A consultancy business is only as good as the knowhow it can impart onto clients. So it speaks volumes that, when asked what sets IBM Consulting apart, Lee-Han Tjioe, General Manager for Hong Kong and Macau, points to its rich and varied expertise.
“We have both business consulting and technology consulting in our scope,” Lee-Han says. “We have business consultants in our team that help clients with their strategy, with their new propositions, with defining or optimising business processes. That's one part of our practice. The other part is where we also advise on specific technology topics. So we have consultants that are very specialised in key technologies like AI and Hybrid Cloud that can help clients to achieve technology enabled major operational improvements. We basically have both deep business and technology skill sets to deliver end-to-end solutions.”
IBM has been a trusted advisory and delivery partner with high market reputation for decades, and has further developed into an eco-system provider with recent major corporate acquisitions to expand its AI and Hybrid Cloud skill sets to support clients with implementing differentiating industry and technology solutions. Today, IBM works closely and collaboratively with companies and eco-system partners to achieve required business model changes enabled by modern digital solutions which, without reliable partners, would be hard to scale at fast pace.
In many cases, IBM’s clients are international and local conglomerate companies across multiple key industries. “We are co-creating with our clients and ecosystem partners to develop new propositions and experiences, and applying best practices in a fast fashion with fast go-to-market. One example is with an insurance company that we work with on IOT for “pay-how-you-drive” insurance. And so we helped the client to actually get the right technologies into the cars to track driving behaviours and attach that to very innovative insurance propositions.”
IBM’s partnership with AXA
Another example is IBM’s strong partnership with insurance company AXA, which has endured for many years. Initially, AXA had their applications managed by providers over the world but was looking to consolidate, recognising that it was very hard to achieve consistent levels of service as well as cost-effectiveness. AXA brought IBM on board to manage those applications but also to help them innovate.
“Our partnership with AXA means that we are delivering multi-year support for the business-critical applications that AXA has,” Lee-Han continues. “Those applications are supporting distribution, sales, and key internal operations. We have transferred knowledge of 60 applications within four months and now support about 100+ applications. This is the foundation for our partnership with AXA. We are now helping with further accelerated0 deployment of API-based services on AXA’s digital platform to meet the fast developing new market needs.”
IBM Consulting and Our Transformation
IBM Consulting’s business can be broken down into four pillars: 1. Strategy Consulting, where it works with clients to define vision and blueprint for its future; 2. Experience Consulting, where Garage and Design thinking approaches are applied to redefine new experiences for clients and their customers; 3. Operations Consulting, in which it examines how it can optimise current business activity with automation and new technologies such as AI and IoT; and lastly 4. Technology Consulting, where IBM helps clients to implement or manage enterprise solutions and leverage Cloud technologies for optimising application management.
It’s a diverse remit – but at the heart of everything the firm does is the Virtual Enterprise, IBM’s framework that helps clients in their pursuit of digital transformation. Transformation is not just about taking on technical hurdles, IBM’s depth of transformation experiences and understanding of key industry opportunities proofs a Virtual Enterprise approach can be achieved with an end-to-end vision for achieving business growth.
READ THE FULL AXA HONG KONG REPORT HERE
The MarketWatch News Department was not involved in the creation of this content.
Jul 11, 2022 (Heraldkeepers) -- New Jersey, United States-In the following decade, the global Enterprise Information Management Market is supposed to altogether rise. With personalisation on the ascent, the medical care industry isn’t expected to be safe. Not exclusively may the patient’s clinical history be digitized, yet additionally the preparatory activities that ought to be finished. This is the way the medical care industry will work before long.
The statistical surveying Enterprise Information Management Market report is a careful and top to bottom assessment of the current state of the business by specialists. This measurable reviewing report gives the most forward-thinking market data and future patterns, permitting you to recognize the things and end clients that are producing income development and advantage. It centers around the genuine drivers and limitations for the significant partners, as well as the ebb and flow challenge status and future improvement potential.
