IBM

jamesmith

busy week...quick post and elaborate later...

ftp://public.dhe.ibm.com/annualreport/2007/2007_ibm_annual.pdf
2007 annual report layout roadmap to 2010, grow EPS from $7.18 in 2007 to $10 or $11 by 2010. IBM beat roadmap target by achieving $11.52 EPS by 2010

ftp://public.dhe.ibm.com/annualreport/2010/2010_ibm_annual.pdf
2010 annual report layout roadmap to 2015, grow EPS from $11.52 in 2010 to $20 by 2015. IBM's 2012 EPS is $14.37

of course 2013, 2014, 2015 are all guesses...to get $20 EPS by 2015, IBM have to achieve on average 11.7% EPS growth

源济

谢谢分享！

Sparrow

看来IBM还是很牛的

jamesmith

You may wonder how does IBM get its EPS growth? with relatively flat revenue. Most of the EPS growth comes from share reduction + margin growth.

The share reduction part is easy to quantify. In recent years, buy back program is responsible for almost 40% of EPS growth.

IBM is very good at financial maneuver, by selling lower margin assets (hardware) and buying higher margin assets(software), it is able to generate a impressive rate of EPS growth. Don't take this lightly, DELL and HP try to do the same but not nearly as successful(For example, over the years, the amount of money HP spend on acquisition is higher than HP's market cap). Acquiring software business at right cost and make it work with existing department is harder than it seems, this shows the ability of IBM management team.

After the previous ER, IBM announced $5 billion more share buyback, with existing $6.2 billion left, that's $11.2 billion of buyback.

jamesmith

jamesmith 发表于 2013-6-26 08:50 PM
You may wonder how does IBM get its EPS growth? with relatively flat revenue. Most of the EPS growth ...

Quote from 2011 Buffett's annual letter to shareholders:

Today, IBM has 1.16 billion shares outstanding, of which we own about 63.9 million or 5.5%. Naturally, what happens to the company's earnings over the next  five years is of enormous importance to us. Beyond that, the company will likely spend $50 billion or so in those years to repurchase shares. Our quiz for the day: What should a long-term shareholder, such as Berkshire, cheer for during that period?

I won't keep you in suspense. We should wish for IBM's stock price to languish throughout the five years.

The logic is simple: If you are going to be a net buyer of stocks in the future, either directly with your own money or indirectly (through your ownership of a company that is repurchasing shares), you are hurt when stocks rise. You benefit when stocks swoon. Emotions, however, too often complicate the matter: Most people, including those who will be net buyers in the future, take comfort in seeing stock prices advance. These shareholders resemble a commuter who rejoices after the price of gas increases, simply because his tank contains a day's supply.

jamesmith

added some IBM and WFC today

jamesmith

Interview on Ginni Roomette by Charlie Rose, nice to watch

http://www.bloomberg.com/news/vi ... e-04-17-?cmpid=yhoo

zhao

jamesmith

a brief update (might post a longer update after earning reports Monday)... From post number 4; IBM's earning growth comes from shares reduction, profit margin growth and revenue growth.
- diluted shares outstanding reduced to 995 million, this is lower than expected, helped by lower share price
- gross margin increased to 50%! this is due to removing low margin businesses
- revenue suffered also because selling low margin hardware business, (that business IBM got rid of has 7B in revenue)
- IBM removed the 2015 earning target, because revenue growth is slower than expected, make sense for a 100B business reinventing itself
- IBM paid a lot of money for workforce rebalancing (layoff) and selling the hardware business, I would consider these one time events, so if we remove these, the earning number is not as bad as people think, 2014 earnings without these charges should be around mid to high $16. That means, in reality, IBM is selling for less than 10 P/E right now!

I have been reinvesting dividends and slowly adding to this position, my average price is around $170.

jamesmith

Added some IBM today at $165.25, I will be adding periodically if it stays below $170.

zhao

good entry

jamesmith

IBM down after earning, a good chance to add shares cheap.

1) revenue down 1% excluding foreign exchange and divestment
2) strategic imperatives grew 30%
3) 3%+ dividend when you are waiting for a turnaround
4) very efficient! EPS went up because of higher margin! Free cash flow went up!
5) backlog continue to increase!
6) reduced debt! non financing debt is down $4.5 billion! while cash only down $1 billion
7) low payout ratio means dividend is likely to increase and continues to buyback shares, reduced 1% share count this year so far.