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IBM News and Announcements
| ||IBM staffers file patent for blockchain-powered domain name service
Researchers at IBM are mulling a decentralized domain-name service.
Sat, 17 Aug 2019 19:47:45 +0000
| ||Why Is IBM (IBM) Down 11.8% Since Last Earnings Report?
IBM (IBM) reported earnings 30 days ago. What's next for the stock? We take a look at earnings estimates for some clues.
Fri, 16 Aug 2019 13:30:01 +0000
| ||Pentagon’s $10 Billion Brain Is Frozen by a Contracting Scandal
(Bloomberg Opinion) -- In the latest twist in the fraught competition for the Department of Defense’s $10 billion cloud-computing project, the Pentagon Inspector General’s Office announced a new investigation into whether there have been improprieties or corruption in the contracting process thus far. This probe, described to me as a very significant undertaking by Pentagon insiders, will complement a review already being conducted by new Secretary of Defense Mark Esper.The cloud project is formally known as the Joint Enterprise Defense Infrastructure or, in a nod to “Star Wars” geeks, JEDI. It would provide a single managerial system and a single repository for storage of the department’s incomprehensibly vast data streams. As the controversy hit, the contract was reportedly about to be awarded, with the final competitors being Amazon Web Services Inc (the heavy, heavy favorite) and Microsoft Corp.The twin investigations were spurred by pressure from three sources: disgruntled competitors who felt they were out of the running; Congressional actors representing districts and states from where those competitors have a presence; and the Oval Office itself. President Donald Trump said in mid-July that he intended to review the JEDI contracting after receiving “tremendous complaints” about the process from “some of the great companies in the world,” including IBM, Microsoft and Oracle – each of which bid on the JEDI contract.None of this, other than direct interference by the commander in chief, is particularly out of the ordinary for big defense acquisitions, given the byzantine procurement process in the Pentagon. As a newly selected one-star rear admiral in 2000, I was assigned to manage a complex agency-wide telecommunications contract that included creating a new constellation of satellites. By the time it was finally awarded, I had long transferred out of the Pentagon. And in 2013, as I was a grizzled four-star Admiral about to finish up my career, I was still wondering why the satellite constellation wasn’t yet fully operational. The short answer is that at the nexus of big money, political influence and uncertain technology, delays are a certainty.All of this begs the questions of why the U.S. military is pursuing this system, and how it can be brought on line rapidly – by whomever eventually wins the contract.JEDI will be an absolutely vital part of America’s future warfighting capability, especially in the increasingly complex new 5G environment. At heart, the vast cloud would allow a much more efficient information-technology system, replacing the hodgepodge of thousands of hand-tooled, inefficient networks that exist today. This is especially critical for the military, where so many personnel transfer every two to three years, often taking with them a hands-on knowledge of an individual network or complex of software. For a vast organization like the Department of Defense -- the largest “company” in the world – JEDI’s efficiency at scale will be crucial to optimizing expensive resources and operating efficiently.It’s not just about efficiency, though: JEDI should vastly improve resiliency and security. Instead of individual networks and organizations backing up their information locally, everything is stored in a much more defendable cloud structure - just as your personal data and photographs likely exist in the Microsoft or Apple Inc clouds today. The data can be seamlessly transferred, even in the intense crucible of combat. Cybersecurity experts tell us that there is great strength in reducing the number of individual portals that can be attacked and overcome; streamlining and unifying the defenses of the entire department make sense. This reduction of “threat surfaces” is crucial.Finally, from an operator’s perspective, there is great allure in one-stop shopping to stream data (a sort of military Netflix,), to record and store it, to create simple systems to “patch” software, and to build an infrastructure that permits constant monitoring of the entire department’s networks. Lieutenant General Jack Shanahan, head of the Pentagon’s Artificial Intelligence Center, commented recently on the operational capabilities necessary for the emerging era of great power competition, with China in particular.“Imagine the speed of operations in a fight in the Pacific, where you just do not have time to figure out, ‘How do I get my data, clean my data, move it from point A to point B.’” Shanahan said. “If I’m a warfighter, I want as much data as you could possibly give me. Let my algorithms sort through it at machine speed. It’s really hard for me to do that without an enterprise cloud solution.” His comments were echoed by the department’s chief information officer, Dana Deasy, in a rare on-the-record co-briefing to the press they held last week.In order to move quickly to find efficiencies, create new resiliency, and provide a single point of contact for all IT operations, the Department of Defense needs to thoroughly but quickly complete these investigations. If there are real instances of malfeasance, they should be uncovered and the perpetrators punished forthwith. Frankly, Secretary Esper has an unattractive set of options, including starting the competition over; pressing forward to award despite the external pressure; or searching for some middle ground that may satisfy nobody. Whether he can power through all the sand in the gears here will be the first test of his leadership abilities, and will be among the most important he will face.In the likely scenario that all this smoke reveals not much fire but rather disgruntled competitors and political angst (and a strong component of anti-Amazon influence from the White House, where Amazon founder and Washington Post owner Jeff Bezos is despised), Esper should press through to a contract award as soon as is legally appropriate. Warfighting in the 21st century will be “brain on brain” combat, and a large, singular cloud structure is the gray matter the U.S. military needs.To contact the author of this story: James Stavridis at firstname.lastname@example.orgTo contact the editor responsible for this story: Tobin Harshaw at email@example.comThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.James Stavridis is a Bloomberg Opinion columnist. He is a retired U.S. Navy admiral and former supreme allied commander of NATO, and dean emeritus of the Fletcher School of Law and Diplomacy at Tufts University. He is also an operating executive consultant at the Carlyle Group and chairs the board of counselors at McLarty Associates.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
Fri, 16 Aug 2019 11:30:05 +0000
| ||AI Startup Plans IPO at Value of Over $1 Billion -- in China
(Bloomberg) -- The promise of artificial intelligence has yet to translate into big business. Now Kai-Fu Lee, a prominent venture capitalist in China and founder of Sinovation Ventures, says his firm’s new startup should be able to reach $100 million in revenue next year and go public the year after.AInnovation, established in March 2018, develops artificial intelligence products for companies in industries such as retail, manufacturing, and finance. Its customers include Mars Inc., Carlsberg A/S, Nestle SA, Foxconn Technology Group, China Everbright Bank Co. and Postal Savings Bank of China Co.Chief Executive Officer Hocking Xu, a veteran of International Business Machines Corp. and SAP SE, has hired staff that work with traditional companies to figure out how to take advantage of AI in their operations. AInnovation is on track to hit $100 million in revenue within two years of its founding, the fastest pace yet for such a startup, Lee said.“We took the approach of ‘Let’s take some of the best business people and let’s target the industries which need AI the most’,” he said.Lee figures AInnovation will be able to go public in less than two years at a valuation of $1 billion to $2 billion. The firm has raised about $70 million so far from Sinovation, CICC ALPHA and Chengwei Capital. Since the company was funded with yuan, it would most likely list domestically, either on China’s new NASDAQ-like Star market, or on the country’s ChiNext.For retail companies, AInnovation sells products including a smart vending machine that opens with facial recognition and software that monitors retail shelves with image recognition. It’s created computer vision technology that detects defects on the production line for manufacturers and underwriting software and natural language processing technology for financial firms. There’s a large market in particular for technology to catch flaws early in the manufacturing process, said Jeffrey Ding, a researcher with Oxford’s Center for the Governance of AI. That effort “aligns with the Chinese government’s priorities to upgrade smart manufacturing capabilities to compete with countries like Germany and Switzerland,” he said in an email.The former president of Google China, Kai-Fu Lee founded Sinovation Ventures in 2009. It manages more than $2 billion across seven funds in U.S. and Chinese currencies. It holds shares in more than 300 companies, most of which are in China. Its investments include autonomous driving company Momenta, consumer AI chip firm Horizon Robotics Inc. and bitcoin mining and AI chip company Bitmain Technologies Ltd.In artificial intelligence, “we’re still at a very early stage in the commercialization,” Lee said. “We’re still at the equivalent of early internet portals, back when everybody was using Yahoo and there wasn’t even a Google, Amazon, or Facebook.”Global economic ructions, however, may present short-term challenges. Venture deals in China have been plummeting as investors pull back amid escalating trade tensions and slowing economic growth. The value of investments in the country tumbled 77% to $9.4 billion in the second quarter from a year earlier.“In an economy that’s slowing down, everything slows, including venture capital. There will definitely be a shakeout,” Lee said. “The positive side is that if the economy is challenging, and valuations are down, it’s a good time for us to go shopping.”Sinovation was one of the first Chinese venture capital firms with a presence in the U.S. With the trade war and the Trump administration’s tighter scrutiny of foreign investments, the firm has scaled back investments and no longer has an office in the U.S., Lee said, adding that investments in America have always been a small fraction of its overall investments.“In the long term, it’s a pity if we have to cause a total separation of two countries because one could argue that AI got to where it got because the whole world has been able to work together.”(Updates with analyst’s comment in the 9th paragraph)To contact the reporter on this story: Selina Wang in China at firstname.lastname@example.orgTo contact the editors responsible for this story: Jillian Ward at email@example.com, Peter Elstrom, Colum MurphyFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Fri, 16 Aug 2019 07:00:45 +0000
| ||Berkshire Hathaway Buys More Amazon
It wasn't Warren Buffett's decision, but Berkshire now holds $1 billion worth of the e-commerce giant.
Thu, 15 Aug 2019 17:53:00 +0000
| ||The Real Secret To Microsoft's Success
Microsoft is no longer in the raw experimentation stage common to young and growing companies. Rather, its main goal is to create profitability streams, then maintain and expand them.
Thu, 15 Aug 2019 17:31:57 +0000
| ||Ecolab's Chemstar Buyout to Boost Food & Beverage Business
Chemstar's flagship Sterilox Fresh to help boost Ecolab's (ECL) Food & Beverage unit.
Thu, 15 Aug 2019 13:19:01 +0000
| ||Linux-maker Red Hat Purchase Adds Risk to Owning IBM Stock
IBM (NYSE:IBM) stock continues to struggle. Since hitting highs above $215 per share in 2013, the shares have seen a steady decline. Today, the IBM stock price has fallen below $132 per share.Source: Shutterstock Amid evolving technologies, IBM has to pivot again to remain relevant. It has attempted this feat by buying Red Hat. Investors are bailing out of the shares as integration of the Linux maker will take time. Given the time lag and the falling profits, owning the stock amounts to a gamble on whether management can successfully absorb Red Hat into the company. IBM Stakes its Future on Red HatAs the name International Business Machines implies, the company came to prominence by providing the "computers" that stood at the cutting edge of technology decades ago. What was once known as "Big Blue" has long since ceased to act as an innovator. Yet, it has remained relevant for decades by building businesses around technologies invented by others.InvestorPlace - Stock Market News, Stock Advice & Trading TipsThe question on investors' minds now revolves around whether this company can reinvent itself yet again. In a software arena dominated by the likes of Adobe (NASDAQ:ADBE), Microsoft (NASDAQ:MSFT), and Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG), the company faces a daunting challenge.It took a huge leap forward in the cloud by purchasing Red Hat. As InvestorPlace contributor David Moadel wrote earlier this week, the move makes IBM a "serious contender" in the open-source software arena. Still, one can understand why IBM stock plunged following management's last quarterly report when they told the public that Red Hat would not help boost earnings until 2021. Where Will IBM Go Next?This leaves investors in International Business Machines stock with two key questions: how will IBM perform while the company fully absorbs Red Hat, and will the acquisition ultimately lead to a turnaround in the shares? * 7 Safe Dividend Stocks for Investors to Buy Right Now The drop in IBM stock following the last earnings report means investors should expect very little of the equity for now. Revenue and profits will fall for fiscal 2019. Also, analysts only see modest growth on both measures in 2020. This makes the forward price-to-earnings (PE) ratio of 9.8x appear less appealing. Moreover, the sentiment helped to take the IBM stock price down to about $131.25 per share after Wednesday's market carnage.Answering the question of whether Red Hat will turn IBM around will simply take time. It has remained a force in technology years after the tech it invented became obsolete. That by itself stands as a testament to the firm's resiliency. Still, I would not consider a comeback in IBM stock a sure thing. In truth, it has become a riskier stock than one might think. Mind the DividendThis danger is strongly tied to the IBM dividend. At first glance, the payout looks robust. It currently yields 4.9% and has increased for 22 straight years. The coveted "dividend aristocrat" status requires 25 years of payout hikes. However, this dividend currently eats up more than 65% of the company's profits; that number was about 26.5% as recently as 2014. * Stocks Under $7 to Invest in Now Slashing a payout usually leads to years of stagnation for an equity. Hence, companies like to maintain these streaks if possible. In 1993, IBM reduced its dividend in a bid to save the company. Fortunately for shareholders, the dividend cuts then led to only a short-term selloff in IBM stock. Still, should Red Hat fail to turn the revenue and profit picture for IBM around, the company may have no choice but to cut the payout again. If this happens, traders should not count on a quick recovery for the stock this time. Bottom Line on IBM stockThe near-term prospects for a recovery in IBM stock begin and end with Red Hat. Evolving technologies have hurt profit growth for the venerable tech firm. The company hopes its takeover of the Linux maker will give IBM the technology -- and street cred -- it needs to remain relevant.Simply put, though, IBM stock has no obvious path to recovery without Red Hat. Moreover, the increasing cost of maintaining its dividend depends on this success. Should it cut its payout, it could suffer years of stagnation like other companies forced to surrender their dividend aristocrat status.For now, buying IBM stock has become a gamble on the company's success at integrating Red Hat. A favorable outcome would probably take it back to 2013 highs above $215 per share. A failure means lower dividends and a stagnant or falling stock price, possibly lasting years.How lucky do you feel?As of this writing, Will Healy did not hold a position in any of the aforementioned stocks. You can follow Will on Twitter at @HealyWriting. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 15 Growth Stocks to Buy for the Long Haul * 5 More Cloud Stocks With Plenty of Potential * 5 Clean Energy ETFs to Buy for 2019 The post Linux-maker Red Hat Purchase Adds Risk to Owning IBM Stock appeared first on InvestorPlace.
Thu, 15 Aug 2019 10:04:44 +0000
| ||The Timely Ten- Today's Best Blue Chip Dividend Payers
Can a quarter of a percent rate cut, or any amount of rate cuts for that matter, address or even alleviate the market's concerns? asks Kelley Wright, dividend expert and editor of Investment Quality Trends.
Thu, 15 Aug 2019 10:00:00 +0000
| ||Take Your Time With IBM Stock as it Digests its Behemoth Linux Maker Deal
IBM (NYSE:IBM) shares have tumbled this month. Since its investor presentation on August 2, IBM stock has fallen from $146.58 a share to $134.12. Reducing its 2019 earnings guidance, IBM anticipates that the recent Red Hat acquisition will not contribute to earnings until 2021.Source: Shutterstock The adjustments to earnings are due to non-cash write-downs of deferred revenue. As InvestorPlace contributor Mark Hake wrote last week, IBM has suspended its stock buyback program in order to pay for the Linux maker.But with the Red Hat adding much needed growth, what's the verdict with International Business Machines stock? Is there upside for long term investors? Or is there additional downside to the IBM stock price? Let's have a closer look at why IBM stock may be a buy at today's price.InvestorPlace - Stock Market News, Stock Advice & Trading Tips Red Hat Adds Growth PotentialPrior to the Red Heat deal, IBM was treading water. The company released earnings on July 17. For the second quarter of 2019, revenue was down year-over-year. Sales were $19.1 billion, down from $20 billion in the prior year's quarter. The company's Cloud and Business Services unit saw slight growth (5% and 3% YoY, respectively), but declines in the Global Technology Services and Systems units countered this improvement. Despite this slight revenue slip, IBM managed to keep quarterly operating income steady at ~$2.8 billion. * 8 Dividend Aristocrat Stocks to Buy Now No Matter What The Red Hat deal adds a variety of growth catalysts to the International Business Machines story. For one thing, the acquisition makes IBM a bigger player in the $1 trillion cloud computing space. The deal is