Corporate Finance: IBM's Financial Event Analysis and Performance

This report provides an analysis of several significant financial events related to IBM, including earnings reports, acquisitions, and CEO actions. The analysis examines the impact of these events on IBM's stock price and overall financial performance. Events such as the launch of new services with SAP S/4HANA, revenue declines, CEO stock purchases, and analyst ratings are discussed. The report also considers the market's reaction to these events, including pre-market trading, stock price volatility, and investor sentiment. The analysis aims to provide insights into the factors that influence IBM's financial health and its position in the market, offering a comprehensive overview of IBM's recent performance and future prospects.

Running head: CORPORATE FINANCE
Corporate Finance
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Introduction:
IBM: The full form of IBM is the International Business Machines Corporation. It is An
American multinational organization, having its headquarters in New York, United States,
Armonk. IBM has founded in the year 1911 by the merging three companies named
Computer Scale Company, Tabulating Machine Company and International Time Recording
Company. It employs around 435000 people worldwide. Charles Ranlett Flint was the
founder of IBM on 16th June. The present CEO of IBM is Ginni Rometty; she is also the
current chairwomen of the Company. It earns revenue of about $ 92,793 billion. It has 12
research laboratories throughout the country. The industries they cover are could computing
and cognitive computing [1].
DELL: Dell Company is one of the biggest computer hardware and computer software
industry in the world. Michael Dell founded it in the year 1984 on 1st February. Its
headquarters is situated in the US. It employs more than 145000 people worldwide. It
manufactures personal laptops, computers and products which is related to technology. In the
year 2016, it earned a revenue of around us $ 54.9 billion. Currently, the CEO of the
company that is Michael dell, who is holding about 75% shares and the silver lake partners
hold the remaining 25% of the company share. The company analysis the geographical
segment and also the recent financial performance to improve its growth. [2]
Events of IBM:
10/18/2017, Third-Quarter Earnings per share (EPS) estimates as IBM runs After
Revenue View:
IBM has already earned 6.5% in the pre-market after trading to $ 156.00. It is already
buying three months high after it implied fourth-quarter revenue estimation and third-quarter
operating [1] earning per share and revenue top estimates.

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 IBM has traded lawn that $156 per share. Since July.
 IBM had 17 holds, 4 sells, 6 buys, average PT $162.
The margin of increase in the stock price was more on the day of the event as
compared to the increase in its price after the events. There was an overall increase in the
share price after this event. This provide a positive effect of the event on its shareholder. This
is because the earnings per share reported by the company is above the market consensus,
indicating better future prospects by the company.1
May 6, 2019, IBM launches new services to Advance Enterprise Transformation with
SAP S/4HANA:
SAP is considered as the Simple Financing software, which is formally known as SAP
S/4HANA, which is used as the financial and accounting component. SAP. It is considering
as S/4HANA Finance solution as the SAP S/4HANA Finance is forecasting as more
compatible packaging with the use of SAP logical Cloud. To run the real-time reports in a
format of operational and financial data need to use Simple Finance, which is an ERP
business software that runs on SAP HANA’s in-memory platform. For example, the
calculations relating to closing accounts of record can be run at any time during the period
that may be with in the day, month, or quarter with up-to-the-minute accuracy.
1 Boere, Esther, et al. "Effect of output price volatility on agricultural land use." New Medit
14.3 (2015): 10-21.

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For run the organization smoothly, SAP (Systems, application and products in data
processing) has kept on innovating the digital way of data processing. It has broken the
limitation of the past by introducing the digital core product that is SAP S/4 HANA. SAP was
founded by the IBM employees name Wellenreuther, Hopp and Hector in the year 1972. For
over more than four decades, SAP is innovating to help customers globally around the world
to run their business or industry smoothly by solving the day to day challenges of the
company.
The devices which adopted SAP S/4 HANA has accelerated business value and has
customized experiences for every user. The primary discriminator of SAP S/4HANA is the
unique architecture, which is quite a contrast from the traditional comparative elements. It
usually charges in software memory, data that stored in column formats, allow in inspections
and calculate the potentiality. The software, SAPs/4HANA is not only used in presenting the
data also focused on providing to the managerial persons to take decisions for real-time from
the information that drive from the records and takes into consideration for both internal as
well as the external sources. This system SAP S4/HANA, allows the entity to work smoothly
in a digital economy. 2
On the day of the event no particular volatile movement in the stock price was
exhibited, this is because the announcement to use the SAP software had no severe market
impact.
04/ 17/2019, falling of IBM because analysts bemoan for weak Revenue:
2 Cho, Joong-Seok. "The effect of the accrual component of earnings volatility on security
analysts' target price forecast performance." Investment Analysts Journal 43.79 (2014): 51-56

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IBM share price falls in the pre-market trading after IBM has complained or reported
about the decline in the revenue. It also included wide followed businesses as cloud
computing and false intelligence. As the declining sales of IBM have been predicted, it was a
very disappointing for the analysts as they were looking forward to the upcoming close of
IBM’s deal to be with red hat Inc. the IBM shared has ruined by 3.3 percent.
The return in the share price was negative on the day of the event as compared to the
increase in its price after and before the events. But after this event the share price is increase
in 0.88%. So the IBM share price is falls in the pre-market.3
3 De V. Cavalcanti, Tiago V., Kamiar Mohaddes, and Mehdi Raissi. "Commodity price
volatility and the sources of growth." Journal of Applied Econometrics 30.6 (2015): 857-873.

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09/26/2018, IBM raised at Union Bank of Switzerland (UBS), a general agreement about
the revenue seen as “beatable”:
After taking required amount from the union bank of Switzerland john Roy, who was
responsible for conducting analysis, writes on a note that a part of the analysis will show that
the market will apply “virtually no value” to the hardware of IBM’s.
 The revenue expected by the view as was 0.2% decline as “beatable”.
 It is expected to improve its operating margin by 130bps for better services.
 To look after Watson “hype cycle” in 2018 and a 4.4% dividend will be provided for
a floor.[1]Only 10% would be provided for public cloud exposure.
 The PT was raised from $160 to $ 180.
 It has 2 sells, 8 buys, 16 holds, average PT $ 1661
The event had no significant major impact on the share price as the stock price on the
date of announcement moved only 1.81%. As the introduction of the hardware in IBM had no
market consensus opinion about the announcement.
10/29/2018, IBM Sinks After Red Hat Deal; Potential Support Zone $116-$118
 In IBM today potential support zone is $116-$118.
 The support zone is below $116-$118, next to focus on $111, and after then (76.4%
L-T Fibonacci ($ 104).

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The share price had a stable fall before the day of the event and the fall rose on the
day of event which was followed the next day. The fall was reported as the company had a
failure in the deal which was expected by the investment community which led to the fall in
the stock price.4
04/18/2018, IBM Defended at Morgan Stanley as the Shares Slide on Margin was
missed:
IBM share falls by 4.8 % in pre-market trading. After its 1st quarter gross margin was
not enough because of which the company efforts was in vain to stability its profitability,
though it did improve materially in the4th quarter as the company quiets to bring the level of
margin with respect for the last years. Looking forward the 2nd half estimates as move as
desirable, helped by an expected $600 million in gross lost saving and a stronger than
expected second quarter Earnings per share (EPS) prediction.
4 Lashgari, Zahra, and Mousa Ahmadi. "The impact of dividend policy on stock price
volatility in the Tehran stock exchange." Kuwait Chapter of the Arabian Journal of Business
and Management Review 3.10 (2014): 273.

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In this events IBM share price fell by -7.53% on the day of event, as the market
consensus was not met. The day before the event the market hoped that IBM would meet the
margin. However, it was not met on the day of result hence the stock price witnessed
volatility.
Nov 06, 2018 IBM Chief Executive Officer Ginni Rometty buys about $3 million in
company stock:
IBM CEO Ginni Rometty purchase company stock in $ 3 million. The CEO bought
around $1 million in the open market and $2 million in the IBM retirement fund. Today the
CEO earned around 314,000 shares. According to the regulatory filing, senior executives and
the board members also purchased the stock. Recently IBM committed to buying 4 million
shares of the company. In red, blue history acquisition is the biggest red hat. This year the
percentage of IBM is down around 25 %, and the company suffer a growth in the revenue in
its nearby businesses. So the stock fell by 7.3 % to $ 115.67nearby businesses.
The market consensus was familiar with the prospects of the selling of shares in the
open market. As the consensus was aware of the future potential of the stock, the liquidation
was taken by the investors in a positive way which led to the steady rise in the stock.
01/17/2018, IBM pure strategy raised:
IBM rating has been raised to overweight from underweight, and pure storage to
overweight from equal weight by Barclay's analysts Mark Moskowitz. In IT hardware and

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data networking Mark Moskowitz had seen a healthy fundamentals. For both the revenues
and EPS, relative gains have eclipsed the changes to consensus estimate.5
 Most investors expect consensus estimate to exhibit a series of upward revisions with
winners and losers because of the gap relative to multiple changes.
 Believes fundamental and evolving clouds adoption both can combine to have a limit
relative downside potential to consensus estimate.
IBM PT TO $192 FROM $133
 Over the next 12-18 months IBM may have a modest growth and could enter into a
period of top line stability.
 Additional time for strategic initiatives to hit full stride while legacy decline
decelerate has been allowed for IBM's revenue and margin profile.
 After Amazon and Azure, IBM could emerge as the next important cloud vendor.
Here customers could see a multi could strategy to avoid any blockage
PURE STRATEGY PT TO $22 FROM $19
 To win new development expect PSTG to rationalize costs quicker than expected as
well as use its software advantage
 Believe PSTG have optimal opportunity to pinch its brand
 HP Inc. PT maintained $23
 Due to peak valuation and limited potential upside it should downgrade primarily
5 Leech, Nancy L., Karen C. Barrett, and George A. Morgan. IBM SPSS for intermediate
statistics: Use and interpretation. Routledge, 2014.

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 In both PC and printing markets HP's market position was as a consolidator 6
 After an impressive year of 10% revenue growth HP's business could see a significant
deceleration in 2018
 Investor sentiment could be damper because of the uncertainty around Samsung
printing integration.
 After growing high single digit in 2017 printing suppliers could face a tougher
comparison.
PRESIDO PT TO $20 FROM $17
 Presido and valuation multiples have adequately adjusted because of the tax reform
'goodness'
 To help lift the model and stock higher, the downgrade fundamental will need to be
improved significantly.
JUNIPER PT TO $25 FROM $28
The routing segment and total revenue will be pressurized by anticipating the rising
headwinds.
6 Sainy, R. O. M. I. "A Study of Factors affecting Stock Price Volatility: Perception of Stock
Brokers." Intercontinental Journal of Finance Research Review 4.2 (2016).

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The margin of increase in the share price was more on the day of the event as
compared to the decrease in its price after the events. There was an overall increase in the
share price after this event. This provide a positive effect of the event on its shareholder.
01/19/2017, IBM Gross margin:
In almost 6 years IBM have generated revenue growth. But the gross margin have
missed the analysts’ expectations sending shares down 3.1% in pre-market trading. The
disappointment part is that the upside in 4th quarter revenue have come from the legacy
mainframe hardware business and not from the key strategic imperative segments7
CANTOR FITZGERALD
 The currency revenue have grew for the first time constantly in 5 years which is
driven by strong results in the systems business and a hardware refresh cycle
 Before IBMs valuation multiple can expand its need return to consistent organic
growth and margin expansion.
 On a constant currency basis the core business has continued to decline by high single
digits in 4 quarters.
 Rates neutral, PT $152.
7 Shah, Syed Akif, and Umara Noreen. "Stock price volatility and role of dividend policy:
Empirical evidence from Pakistan." International Journal of Economics and Financial Issues
6.2 (2016): 461-472.

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OPPENHEIMER
 Systems and strong uptake for IBMs new mainframe products expected revenue
growth
 Gross margin concerns remain 'front and center' and fell across every product
category.
 Rate marker perform
 While the progress in strategic imperative segments is positive and it is already back
in to the stock and investors[1]
COWEN
 More than offset outsourcing weakness, IBM affirmed digital strength VS traditional
decline as consulting growth 8
 In 2018 IBM sees an improved performance consistent with Cowen survey work
 US tax reform is a meaningful 2018 head wind, reflecting the mixed effects for
services.
RBC
 The quality of IBM earnings have a tax rate of 6% on a non GAAP basis, while
expectations for the rate is much higher.
 Gross margin were soft at 49.5%
 IBM's Current year 2018 guidance is "incrementally" better
 For stare buybacks expect IBM use excess free cash flows
8 Starke, William J., et al. "The cache and memory subsystems of the IBM POWER8
processor." IBM Journal of Research and Development 59.1 (2015): 3-1

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 Rates outperform, PT $180.
The stock price of the company showed volatility before and after the date of the
event, with no movement in stock price on the day of the event.9
Events of DELL:
Sep 24, 2019, Dell technologies to hold business update September 24 in New York:
Dell technologies hold a business inform in New York. The CEO and Chairman
Michael Dell, Jeff Clarke Vice chairman, Tom sweet chief financial officer and senior vice
president, Dennis Hoffman Corporate strategy will analysis the financial framework and
company strategy.
The business update meeting of the company is considered as a relevant event as it
highlights the future business opportunity being tackled by the company using relevant
policy. The stock price was positive before and after the date of the event, while it generated
negative return on the date of the event.
Nov 28, 2018 Dell announces a potential cyber security incident.
9 Vo, Xuan Vinh. "Foreign ownership and stock return volatility–Evidence from Vietnam."
Journal of Multinational Financial Management 30 (2015): 101-109

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The cyber security incident of the company had no relevant volatile impact on the
stock price of the company. Thus the return of the stock price of the company on the day of
event was relatively nominal.

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Sinharoy, Balaram, et al. "IBM POWER8 processor core microarchitecture." IBM Journal of
Research and Development 59.1 (2015): 2-1.
Starke, William J., et al. "The cache and memory subsystems of the IBM POWER8
processor." IBM Journal of Research and Development 59.1 (2015): 3-1
Vo, Xuan Vinh. "Foreign ownership and stock return volatility–Evidence from Vietnam."
Journal of Multinational Financial Management 30 (2015): 101-109.