The worldwide Enterprise Information Management market is expected to grow at a booming CAGR of 2022-2030, rising from USD billion in 2021 to USD billion in 2030. It also shows the importance of the Enterprise Information Management market main players in the sector, including their business overviews, financial summaries, and SWOT assessments.
Enterprise Information Management Market Segmentation & Coverage:
Enterprise Information Management Market segment by Type:
Cloud Computing, Big Data, Others
Enterprise Information Management Market segment by Application:
Aerospace & Defense, BFSI, IT and Telecommunication, Energy and Power, Government, Healthcare, Hospitality, Retail, Transportation and Logistics
The years examined in this study are the following to estimate the Enterprise Information Management market size:
History Year: 2015-2019
Base Year: 2021
Estimated Year: 2022
Forecast Year: 2022 to 2030
Cumulative Impact of COVID-19 on Market:
During the COVID-19 scourge, the business is offering basic help to states’ advanced framework the whole way across the world. People and legislatures at all levels, government, state, focal, metropolitan, and commonplace, have been in persistent contact to provide and get continuous data on COVID-19.
Get a trial Copy of the Enterprise Information Management Market Report: https://www.infinitybusinessinsights.com/request_sample.php?id=837736
APAC (Japan, China, South Korea, Australia, India, Rest of APAC is additionally sectioned into Malaysia, Singapore, Indonesia, Thailand, New Zealand, Vietnam, and Sri Lanka) and Europe (Japan, China, South Korea, Australia, India, Germany, UK, France, Spain, Italy, Russia, Rest of Europe is additionally divided into Belgium, Denmark, Austria, Norway, Sweden, The Netherlands, Poland, Czech Republic, Slovakia, Hungary, and Romania).
The Key companies profiled in the Enterprise Information Management Market:
The study examines the Enterprise Information Management market’s competitive landscape and includes data on important suppliers, including IBM, Oracle, Open Text, EMC, SAP, OpenText, OTSI,& Others
Table of Contents:
List of Data Sources:
Chapter 2. Executive Summary
Chapter 3. Industry Outlook
3.1. Enterprise Information Management Global Market segmentation
3.2. Enterprise Information Management Global Market size and growth prospects, 2015 – 2026
3.3. Enterprise Information Management Global Market Value Chain Analysis
3.3.1. Vendor landscape
3.4. Regulatory Framework
3.5. Market Dynamics
3.5.1. Market Driver Analysis
3.5.2. Market Restraint Analysis
3.6. Porter’s Analysis
3.6.1. Threat of New Entrants
3.6.2. Bargaining Power of Buyers
3.6.3. Bargaining Power of Buyers
3.6.4. Threat of Substitutes
3.6.5. Internal Rivalry
3.7. PESTEL Analysis
Chapter 4. Enterprise Information Management Global Market Product Outlook
Chapter 5. Enterprise Information Management Global Market Application Outlook
Chapter 6. Enterprise Information Management Global Market Geography Outlook
6.1. Enterprise Information Management Industry Share, by Geography, 2022 & 2030
6.2. North America
6.2.1. Market 2022 -2030 estimates and forecast, by product
6.2.2. Market 2022 -2030, estimates and forecast, by application
6.2.3. The U.S.
22.214.171.124. Market 2022 -2030 estimates and forecast, by product
126.96.36.199. Market 2022 -2030, estimates and forecast, by application
188.8.131.52. Market 2022 -2030 estimates and forecast, by product
184.108.40.206. Market 2022 -2030, estimates and forecast, by application
6.3.1. Market 2022 -2030 estimates and forecast, by product
6.3.2. Market 2022 -2030, estimates and forecast, by application
220.127.116.11. Market 2022 -2030 estimates and forecast, by product
18.104.22.168. Market 2022 -2030, estimates and forecast, by application
6.3.4. the UK
22.214.171.124. Market 2022 -2030 estimates and forecast, by product
126.96.36.199. Market 2022 -2030, estimates and forecast, by application
188.8.131.52. Market 2022 -2030 estimates and forecast, by product
184.108.40.206. Market 2022 -2030, estimates and forecast, by application
Chapter 7. Competitive Landscape
Chapter 8. Appendix
What are the different utilizations of valuable metals?
What are the principal components that are pushing the Enterprise Information Management market forward?
What is the main snag to worldwide Enterprise Information Management market extension?
What are the overall Enterprise Information Management market’s most significant districts?
International: +1 518 300 3575
The MarketWatch News Department was not involved in the creation of this content.
BANGKOK, June 22, 2022 /PRNewswire/ -- Electricity Generating Authority of Thailand (EGAT), an agency that oversees the Thailand's power security under the Ministry of Energy, announced today that it has expanded the use of AI-powered asset management solutions to all power plants.
This includes its baseload and renewable power plants covering more than one million high-value assets in total. This transformation will help drive more accurate and faster power production, prediction, and planning, that can help lower the cost of power production and enable EGAT to better support the electricity price for Thailand. The increased efficiency also leads to less carbon footprint and help drive a more sustainable operations.
The integrated, single view of insights on power production and maintenance of all its power plants are keys to EGAT to move towards sustainable operations and reduce its carbon footprint in order to comply with Thailand's energy sector 'Carbon Neutrality' goal, with a balance between power production cost, impact on environment and the reliability of Thailand's power system.
Paitoon Tangjitruamboon, Assistant Governor Generation of EGAT, said "EGAT today looks not only at adopting technology to maximize efficiency and minimize capital expenditure, but also at how it can bring benefits to citizens while taking into account the sustainability aspects of asset management and reduced adverse environmental impact. Being able to reduce our power production cost enables EGAT to better support the electricity price for Thailand. In addition, the proven increased production efficiency also leads to the expanded use of IBM's AI-powered asset management system at our hydroelectric and solar power plants. This drive towards clean energy practice will help EGAT reduce carbon footprint and achieve our environmental sustainability goals."
EGAT started adopting IBM's AI-powered Maximo Enterprise Asset Management solutions in January 2021 with Triple Dot Consulting Co., Ltd., an IBM business partner. The integrated insights from all power plants allow EGAT to predict asset failure and maintenance, while also managing its assets with inventory analytics. This has lowered the cost of purchasing new equipment, reduced unnecessary space utilization, and extended strategic asset lifecycles.
The virtual management of its inventory, together with the use of machine learning, allows EGAT to see health scoring and life of each component in real time, which helps minimize the unplanned downtime, disruption and asset failure. Predictive maintenance also leads to decreased time that EGAT's inspectors need to spend on monitoring assets.
Surarit Wuwong, Country Manager for IBM Thailand's Technology Group, said "organizations today must be equipped with fast and accurate asset monitoring and predictive maintenance capabilities, with unified data and all the relevant devices being integrated in real time. Most importantly, sustainability aspects should be included into an investment decision. EGAT today is leading the way, not only in Thailand but also in ASEAN, with three imperatives for modern asset management: scalable, sustainable and real-time inspection and monitoring anywhere, anytime, on any device."
Extreme weather, climate action failure and human-led environmental damage were cited as the top three most likely risks for businesses over the next ten years in the World Economic Forum's Global Risks Report 2021.
About IBM Maximo Enterprise Asset Management:
IBM (NYSE: IBM) Maximo Enterprise Asset Management is today deployed across 99 countries, seven continents and used by many of the world's largest organizations. For more information, please visit www.ibm.com/products/maximo/asset-management.
IBM Thailand Co., Ltd.
As major American corporations began to welcome workers back in the spring, they were surprised by what they saw: fewer employees than they expected who wanted to return to offices. That was the case at Ford, which told CNBC back in April that the initial numbers were "lower than we expected," and more recent comments from the CEO of IBM show that many workers at the biggest firms prefer to remain working from anywhere but the office, at least most of the time.
Only 20% of IBM's U.S. employees are in the office for three days a week or more, the tech company's CEO Arvind Krishna told CNBC's Sara Eisen at the Aspen Ideas Festival on Monday. Krishna added that he does not see a scenario where the balance ever gets back to over 60% of workers in the office more often than not.
In an earlier tech era, IBM was one of the first major tech firms to embrace remote work before it was common, with at one point in the 2000s as much as 40% of its workers remote, but it ended up reversing course and requiring workers to again be based in offices in 2017. Now, the paradigm has shifted again.
"I don't think it'll ever cross 60," Krishna said. "So I think we've learned a new normal."
IBM had over 280,000 workers globally at the end of last year.
Krishna does expect employers to get some leverage back when it comes to wages, though only a lower level of wage inflation rather than a reversal of it. "We will get an adjustment of wages," Krishna said at the Aspen Ideas Festival. "I expect to see a decrease in the growth rate, a step down."
He also indicated the wage pressures will vary depending on market.
"The 8-9% inflation or the 5% in wages is not uniform. Some pockets are 9 to 20," he said. "Some pockets are close to flat, and that's going to cause some inequity as we go forward."
Krishna added that IBM's own hiring inflation has been 9%-plus. "Ours is on the upper end, ours is well above nine I would say for replacement workers," he said. "It is so hard to get people."
Most of the layoffs taking place in tech, he said, are at the unprofitable firms, and other recent reporting from CNBC and survey data from the tech industry do show that workers remain in the driver's seat when it comes to job offers and many firms plan to continue aggressively hiring.
Krishna does not expect overall inflation to come down quickly, staying well above the Fed's target of 2% next year. IBM is preparing for a "period of more sustained inflation," Krishna said, and a return to the Fed target of 2% not realistic for another three to four years.
This doesn't mean he sees a recession coming, as he described the current period of high inflation combined with a labor market shortage as atypical and making past economic precedents less significant as forecasting tools.
Meanwhile, tech spending remains strong in the business to business segment, Krishna said, with sectors including retail, banking and finance, and pharmaceuticals and biotech all spending more on technology.
"We're not seeing a slowdown in the B2B space," he said.
Watch the vide above for highlights from the full interview with the IBM CEO at the Aspen Ideas Festival during which Krishna also provides the tech giant's view on the Supreme Court abortion decision and its approach to responding to political issues.
Disclosure: NBCUniversal News Group is the media partner of the Aspen Ideas Festival.
The trading price of International Business Machines Corporation (NYSE:IBM) floating lower at last check on Wednesday, July 13, closing at $137.37, -1.30% lower than its previous close.
Traders who pay close attention to intraday price movement should know that it has been fluctuating between $138.565 and $141.55. The company’s P/E ratio in the trailing 12-month period was 24.90, while its 5Y monthly beta was 1.10. In examining the 52-week price action we see that the stock hit a 52-week high of $144.73 and a 52-week low of $114.56. Over the past month, the stock has gained 0.88% in value.
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International Business Machines Corporation, whose market valuation is $125.50 billion at the time of this writing, is expected to release its quarterly earnings report Apr 18, 2022 – Apr 22, 2022. The dividend yield on the company stock is 4.74%, while its Forward Dividend ratio is 6.60. Investors’ optimism about the company’s current quarter earnings report is understandable. Analysts have predicted the quarterly earnings per share to grow by $2.29 per share this quarter, however they have predicted annual earnings per share of $9.69 for 2022 and $10.43 for 2023. It means analysts are expecting annual earnings per share growth of 22.20% this year and 7.60% next year.
Analysts have forecast the company to bring in revenue of $15.25 billion for the current quarter, with the likely lows of $15.09 billion and highs of $15.42 billion. The average estimate suggests sales will likely down by -18.60% this quarter compared to what was recorded in the comparable quarter last year. From the analysts’ viewpoint, the consensus estimate for the company’s annual revenue in 2022 is $60.99 billion. The company’s revenue is forecast to grow by 6.40% over what it did in 2022.
A company’s earnings reviews provide a brief indication of a stock’s direction in the short term, where in the case of International Business Machines Corporation No upward and no downward comments were posted in the last 7 days. On the technical side, indicators suggest IBM has a 50% Buy on average for the short term. According to the data of the stock’s medium term indicators, the stock is currently averaging as a 100% Buy, while an average of long term indicators suggests that the stock is currently 100% Buy.
Here is the average analyst rating on the stock as represented by 1.00 to 5.00, with the extremes of 1.00 and 5.00 suggesting the stock should be considered as either strong buy or strong sell respectively. The number of analysts that have assigned IBM a recommendation rating is 20. Out of them, 11 rate it a Hold, while 7 recommend Buy, whereas 0 assign an Overweight rating. 0 analyst(s) have tagged International Business Machines Corporation (IBM) as Underweight, while 2 advise Sell. Analysts have rated the stock Hold, likely urging investors to take advantage of the opportunity to add to their holdings of the company’s shares.
If we dig deeper into the stock’s outlook, we see that the stock’s PEG is 1.92, which symbolizes a positive outlook. A quick review shows that IBM’s price is currently -1.13% off the SMA20 and 0.29% off the SMA50. The RSI metric on the 14-day chart is currently showing 46.40, and weekly volatility stands at 1.55%. When measured over the past 30 days, the indicator reaches 1.99%. International Business Machines Corporation (NYSE:IBM)’s beta value is currently sitting at 0.93, while the Average True Range indicator is currently displaying 2.86. With analysts defining $115.00-$185.00 as the low and high price targets, we arrive at a consensus price target of $146.35 for the trailing 12-month period. The current price is about 16.28% off the estimated low and -34.67% off the forecast high, based on this estimate. Investors will be thrilled if IBM’s share price rises to $145.00, which is the median consensus price. At that level, IBM’s share price would be -5.55% below current price.
To see how International Business Machines Corporation stock has been performing today in comparison to its peers in the industry, here are the numbers: IBM stock’s performance was -1.30% at last check in today’s session, and 3.40% in the past year, while Microsoft Corporation (MSFT) has been trading -1.47% in recent session and positioned -8.53% lower than it was a year ago. Another comparable company Alphabet Inc. (GOOG) saw its stock trading -1.01% lower in today’s session but was down -12.04% in a year. Furthermore, Alphabet Inc. (GOOGL) showed a decrease of -1.12% today while its price kept declining at -10.20% over the past year. International Business Machines Corporation has a P/E ratio of 24.90, compared to Microsoft Corporation’s 26.47 and Alphabet Inc.’s 22.13. Also during today’s trading, the S&P 500 Index has plunged -0.34%, while the Dow Jones Industrial also saw a negative session, down -0.65% today.
An evaluation of the daily trading volume of International Business Machines Corporation (NYSE:IBM) indicates that the 3-month average is 5.37 million. However, this figure has increased over the past 10 days to an average of 4.05 million.
Currently, records show that 899.30 million of the company’s shares remain outstanding. The insiders hold 0.10% of outstanding shares, whereas institutions hold 57.00%. The stats also highlight that short interest as of Apr 28, 2022, stood at 21.65 million shares, resulting in a short ratio of 4.14 at that time. From this, we can conclude that short interest is 2.41% of the company’s total outstanding shares. It is noteworthy that short shares in April were down slightly from the previous month’s figure, which was 21.68 million. However, since the stock’s price has seen 4.13% year-to-date, investors’ interest is likely to be reignited due to its potential to move even higher.
Even if we find ourselves in a bear market, my pair of stocks will be looking to provide alpha from the long stock, as I anticipate the long stock will outperform the short position over time. I picked both stocks from the software sector since it has some unique characteristics that make exponential growth more attainable. Here's how the spread long Datadog (NASDAQ:DDOG) and short IBM (NYSE:IBM) looks like historically, since 2019 when Datadog got listed:
There are 2 ways in which I think about this stocks pair. Firstly, we can look at the fundamentals to decide which companies are suitable for both long and short. Secondly, another important filter is technical analysis, especially for the short part. There are many types of potential shorts that I can choose from, but in the end, I decided to go with a mature company that everybody expects will perform well and the return will be much lower than the return for my long position. I am thinking about this in terms of cyclical vs defensive stocks so I will try to pick a low-beta stock as my short.
I will for sure avoid any high growing company that has a rough patch and has fallen out of the investors' grace (the grow at all cost type of company). These have a small chance of recovering and usually the high growth translates into a high beta. This is not a risk that I'm willing to take so I will go for a mature company that signals a potential slowdown in the business performance.
Firstly, I need to decide which industry might provide the best returns after the tide will turn. And I believe that it will. Perhaps not in a few weeks or months, but it will. In my opinion, one of the best industries to invest in is software. It showcases low fixed costs, which creates operating leverage (proved by very high gross margin), small amount of (CAPEX) required to grow exponentially, high % of recurring revenue, which offers good revenue visibility and improves the free cash flow, and low debt. These characteristics make software companies more resilient in the face of an economic recession, especially the ones that don't carry any debt on their balance sheet and have a strong cash position or the ability to consistently generate free cash flow.
To identify the best software companies, I will use the Rule of 40. It's a widely used software metric that usually contains the quarterly YoY revenue growth and operating margin or FCF margin as % of revenue. For the revenue part I will use the 2022 expected revenue CAGR to remove the seasonality that might appear when using quarterly data. Moreover, I will use the (LTM) FCF instead of operating margin as I believe it's the most rigorous metric to look at and it showcases a company's ability to generate cash, even when having negative operating margin.
Another important aspect that I need to consider in the analysis is the stock-based compensation. I believe this is a true economic cost for the company and as a result I will not add back the (SBC) to the Net profit when calculating the Operating Free Cash Flow. I will treat the SBC as a real expense and since it's already expensed on the Income Statement, I will not add it back. The formula that I used for FCF becomes:
(FCF) = Cash from operations - CAPEX
As we can observe, when expensing the SBC, there are only 6 companies that have a Rule of 40 > 40%. The best from this data set is Datadog. It has a result of 71%, composed of 57% YoY revenue growth and 14% FCF margin. This is not enough to decide if this will be my pick and further analysis is needed for their unit economics.
Datadog created a platform that integrates and automates infrastructure monitoring, application performance monitoring (APM) and log management to provide unified, real-time observability of their customers' entire technology stack. Since 2018, when the company introduced its log management product, it became one of the first to combine the "three pillars of observability" to enable digital transformation and cloud migration. Datadog is designed to be cloud agnostic and easy to deploy, with hundreds of out-of-the-box integrations and endless customizability.
Datadog has recently been named a leader in the APM and Observability space by research and consulting firm Gartner. Other leading companies are Dynatrace, New Relic, Honeycomb, and IBM:
Datadog uses ARR as their preferred key performance indicator. ARR is defined as the annual run-rate revenue of subscription agreements from all customers at a point in time. It is calculated by taking the monthly run-rate revenue and multiplying it by 12.
The company grew its customer base very fast during the last couple of years. More importantly, the company has done a great job of attracting new customers with more than $100k in ARR. At the end of 2021, Datadog had more than 2000 customers, growing 64% as compared to 2020. Moreover, we can observe the concentration around the big customers since this cohort represents around 83% of Datadog's ARR.
Datadog employs a land-and-expand market strategy centered around offering products that are easy to adopt and have a very short time to value. Then, customers can expand their footprint on a self-service basis. Its go-to-market strategy, in conjunction with its ability to consistently come up with new products, offers its customers numerous opportunities to upsell. As a result, at the end of 1Q22, 81% of Datadog's customers were using 2+ products, while 35% were using 4+ products. This proves a high ROI on its R&D investments as the platform expands and creates new complementary offerings:
As a result, the company had an incredible 130%+ Net dollar retention rate for the last 19 consecutive quarters. This represents the ARR from the same set of customers in one period, relative to the year-ago period.
This metric shows how well the company is using its sales & marketing team. It's important to analyze sales efficiency to ensure that growth is efficient and sustainable. The formula that I used is:
(CAC) = S&M Expenses period n-1 / Nr of new customers in the current period
This shows how many years it takes on average for a customer to produce enough gross profit to pay back its CAC. It incorporates the S&M expense per customer, the revenue gained from the customer but also the gross margin of the company:
(CAC) payback period = Average S&M Expense per customer / Average revenue per customer x Gross margin
The gap between the CAC and gross margin per customer has decreased and now the company has a CAC payback period of around 1.1 years (~ 13 months), which is a small improvement from 2020. This is an encouraging sign, especially considering that the average SaaS company has a CAC payback period above 12 months, as we can see from the work of Jamin Ball:
Datadog has been one of the few companies that has consistently delivered on its guidance. It crushed revenue and earnings expectations pretty much every single quarter since it got listed:
Moreover, Datadog also raised its guidance for revenue and earnings in Q1 of 2022 and despite economic uncertainty, the company shows no signs of slowdown. This proves that management has tremendous confidence in the demand for Datadog's products:
"Our strategic focus remains to invest aggressively in R&D and go-to-market to optimize for long-term growth. In Q1, we are pleased to have had our best-ever quarter of hiring, and we plan to continue hiring aggressively throughout 2022." - Datadog's CFO, May 2022
As a result of management's confidence in the underlying business for 2022 and onwards, estimates for earnings per share have been adjusted accordingly. Although the risk for an economic recession is elevated and historical performance doesn't guarantee future performance, I believe that management proved its ability to execute and deliver on their estimates. Moreover, management owns a big piece of the company, around 9.5%, which shows that management's objectives are aligned with the shareholders' best interests:
Datadog has a strong balance sheet: at the end of 2021 it had around $1.5 billion in cash & equivalents, around $735 million in debt, while the number of outstanding shares has only increased 6% since 2019, when the company got listed:
Datadog grew it revenue tremendously during the last couple of years, with its gross margin remaining relatively constant, around 77%, while EBITDA came in around breakeven in the last 2 years. The fact that Datadog grows so fast without accumulating big losses is a major plus and it all comes from the operational expenses that are very well managed by the company. Here's how the OPEX look like as % of revenue:
An encouraging trend that started with 2021 is that R&D as % of revenue surpassed the S&A plus G&A as % of revenue. Moreover, R&D grew as % of revenue, surpassing 40% for the first time ever. This shows a commitment to invest in new products and create opportunities to upsell its existing customers, which is exactly what I want to see from a company that innovates and tries to be at the forefront of its industry.
Moreover, the S&M spending isn't out of control and has actually decreased as % of revenue, which is a rare occurrence for a software company growing so fast.
As I've highlighted before, Datadog's cash flow statement is a big plus for the company. It consistently shown positive operating cash flow. Moreover, even when expensing the (SBC), the operating cash flow remains positive:
The only downside that I can see for the CF statement is the Accounts receivables balance. It has consistently grown, and it might show difficulties in collecting payments from its customers. In order to find out if that's a real concern, let's look at the Days Sales Outstanding (DSO), which represents the average number of days it takes credit sales to be converted into cash or how long it takes a company to collect its account receivables. It is defined as:
Days Sales Outstanding = (Average Accounts receivables / Revenue) * 365
DSO has consistently been around 80 days, while in 2021, in spite of the growth in the Accounts Receivables balance it has improved to around 77 days. As a result, this is not a concern for the cash-flow statement of the company. Lastly, the very low amount of (CAPEX) needed for the growth of the business is yet another plus for Datadog:
If we open the Valuation tab here on Seeking Alpha, that thing looks awful. Starting with a high Price/Sales and gigantic Price/Earnings, pretty much every metric shows that the company is ridiculously overvalued:
Moreover, when we compare the best high growing software companies, Datadog is one of the most expensive stocks when considering metrics like Enterprise Value / 2022 Gross Profit. I'm focusing on this metric since it incorporates the operating leverage that a high gross margin company has created. