM.Outsourcing22

Financial details of the contract were not disclosed. However, two people familiar with the developments, who requested anonymity, pegged the deal value at about $100 million.

As part of the six-year deal, IBM will manage back-office operations such as application development and maintenance and infrastructure management services. It will build a technology platform for Janalakshmi and provide mobile, cloud computing and analytics services as well. IBM will also be responsible for digitizing and automating operations and processes at Janalakshmi.

Janalakshmi has previously also handed out contracts to IBM rival Accenture Plc. Last year, it gave a five-year contract to Accenture as part of a cost-cutting drive amid expanding operations.

In 2013, Janalakshmi had applied for a banking licence. The Reserve Bank of India eventually handed out licences to IDFC Ltd and microfinance institution Bandhan Financial Services Pvt. Ltd.

Earlier this year, Bharti Airtel Ltd renewed its outsourcing contract with New York-based IBM. The renewed five-year deal is pegged at around $750-800 million.


IBM to invest $3B in R&D for next-generation chips

July 11th, 2014

IBM is going to pump $3 billion over the next five years into a research and development plan that advances its chip smarts as the company addresses the rise of cloud computing and big data. Basically, IBM hopes this new research initiative will eventually lead to semiconductors that measure only 7 nanometers, which is tiny compared to their current size of 22 nanometers. The smaller the chip, the faster it can be, which is important to cloud computing and big data, both of which require powerful compute.Outsourcing15

Additionally, IBM is preparing for a future in which silicon isn’t even needed for chips, as its research endeavor involves looking into other manufacturing areas like quantum devices, carbon nanotubes, photonics, graphene and other exploratory areas of manufacturing.

It’s interesting to note that while IBM is making this broad announcement, which should keep other chip makers like Intel on their toes, the focus of Big Blue’s news is on research and development and not necessarily the actual production of the supposed chips of the future.

In June, it seemed as if IBM was on the verge of selling its chip-making prowess to GlobalFoundries, and today’s news doesn’t throw that out of the water yet. IBM can still end up outsourcing its chip-manufacturing and save some cash while it concentrates on the design at home.

While the company is almost finished with selling off its server business to Lenovo in a $2.3 billion deal first announced in January that is still pending U.S. regulatory approval, today’s announcement makes it seem as if IBM is not ditching the hardware scene altogether, it’s just repositioning itself to deal with the future of chip making.


IBM forks out $100m for China’s next generation of data scientists

July 9th, 2014

IBM announced today its plan to donate US$100 million worth of big data and analytics software to 100 Chinese universities in the hope of helping toOutsourcing12 create the “next generation” of data scientists.

According to IBM, the effort aims to reach up to 40,000 students per year to gain expertise in big data and analytics — a skill that the company says is increasingly in demand in China.

The plan follows a memorandum of understanding that IBM signed with the Chinese Ministry of Education in the first quarter of this year, with a focus on addressing the big data and analytics “skills opportunity” in the country.

“IBM is privileged to extend its collaboration with the Ministry of Education and universities in China,” said D.C. Chien, chairman and CEO of IBM’s Greater China Group. “Together we will be able to accelerate the nurturing of skills in big data and analytics and help prepare future business leaders to apply [big data and analytics] technologies to tackle complex societal issues, from health care to transportation and public services.”

Under the new initiative, IBM will set up big data and analytics technology centres, and provide technical training to professors and faculty, in areas ranging from information management, data mining, social media analytics, and risk management.

Big Blue has already been in collaboration with seven universities, including the Beijing Institute of Technology, Fudan University, Guizhou University, and Huazhong University of Science and Technology, which are among the pilot schools that will rollout new programs in their education system in the coming academic year.

The company plans to bring 40 new universities on board to this program by the end of this year. In fact, according to IBM, the application guidelines will be issued to all qualified academic institutions later this month, with the program rolled out to all 100 universities in mid-2015.

The agreement comes at a time when the United States’ use of big data and analytics for surveillance purposes has the Chinese government on edge — following the publication of documents leaked by whistleblower Edward Snowden last year.

Over the past few months, Beijing has reportedly pulled Microsoft’s Windows 8 from all new government agency computers, and called for private industry to replace US-made IT hardware and software with domestic alternatives. Reports last month suggested that the government was even urging the country’s banks to remove high-end IBM servers from their operations.

Despite this, IBM has brokered not only its university big data donation deal — dubbed IBM U-100 — with the Chinese authorities; it has also struck an agreement with, a prominent subsidiary brand of Chinese education solution provider, Uniquedu Corporation.

The deal with will see IBM set up an “IBM zone of big data and analytics”, and according to IBM, the agreement will deliver online courses to students in order to help prepare the next-generation workforce with the skills and expertise needed to embrace big data as the “next frontier for innovation for the coming decades”.

“Big data is big business, but its rapid growth has outpaced colleges’ and universities’ ability to develop and implement new curriculums,” said Li Shu Chong, president of China’s largest research, consulting, and IT outsourcing service company, CCID Consulting. “IBM’s extensive initiative is poised to help develop new talent in China that will be needed to realize the full potential of big data.”

