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A SPECIAL NEWSFLASH
The New York (Sunday) Times on IBM Prospects
Sticking to Its Guns?
"IBM Hews to Its Vision, Even as Growth Slows"
PHOENIX, Nov.
26
- Having promised growth, and then failed to deliver it, the IBM CEO was
trying to talk Wall Street out of looking for it at a conference with
analysts held earlier this month - as you saw in our last Newsflash which
cited the Wall Street Journal and FORBES magazine reports about it (see Annex
Newsflash No. 2000-02, Nov. 10, 2000).
Well, now the New York Times has joined a growing list of media who are
starting to question IBM's strategy. IBM
Hews to Its Vision, Even as Growth Slows, reads the
headline of the Sunday Times report that ran in its "Investing"
section. The article contains an eclectic compendium of analyst opinions,
including the following comment by yours truly "Some analysts expect the
stock to bounce back to the $120-to-$130
range in 12 to 18 months.
It is not a unanimous view, of course. There are firm skeptics, like Bob Djurdjevic of Annex Research in Phoenix, who calls I.B.M.'s belief that customers will value its plumbing — new hardware and software — over that of competitors a major mistake. "They still think of themselves as a technology company, but no one cares about technology today," Mr. Djurdjevic said.
All that customers want, Mr. Djurdjevic contended, are the services that technology makes possible, like better handling of production and sales data. In his view, although I.B.M. is the world's largest computer services company, its culture has diverted it from a more focused, full-throttle attack on that market and has clouded its future. While slower-growing hardware and software businesses at I.B.M. generate the cash that allows Mr. Gerstner to keep buying shares and finance capital investment, the effort to maintain them is a threat to I.B.M.'s prosperity, Mr. Djurdjevic said."
The only problem with the New York Times report may be its title. For, it implies that the IBM leaders have a vision about the future. The Nov. 27 FORBES "Baby Blues" article provided no such illusion. Which is why it helped knock the wind along with $11 billion out of the IBM stock in the Nov. 10 trading action.
One possible reason? A renewed market interest in the IBM break-up idea which Gerstner had dismissed out of hand in mid-1996 (see "Louis XIX of Armonk", and several Annex Bulletins on that topic, along with our latest piece on the IBM Break-up.
What is going to be tomorrow's market reaction to the Sunday New York Times article? We've tabled our answer, to borrow a chess term, and will share it with Annex Research clients upon request.
Meanwhile, here is the starting point for the rest of our readers and visitors to our web site. On Friday (Nov. 24), the IBM stock closed at $99 15/16. Ironically, it is virtually the same as the price of the Big Blue shares before the last major dip (on Nov. 10 - $99.44).
Happy bargain hunting!
Bob Djurdjevic
