WHAT WILL WE MAKE OF THIS MOMENT BLYTH TECHNOLOGY GROUP Chad - - PowerPoint PPT Presentation

BLYTH TECHNOLOGY GROUP Chad Mitchell, Luke Chen, Paa Adu, Udai Baisiwala, and Wayne Shu

WHAT WILL WE MAKE OF THIS MOMENT

Recent Performance

A Guide to the Counterattack

• 11 consecutive quarters of declining revenue
• Over 10% decline in stock price over 1 year period
• Buybacks signal a lack of belief in the organic growth strategy
• History is not a good indicator of future performance

Investment Thesis

Bearish sentiment towards IBM undervalues its self- renewal process rooted in a history of successful

• turnarounds. Profits in high growth areas and key

partnerships with leading companies signal that Big Blue

• ffers an opportunity for a long-term investment play

Company Overview

Ticker: IBM Current Price: $164.83 Market Cap: $163.35 billion 52-week range: 149.52 - 199.21 Dividend Yield: 2.69% ($4.40 ann.)

• Ability to reorganize itself

○ Divest from low-margin ○ Enter high growth - high margin ○ Commitment to long-term strategy

• Legacy of Innovation and unique position in the market

○ Wide customer base and integrated framework ○ Patents (Number 1 U.S. patent holder for 22 years) ○ Long-term product strategy - Watson, dedication to areas that can expand tremendously

History of IBM Resurgence

Core Business Structure

• IBM known for its variety of computer

products and services. 3 main focus areas divided into 5 formal sectors: ○ Services(Global Business Services, Global Technology Services): $54.9 billion ○ Software: $25.4 billion ○ Hardware and Financing(Systems & Technology): $12.0 billion

• Maintains position in hardware through

manufacturing of mainframe computers (z13), $3 billion R&D in advanced silicon microprocessors.

• Strategic imperatives play off of IBM’s

infrastructure and technical background to bring IBM to the next level (Cloud, Security, Analytics, Mobile).

Structure of the Business

High Growth Opportunities

• Cloud

○ 60% growth on $7B in revenue ○ Leader in hybrid, private cloud ○ Soft Layer is leader for bare metal cloud

• Analytics

○ 7% growth on $17B in revenue ○ Flash: real-time analysis ○ Watson capacities ○ Mine structured, unstructured data

• Security

○ 19% growth on <$1B in revenue ○ Used by 7/10 top US banks ○ 25 security labs

• Systems of Engagement (Social, Mobile)

○ >200% growth on <$1B in revenue ○ Client Collaboration, IBM Connections

Partnerships

Apple ○ IBM and Apple will work on mobile enterprise apps catering towards various sectors such as retail, finance, and healthcare ○ IBM to optimize cloud-based services for IOS Twitter ○ Integration of Twitter data with IBM data analytics services on the cloud to provide more comprehensive data-driven business solutions

SAP ○ SAP’s cloud business applications being run on IBM’s cloud ○ IBM is a mature, trusted brand for non-US companies Tencent ○ Largest internet company in China partnering with IBM ○ IBM has been building data centers in China since 2011 ○ Has previous relationship with Chinese through Lenovo deals

Management Team

Ginni Rometty has years of experience within IBM.

• Started 1981
• Has seen how 1993 turnaround happened
• Enthusiasm for technology

Management committed to long-term thinking.

• IBM research still by far leading in patents.
• Committed to acing enterprise solutions
• Culture and history of long-term thinking and success through change
• Warren Buffett is largest shareholder

DCF

Recommendation

• Time horizon: 12-18 months
• Price target: $215
• Sell if: Combination of slowing momentum in growth areas and persisting

decline in revenue

“Nobody ever got fired for choosing IBM”

Questions?