According to CCID, the big data technology and services market in China will continue to grow from US$2.3 billion in 2014 to US$8.7 billion in 2016.


IBM Boosts Enterprise Collaboration With Connections 5

July 4th, 2014

IBM has refreshed its Connections enterprise social and collaboration platform, an integrated suite of tools that also include content management and analytics.Outsourcing37

Connections 5, launched July 2 in the IBM Cloud marketplace, is available as a cloud service or as on-premise software.

It can also be deployed within a hybrid environment to embed collaboration, analytics and content capabilities within existing business processes.

The platform provides a number of social tools, including file sharing, communities, blogs and wikis, which a company can use to support business relationships with partners and customers. The software can also be used internally to improve collaboration among employees.

What to Do:
Consider interacting with business partners and customers through cloud-based or on-premise collaboration portals to provide more immediate services.

“The ability to bring key internal and external stakeholders into the conversation can facilitate a more collaborative, responsive and authentic way to work and deepen engagement,” Jeff Schick, vice president of social software for IBM, said in a statement.

Connections customer Superior Group, a provider of workforce services and outsourcing, said Connections’ social tools helped reduce email volume by 20 percent.

IBM refreshes Connections enterprise social software
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“IBM Connections gives us an open, agile and customizable platform with fully integrated collaboration, analytics and content management capabilities,” Tom DeClerck, CIO of Superior Group, said in a joint statement with IBM.

IBM enterprise social software is used by three-quarters of Fortune 100 companies, according to the vendor.

IDC predicts global enterprise spending on standalone social software will grow at a compound annual rate of 22 percent through 2017, when it will reach almost $2.7 billion from $1 billion in 2012.

The predicted growth is significantly less than previous predictions, because companies have been integrating and embedding the software’s capabilities into other primary enterprise technology “to support business-critical decisions and more social workflow,” IDC said in a market analysis.

Vendors are also embedding social capabilities in products. For example, Microsoft announced last September that it was adding such tools and services into its Dynamics 2013 customer relationship management (CRM) software.

Many of the functions of Connections started as collaborative projects within IBM, Jeanette Horan, CIO for Big Blue, told CruxialCIO in an interview last year. The company often deploys new capabilities within IBM before releasing to customers.


IBM In 10-Year Outsourcing Deal With Banco Popular

July 2nd, 2014

IBM has snagged a 10-year contract with Banco Popular to manage the Spanish bank’s tech infrastructure.Outsourcing25

The deal, which will include management of Banco Popular’s private cloud, is expected to help save $200 million over the next decade. Banco Popular is Spain’s fourth largest bank not owned by the state.

“With this agreement, with IBM as our technology partner, we will achieve market standards in terms of technology services needed to run an important digital transformation in Banco Popular, always aiming to deliver the best service to our clients,” Banco Popular said in a statement.

The bank will transfer 41 tech infrastructure employees over to IBM, which also assisted the organization to modernize its data center and the firm’s new tech headquarters in Madrid.

Banco Popular recently agreed to purchase Citigroup’s retail-banking and credit card business in Spain.

“The progressive adoption of innovative solutions such as cloud computing will enable the bank’s technology infrastructure to be more flexible and adaptable to business needs, which will result in better client service,” said Juan Antonio Zufiria, General Manager of IBM Global Technology Services Europe, in a statement.

What to Do:
Consider outsourcing routine IT functions to a trusted vendor to help cut costs and better focus on core business processes. Look for contracts that allow flexibility in payment, such as pay-as-you-go options.

IBM has made a number of similar deals with financial services firms in 2014, including a five-year services agreement with French online banker Boursorama, in which the banker will move its Web-based IT to IBM’s SoftLayer Cloud infrastructure.

Last December, Big Blue acquired a controlling share in the IT division of European financial services firm Dexia SA to help provide provide services in outsourcing deals worth $1.3 billion over the next seven years.

IBM first announced its plan to acquire SoftLayer for $2 billion in June 2013. Since 2007, it has invested more than $7 billion in 17 cloud-oriented acquisitions. The company has turned to the cloud, which in addition to big data services, it hopes will help offset falling hardware revenues.

In late June, IBM also opened a new cloud data center in London for enterprise use, part of a $1.2 billion investment to increase its data center presence across the world. Over the course of 2014, IBM will add 15 new data centers with plans to expand further in 2015 to the Middle East and Africa.

Banco Popular hands off IT ops to IBM under 10-year outsourcing deal.
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Gartner has predicted that more than 60 percent of banks worldwide will process transactions in the cloud by 2016.

IBM has also made waves in the banking community with its Watson cognitive-computing platform, which it will invest $1 billion into over the next few years.

In January, DSB Bank in Singapore agreed to begin using the technology, joining Citibank, ANZ Bank in Australia and South African firm Nedbank, which have already been using Watson-based tools. Nedbank has saved more than $105,000 per year while increasing customer service productivity levels by 20 percent using these analytics tools.


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