expected to accelerate revenue growth and improve gross margins. The deal is also very synergistic. IBM can now sell Red Hat's suite of solutions to their existing customer base. With IBM's global reach, the company could expand Red Hat's business better than Red Hat would have done as an independent company.But is this deal a guaranteed slam-dunk? In the past, IBM's M&A activity has been focused on small bolt-on deals. At $34 billion, this acquisition is quite a large bite. The company could experience headwinds integrating Red Hat into its operations. Failing to meet investor expectations, the IBM stock price could see additional downside if the deal's benefits take longer to realize.With this in mind, is the risk worth the potential return? Are investors paying a premium or getting a bargain? IBM Stock ValuationWith its weak growth over the past few years, IBM stock sells at a fairly low valuation. Shares currently trade at a forward price/earnings (forward P/E) ratio of 11.8x. The company's trailing 12-month (TTM) enterprise value/EBITDA (EV/EBITDA) is 8.9x. Compare this to Microsoft (NASDAQ:MSFT), which trades for 26.3 times forward earnings, and an EV/EBITDA ratio of 18.4x. Oracle (NYSE:ORCL) trades for 17 times forward earnings, and an EV/EBITDA ratio of 12.4x. SAP (NYSE:SAP) trades for 40.8 times earnings, and has an EV/EBITDA ratio of 18.5x.Comparing IBM to similar large information technology companies, it appears shares trade at a discount. With the aforementioned weak growth in mind, such a valuation is justified. But with the Red Heat deal adding growth potential, there could be substantial upside to the IBM stock price. If the company can pull it off, shares should see material appreciation in the next few years.But is now the time to buy IBM stock? Or will investors have an opportunity to buy on subsequent dips?There are many ways IBM stock could go lower. Enterprise IT is not like making widgets. The constantly evolving landscape makes it tough for established companies like IBM to stay relevant. The elimination of stock buybacks reduces the company's ability to shore up earnings per share. * 7 Stocks Under $7 to Invest in Now What if IBM decides to cut its dividend to reduce debt? The company has not cut the dividend since its early-90s turnaround. However, even with its high debt load, the company's $12 billion in free cash flow is more than enough to support the current $6.48 per share payout. The dividend cut is a low-risk scenario, but still possible given the company's need to reduce debt. Bottom Line: Patience is Advised With IBM StockInternational Business Machines stock is clearly undervalued. The investment community has written off Big Blue, continuing to believe the company remains a dinosaur. With the Red Hat acquisition, IBM can prove the bears wrong, and deliver acceptable revenue growth going forward. But with IBM's history of making stumbles, it is tough to take their investor presentations without a grain of salt. With this in mind, there could be additional downside to the IBM stock price.In the event of additional bad news, IBM stock may be a screaming buy. If the Red Hat deal faces short-term headwinds, shares could trade at fire sale prices. Until then, keep an eye on IBM stock, but don't bet the ranch.As of this writing, Thomas Niel did not hold a position in any of the aforementioned securities. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 10 Real Estate Investments to Ride Out the Current Storm * 7 Marijuana Penny Stocks to Consider for Those Who Can Handle Risk * 7 Safe Dividend Stocks for Investors to Buy Right Now The post Take Your Time With IBM Stock as it Digests its Behemoth Linux Maker Deal appeared first on InvestorPlace.
Wed, 14 Aug 2019 09:16:44 +0000
| ||Better Buy: Apple vs. IBM
Which tech giant is the better value stock?
Wed, 14 Aug 2019 01:34:00 +0000
| ||3 Great Tech Stocks to Buy for the Future
Uncertainty has descended once more on Wall Street. This makes it difficult to find good stocks to buy. But this doesn't mean that there aren't trends that still carry upside potential while we wait for these short-term disruptions to fade.The world has become addicted to tech, and we now depend on it more than ever. From cells phone to home phones, nothing runs without computers in the background. Because this is a trend that is not likely to reverse anytime soon -- pending a zombie apocalypse -- tech stocks will remain in demand for decades.All kidding aside, the movement from analog to digital is fast-paced, and there is only a short list of companies who supply the brains and the infrastructure needed. These three tech stocks are proven winners and will continue to perform well for the next few years. This is because the overall fundamental thesis is still bullish in spite of the worries that are littering the media's ticker tape.InvestorPlace - Stock Market News, Stock Advice & Trading Tips * 7 Safe Dividend Stocks for Investors to Buy Right Now These three have been the main drivers so far and are still best set up to continue to dominate their respective competitors. Amazon (NASDAQ:AMZN), Advanced Micro Devices (NASDAQ:AMD) and International Business Machines (NYSE:IBM) are three likely winners for years to come. Tech Stock to Buy: Amazon (AMZN)Source: Shutterstock Almost nothing happens on the web these days without touching the Amazon Web Services servers. Therefore, AMZN stock is likely to remain in control of its own destiny for many years. This is a hyper-growth company that has never stopped being a startup. Amazon stock will continue to outperform the equity markets in general, in spite of its high price.From a valuation perspective, it has never been cheap, but management backs it up because they continue to deliver. The bottom line doesn't matter as much when AMZN continues to deliver astonishing growth and open up new income streams.There is technical risk from the charts. If AMZN stock falls below $1,750 it can retest $1,620 fast. This is a momentum stock, so it moves quickly in either direction. Should that happen, it won't change the overall thesis of the stock.Conversely, above $1,840 the bulls can trigger a rally to fill the gap to $1,975 per share. Chip Stock to Buy: Advanced Micro Devices (AMD)Source: Shutterstock AMD stock has been the champion of all chip stocks for a while, although it stayed in the shadows of Intel (NASDAQ:INTC) for decades. But now AMD shines bright and casts its own shadow over the whole industry. Last year, when stocks across the sector were falling, Advanced Micro Devices finished up 50%. This outperformance continues into 2019.Year-to-date it is still heads and shoulders above everybody else. Perception counts, and for most experts on Wall Street, Advanced Micro Devices CEO Lisa Su has the benefit of the doubt there. As long as investors believe that she has steered the company into the best wind possible, dips in AMD stock are opportunities to add to the longs. * 8 Dividend Aristocrat Stocks to Buy Now No Matter What Valuation of AMD is not cheap -- but you get what you pay for given the performance of the stock itself. Conversely Intel and Nvidia (NASDAQ:NVDA) have not recovered their mojo after falling from grace. They no longer get the benefit of the doubt on Wall Street like AMD.Technically the AMD stock posture is bullish. It has been setting higher lows while it attacks the closing all-time highs. This is in spite of tremendous nervousness on Wall Street. Should these fears abate, the AMD stock breakout is all but a guarantee. AI Stock to Buy: International Business Machines (IBM)Source: Shutterstock IBM stock is a conundrum for me. I do not like the management because International Business Machines has lagged so far behind other mega-tech stocks in making the transition into the world of subscription models. But I am willing to give it a pass this time because technically, the stock has fallen into support. So if the markets recover from this ongoing geopolitical tizzy, IBM stock may have some short-term upside. This could also serve as a decent entry point into the speculative play on artificial intelligence.For decades, IBM has told us that it is the leader in this sector of artificial thinking. If that's the case, then as artificial intelligence becomes more ubiquitous in our day-to-day lives, IBM will start reaping the rewards from its decades-long efforts in the field. These benefits should then materialize into its stock.Owning IBM at these levels doesn't carry a lot of frothy risk. It sells at a modest price-to-earnings ratio of just over 10 and pays a 4.8% dividend yield.Although there is a great chance that all three will be winners, I prefer either AMZN or AMD stocks over IBM. This is because they have already earned their place in the new order of the tech world. All that AMZN and AMD need to do is continue on the same path. The IBM success story will require blazing a new path.Since the equity markets are near all-time highs and we have so many geopolitical risks looming, there is no rush to bet all your chips at once. Patience is a virtue -- especially under these circumstances.Nicolas Chahine is the managing director of SellSpreads.com. As of this writing, he did not hold a position in any of the aforementioned securities. Join his live chat room for free here. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 10 Real Estate Investments to Ride Out the Current Storm * 7 Marijuana Penny Stocks to Consider for Those Who Can Handle Risk * 7 Safe Dividend Stocks for Investors to Buy Right Now The post 3 Great Tech Stocks to Buy for the Future appeared first on InvestorPlace.
Tue, 13 Aug 2019 15:46:40 +0000
| ||Is Red Hat still Red Hat? Longtime insider talks IBM transition
With the dust starting to settle from IBM’s $34 billion buyout, a Red Hat exec says Big Blue has stayed true to its promises – so far.
Tue, 13 Aug 2019 11:25:00 +0000
| ||Koch’s Massive Tech Bet: ‘Do It or We’ll End Up in the Dumpster’
(Bloomberg) -- It’s not quite what you’d expect from a Koch. Certainly not before the gray-haired Rotary Club in Wichita, Kansas.But there was Chase Koch, scion of one of America’s mightiest private industrial dynasties—a family revered by the political right, reviled by the left and feared by just about everyone—joking about his knock-about years down in Texas.It was back in the early 2000s, Chase said, after he graduated with a marketing degree from the proudly anti-Ivy League Texas A&M (His father, Charles, and uncle, David, studied engineering at MIT, as did his grandfather, Fred). Reluctant to tap the Koch network for a job, he was hunting for work, banging out Led Zeppelin covers with his band and, as he put it, “screwing around in Austin.”Times change—and, with time, the Kochs do, too. Chase, 42, now sits on the board of Koch Industries and is president of Koch Disruptive Technologies, the conglomerate’s venture-capital arm. He’s at the sharp edge of efforts to prepare for a knowledge-based future where cheap computers, data and artificial intelligence might threaten the firm’s dominance.He’s also positioned to control one of the world’s most powerful closely held companies, and represents the future of the conservative political network that has put the Kochs among the country’s most influential families.See the list: The Richest Families in the WorldFew people are aware of just how big Koch is, or the industries it inhabits. Much as Warren Buffett grew Berkshire Hathaway Inc. from its textile-mill roots, Koch keeps about 90% of its profit and pumps the money back into its businesses or buys new ones. It’s now a sprawling network of subsidiaries reporting back to headquarters in Wichita. They include forestry products (Georgia Pacific), fertilizer (Koch Ag & Energy Solutions), fabrics (Invista), commodities trading (Koch Supply & Trading) and ranching (Matador Cattle).The brothers invested well. The $21 million company that Charles joined in 1961 is now worth about $139 billion, a 662,000% return, or roughly 16% annually over almost six decades. Charles and David own about 84% of the company (Elaine Marshall owns most of the rest, gaining control of the stake after the 2006 death of her husband, E. Pierce Marshall).Historically, these investments were in industrial assets—refineries, chemical plants, sawmills.But over the past few years, they’ve been more futuristic, especially in the venture-capital arm led by Chase Koch. The conglomerate has invested billions of dollars in software, network technology, big data, AI, medical technology and 3D printing. “It’s actually really smart for them to do this,” said Hans Swildens, chief executive officer of Industry Ventures, which manages more than $3.4 billion of institutional capital. “If you owned a large number of industrial businesses, and you were looking at all the new technologies that were coming out and how they would affect your business, the best thing that you can do is embrace those.”Jim Hannan, an executive vice president who oversees about half of Koch’s subsidiaries, said tech “has led to a much more common set of issues and opportunities across all our businesses.”At the same time, big industrials are struggling to grow.“We are rapidly moving to a digital economy,” said Nick Heymann of William Blair & Co. “Most of the net worth in the last 20 years in this country has been created outside tangible manufacturing businesses.”For Charles Koch, it was a question of survival. At a 2017 leadership meeting, he pushed his managers to embrace technology and prepare for a knowledge-based future. His message: “Do it or we’ll end up in the Dumpster.”Falling technology costs are generating new threats to established industries.There’s “a level of competition that these players did not face,” said Sanjay Agarwal of Boston-based venture-capital fund F-Prime Capital. “Now you can have startups out of a garage building an autonomous vehicle. That was just not possible earlier.”Cheap computing power and data will fundamentally change every industry, said Koch Chief Financial Officer Steve Feilmeier. The firm said it has invested more than $17 billion in technology companies since 2013, with big bets in cloud computing and enterprise data analytics. Investments have included acquisitions as well as strategic stakes.If it’s going to be disrupted by a new technology, Koch wants to be doing the disrupting and “investing in it in a way where we better understand it,” Feilmeier said.The focus on tech isn’t as big a shift as it appears, said Christopher Leonard, author of “Kochland,” a just-released book about the dynasty.“If you go back to the 1970s, this company was a knowledge company,” he said. “Yes, they owned oil refineries, but they also filled the basement with IBM computers to study the crude-oil market, the gasoline market, to figure out how to run the refineries at the most optimum level.” Data analytics have been embedded in the Koch DNA for decades, Leonard said. “I’m not at all surprised that they’re making bigger moves into that space. It builds on their expertise.”Trying to reposition a huge industrial conglomerate around digital technology doesn’t always have a happy ending.General Electric Co. “made this big effort and got over its ski tips to make itself the platform for industrial digital analytics, and it got way more expensive more quickly” than former CEO Jeff Immelt anticipated, said William Blair’s Heymann.Byron Trott, the founder of merchant bank BDT Capital Partners, who has worked with Koch for more than 25 years and advised on several acquisitions, doesn’t see it running into the same problems. GE faced short-term pressures that come with being publicly traded, he said, while “Koch is doing this because they are really, really good at thinking long term.”Chase Koch’s group has made some of the more ambitious bets outside of Koch’s traditional areas of expertise, like investing in InSightec Ltd., a manufacturer of ultrasound-based surgical tools that can eliminate the need for incisions. He’s the only member of the family from the next generation that works at the company. His sister Elizabeth Koch runs a publishing house, Catapult Books, and David’s children are much younger.Still, Chase took a somewhat unconventional path.After graduating from Texas A&M, he spent several years in Austin playing in a band covering Led Zeppelin, Phish and the Grateful Dead, and trying to find his way in the city’s tech startup scene. While he previously held summer jobs at Koch, including his first at a cattle ranch at age 15, he spent the years after graduation avoiding his father’s shadow.“I was too proud to tap into the Koch network,” he told the Wichita Rotarians.Although he was schooled in his family’s politics from a young age—he recalls Saturdays as a 6-year-old listening to books on tape by Milton Friedman—it’s unclear whether he shares the political philosophy of his father and uncle, who ran for vice president as the Libertarian Party nominee in 1980.“I start with the idea that to learn and grow, you’ve got to be open to other people’s ideas,” Chase Koch told Politico last year. Politics, while important, is “not at all what I’m passionate about.”That raises questions about what will become of the Koch political network, which gives his father outsize influence in the U.S. “There is no comparison for any CEO in corporate America in terms of political influence when compared to Charles Koch,” Leonard said.The Kochs sponsor candidates, think tanks, advocacy groups and academic groups pushing a conservative, free-market agenda. Recently, there have been disagreements with the Republican Party under President Donald Trump on issues such as free trade and immigration. Americans for Prosperity, the Kochs’ primary political advocacy group, is shifting focus toward “finding nonpartisan solutions,” according to a June memo, and it’s prepared to support candidates who get things done regardless of party.In July, the Kochs partnered with liberal investor and philanthropist George Soros to found the Quincy Institute for Responsible Statecraft, a think tank dedicated to promoting peaceful U.S. foreign policy.Leonard said he isn’t convinced the moves constitute a real change to the Kochs’ political goals.“It feels like an adaptable reaction to the moment,” he said, “even as Koch keeps its eye on the long-term strategy of doing one thing, which is constraining the reach of the federal government, dismantling the administrative state and pushing back the reach of government as far as possible.”The political network is “exactly like the corporation,” he said. “It’s run with a long-term view. It has strategic patience.”When Chase returned to Wichita to rejoin Koch Industries after his years in Austin, he began a rotation of high-level jobs, including stints in mergers and acquisitions, tax structuring, agronomics and trading. It was designed as an MBA-like experience to familiarize him with various parts of the operation.Koch Industries won’t detail its succession plan beyond saying that one is in place, and that roles are filled by those most qualified.If Chase eventually succeeds his father in running the firm and the political network, he’ll become one of the country’s most influential people. To contact the author of this story: Tom Maloney in New York at firstname.lastname@example.orgTo contact the editor responsible for this story: Pierre Paulden at email@example.com, Peter EichenbaumSteven CrabillFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Tue, 13 Aug 2019 11:00:09 +0000
| ||33-Year-Old Founder Raises $51 Million to Add AI to Call Centers
(Bloomberg) -- An Indian startup that aims to use artificial intelligence to deliver faster and more personalized customer support for corporate clients is raising $51 million in funding from investors including March Capital Partners and Chiratae Ventures.Uniphore Software Systems Pvt, based in Chennai and Palo Alto, Calif., plans to use the emerging technology to change the labor-intensive business of call centers, displacing workers with machines. Former Cisco Systems Inc. Chief Executive Officer John Chambers’ JC2 Ventures owns about 10% of the startup. Existing backers also include Analog Devices Inc. founder Ray Stata and Infosys Ltd. billionaire co-founder Kris Gopalakrishnan.Umesh Sachdev, 33, founded the company in 2008 with his engineering classmate Ravi Saraogi. They are competing with technology giants like Google, Microsoft Corp. and International Business Machines Corp. as well as at least a dozen AI startups to automate the $350 billion call center industry, helping agents deliver more useful support while decreasing the number of infuriating and ineffectual experiences.“This is one of the largest rounds in an area of deep tech already seeing a lot of investor activity,” CEO Sachdev said in a telephone interview. “It represents the coming of age of conversational AI.”He declined to reveal the startup’s valuation, but said it is “one step away from turning into a unicorn,” the tech industry’s term for a value of $1 billion or more.Voice bots and automated messaging systems are already changing the world of call centers, and experts reckon the majority of human workers will be driven to obsolescence by artificial intelligence. By 2021, about 70% of organizations will integrate AI to assist employee productivity, researcher Gartner Inc forecast earlier this year.Using messaging apps, chatbots and speech-based assistants, so-called conversational artificial intelligence automates communication and delivers personalized experiences. “Virtual agents are gaining ubiquity via smartphones and messaging platforms to support customer care, marketing and employee efficiency,” said Dan Miller, the lead analyst with Saint Paul, Minnesota-based Opus Research.Sachdev estimates that the U.S. alone has 3.9 million call center workers and those numbers will steadily diminish as companies adopt new technologies. “Humans will shift from taking mundane calls to enhancing knowledge and teaching AI what is the good answer and how to resolve issues,” he said.Uniphore will use the funds to hire talent, invest in research and development and accelerate expansion, particularly in its primary market in North America. The startup plans to increase its engineering and development operations to 200 employees in India by the year end, while another 60 will be based in the U.S. and 40 in Europe and Asia Pacific. Its customers include BNP Paribas SA, Genpact Ltd., NTT Data Corp., and PNB MetLife.“Indian entrepreneurs are going from slow-followers to fast-innovators,” said Chambers in an interview earlier this year, explaining why he’s backing Uniphore. “I see a young breed of founders who are hungry for a piece of the future.”To contact the reporter on this story: Saritha Rai in Bangalore at firstname.lastname@example.orgTo contact the editors responsible for this story: Peter Elstrom at email@example.com, Edwin ChanFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Tue, 13 Aug 2019 09:15:00 +0000
| ||IBM and Red Hat Need to Prove the Skeptics Wrong
Up until this past week or two, International Business Machines (NYSE:IBM) stock has had a surprising year. IBM stock, which bottomed at $105 last winter, roared back to as high as $150, making for a cool 40% gain for anyone that bought near the lows. That said, IBM stock has retreated along with the rest of the market in recent days.Source: Shutterstock Still, IBM has had several reasons for its turnaround. For one thing, the massive deal to acquire Red Hat is wrapping up now. As IBM starts to integrate Red Hat into its broader product offerings, it gives the company some great upside potential. Generally, analysts have been quite dour about the deal, saying the company overpaid and will still struggle to unseat the big dogs in the cloud. With expectations on the low side, International Business Machines stock could get moving if the Red Hat integration achieves reasonably good results. A Huge Opportunity for IBM StockIn an investor presentation earlier this month, IBM laid out the case for optimism following the Red Hat acquisition. It starts with a huge addressable market. IBM views the hybrid cloud as a nearly $1.2 trillion market. That breaks down as $550 billion for cloud services, $350 billion for cloud software, $150 billion for infrastructure and $100 billion for equipment sold to the service providers for cloud companies.InvestorPlace - Stock Market News, Stock Advice & Trading Tips * 8 Dividend Aristocrat Stocks to Buy Now No Matter What IBM at present has a roughly $125 billion market cap, so getting even a decent chunk of these fast-growing markets could turn the company's momentum around after its years of underwhelming performance. IBM also notes that in a recent survey, 58% of businesses said that they operate multi-cloud environments. This gives IBM and other companies more opportunity to catch up to the established leaders like Amazon (NASDAQ:AMZN) and Microsoft (NASDAQ:MSFT).The government's current focus on concentrated power in the tech industry is another plus for IBM stock. President Donald Trump's administration has made moves to rein in the big tech titans this year. These include having the U.S. Department of Justice and the Federal Trade Commission investigate the big companies and Trump tweeting specific provocations toward certain firms. For example, Trump recently accused Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG) of meddling in the 2020 election via its search algorithm in a series of Aug. 6 tweets.Against that backdrop, we have the military cloud decision. The U.S. Department of Defense was set to give a massive contract to Amazon or Microsoft. But thanks to the government's worry about big tech's monopoly power, this decision has now been delayed, opening the door to other players such as IBM. The Dow Jones Index FactorIt's important to note that the company's performance likely isn't responsible for all of IBM stock's gains this year. We must also consider the effect of index investing on IBM stock. What's going on here?IBM stock is one of the larger components of the Dow Jones Industrial Average, which as you probably know, only has 30 stocks. What you might not know is that the Dow Jones is price-weighted rather than market-cap weighted. This means that the higher a company's stock price, the more influence it has on the Dow Jones index. In parallel, it means that index funds such as the SPDR Dow Jones Industrial Average ETF (NYSEARCA:DIA) have much larger allocations to Dow components which sport a relatively high stock price.So the highest-priced stock in the Dow, Boeing (NYSE:BA), which has bobbled around the $350-per-share mark over the past six months, is the largest member of the index. Stocks under $100 have far less exposure in the Dow index and related passive funds. IBM stock, given its relatively high price, is among the top 10 holdings in the Dow. These 10 stocks make up more than half the entire index. So when people panic and sell the Dow as an index, as they did last fall, IBM stock gets clobbered. When people buy the market back up, IBM stock gets a big lift.This dynamic explains much of why IBM stock is doing so well compared to tech stocks that aren't in the index so far this year. If the market keeps going up, this will be a big tailwind for IBM stock as passive money flows in. But as we saw over the past week, sentiment can reverse on a dime. IBM Stock VerdictThis is an exciting time for IBM stock. The company has some serious momentum so far this year. For one thing, people are starting to wake up to the possibilities of the Red Hat acquisition. While the deal was mostly panned last year, analysts are rethinking it. Look at the hybrid cloud opportunity. If IBM can pull it off, the stock looks really cheap around $135.Right now, IBM stock is selling for 11x trailing earnings, less than 10x forward earnings, and a nearly 5% dividend yield. That's an incredible bargain in this market if IBM is able to return to any sort of consistent revenue growth. Even in a steady state where cloud growth offsets revenue declines in legacy businesses, investors would still make strong returns in IBM stock from this starting price.Now it's a question of execution. The vision and road map look great. But will they be able to deliver? IBM investors have suffered through years of underwhelming performance. Now is management's time to prove the doubters wrong. In coming quarters, we'll see if they can pull it off.At the time of this writing, Ian Bezek owned IBM stock. You can reach him on Twitter at @irbezek. More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 7 Large-Cap Stocks to Sell Right Now * 7 Stocks Under $7 to Invest in Now * 7 Marijuana Stocks With Critical Levels to Watch The post IBM and Red Hat Need to Prove the Skeptics Wrong appeared first on InvestorPlace.
