by Anura Guruge
Related Posts: ++++ Search on ‘IBM’ & ‘mainframes’ for MANY other Wolfeboro related posts >>>>
Market Caps [viz. all outstanding shares x current stock price] are kind of funny though there is no denying that they do tell a very telling tale. After yesterday evening’s stellar, ‘blow-out’ 2Q results by Facebook it now has a Market Cap higher than most companies — including IBM. To me that is sobering and scary. I used to own IBM, but never on a large scale and never for long. I have been in CSCO and AAPL for longer and for larger positions. But, IBM, as I would often write in my various columns and articles is, or definitely was, in my blood. My claim used to be, in the context of where I stood when it came to IBM vs. the ‘rest’ [and I am old enough to remember the ‘BUNCH‘], was that when ‘cut’ I always bled ‘dark blue‘. IBM was my life from 1974 to c. 2004. Though I only worked for IBM, as an employee, for 5 years (and a part-time consultant for a year), my expertise in many things IBM, in particular mainframes and networking, and I was, “Mr. SNA” for two decades, was how I made a living from 1980 to c. 2010. I followed IBM like there was no tomorrow. I had to. That was what was expected of me.
<< BUNCH = Burroughs, Univac, NCR, CDC and Honeywell. RIP. >>
To see IBM missing out on ‘social’ and ‘mobile’ distresses me. I still care for IBM. It is part of my life and legacy.
IBM screwing up on technology trends, of course, is not new or news. IBM, though it came up with the term ‘PC’, in the end missed out on the PC revolution. OH, do I remember OS/2! Missed out on minis too — and I speak as one that worked for Wang and DG. Lost networking too — and that is what hurt me, in every sense, psychologically and financially. I won’t even mention (bloody) ATM (and NO, we are not talking cash dispensing ATMs) or the (damned) nWays. Talk about Lost Opportunity Costs! Oh dear.
IBM should have, could have, acquired any of these ‘social’ companies if it really tried.
‘Cloud’ is now its big thing. I smile. I have seen this all play out before. Grid Computing, Autonomic Computing (and I even started writing a book on ‘Grid & Autonomic’), SAA … the list goes on.
But what the Market Cap does not reflect is IBM’s continued revenue stream and real, tangible assets.
Facebook, per yesterday’s run-rate, probably will end up with 2014 revenues of around $15 Billion. That is good. IBM, on the other hand, will end up close to $100B!
IBM’s balance sheet states that it had, in 2013, $51B in assets. Facebook, in 2013, had $13.7B.
But here is where I, having had first hand experience of SOME of the amazing properties, see a huge difference. IBM, like the Vatican, has some dynamite real estate investments. ‘Hursley Park’ where I worked is a gem. But, they have so many like that — many in the U.S. Yes, they have divested themselves of MANY since the 1980s. But, per the balance sheet they still have over $50B in property, buildings and land. Facebook $6B.
But, Market Cap does not lie!
Market Cap reflects investor sentiment and belief — and therein lies the rub. Investors, rightly, think of FB as the future, IBM as the past.
I own 5 FB shares! I didn’t bother with the IPO. I knew I wouldn’t get any. Instead, just for fun, I bought 5 shares, on the IPO day for “free” (i.e., using money from an AAPL options call I wrote), at the IPO price, just to say that I had participated in the IPO of the ‘year’. Yes, now it is up 91% — which, alas, is still not that great!
Anyway just was just a ‘stream of consciousness’ because it bothers me to see IBM continuing to lose GROUND.