Mon, 12 Aug 2019 17:31:49 +0000
| ||This Day In Market History: IBM Launches First PC
Each day, Benzinga takes a look back at a notable market-related moment that occurred on this date. What Happened? On this day 38 years ago, IBM (NYSE: IBM ) launched its IBM Personal Computer. Where The ...
Mon, 12 Aug 2019 15:22:04 +0000
| ||Stick With AMD Stock: Su Is Staying
Men who coach sports teams use one strange trick to get what they want.After a winning season they, or their agents, quietly put out the word that they might move. Top college coaches talk of going pro, those in lower leagues talk about going to bigger leagues. Publicly, the rumor is denied, but often the contract is quietly renegotiated, with a big raise.Advanced Micro Devices (NASDAQ:AMD) President Dr. Lisa Su is the hot coach of the moment. So a rumor that she might be headed to International Business Machines (NYSE:IBM) roiled the stock after earnings.InvestorPlace - Stock Market News, Stock Advice & Trading Tips * 7 Stocks Under $7 to Invest in Now There was nothing to it. A quickly-tweeted denial sent the shares up 3%. The Aug. 12 opening AMD stock price bid of $34 per share is close to the stock's all-time high.But franchises will keep calling, and AMD shareholders are right to ask what life might be like after Dr. Su. What Hath Su Wrought On AMD StockUnder its previous management going back over 40 years, AMD stock was the Los Angeles Clippers of the chip world. They were losers, perennial also-rans behind mighty Intel (NASDAQ:INTC), which dominated that world the way the Los Angeles Lakers dominated LA basketball.But Su has turned new designs into monster hits. AMD's Ryzen chips continue taking share from Intel. The latest version of its EPYC chip, dubbed Rome, has even cracked Intel's cloud monopoly, with both Microsoft (NASDAQ:MSFT) and Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG) now among customers. Meanwhile, AMD's Radeon graphics chips are riding the wave created by Nvidia (NASDAQ:NVDA), which expanded their use into data centers and artificial intelligence. A new version of AMD's graphics card is now launching.AMD was hit by the chip slump, but it seems to be pulling out of it quickly. Sales for the second quarter fell 13% from a year ago but gross margins rose to 41%. Advanced Micro Devices Is Still a Small TeamThe problem is, to continue our sports analogy, AMD stock isn't in Intel's league.Intel has more than 10 times AMD's sales. It has five times more cash and short-term investment on the books. It delivered nearly $30 billion in operating cash flow last year. AMD had barely any. If AMD is Rice University, my alma mater, Intel is the University of Alabama.If Dr. Su were a sports coach, there would be big teams coming for her every day. If Intel were to roll up the money truck for her, it's hard to see her saying no. But business, sadly, is not sports, even if sports is a business. Intel chose a finance guy, Robert Swan, as its CEO in January.The IBM rumor was also silly. Analysts do expect CEO Virginia Rometty to retire, but her replacement is widely expected to be Jim Whitehurst. IBM spent $34 billion on Whitehurst's Red Hat and he has sound ideas for changing IBM's corporate culture, which is what that company needs.If Su were to be hired instead, IBM stock would tank. Bottom Line On Advanced Micro Devices StockCEOs aren't paid like founders. After eight years running Apple (NASDAQ:AAPL) Tim Cook still isn't a billionaire.AMD stock was hit by the earnings release. Some are calling it overpriced. Dr. Su is facing another season where she must prove the doubters wrong.Besides, CEOs are mostly paid through stock options, golden handcuffs that anyone hiring them away would have to replicate. Would Intel really swallow its pride and pay the big bucks for an outsider, a woman, for its turnaround?It's unlikely, but I do wish they'd think about it.Dana Blankenhorn is a financial and technology journalist. He is the author of the mystery thriller, The Reluctant Detective Finds Her Family, available at the Amazon Kindle store. Write him at firstname.lastname@example.org or follow him on Twitter at @danablankenhorn. As of this writing he owned shares in AAPL and MSFT More From InvestorPlace * 2 Toxic Pot Stocks You Should Avoid * 7 Large-Cap Stocks to Sell Right Now * 7 Stocks Under $7 to Invest in Now * 7 Marijuana Stocks With Critical Levels to Watch The post Stick With AMD Stock: Su Is Staying appeared first on InvestorPlace.
Mon, 12 Aug 2019 15:13:11 +0000
| ||Amazon's AWS Lake Formation Ups the Ante in Data Lake Space
Amazon's (AMZN) is likely to gain momentum in the data lake solutions space with its fully managed service, AWS Lake Formation.
Mon, 12 Aug 2019 13:25:01 +0000
| ||These 15 companies occupy the most office space in Austin
Forty-six large companies account for 22% of the office space in Austin. This means that Austin’s fate is more vulnerable to the national economy than ever before, and to the whims of tech behemoths such as Google, Apple, Dell Technologies and IBM.
Mon, 12 Aug 2019 12:47:57 +0000
Feed available at: http://finance.yahoo.com/rss/headline?s=IBM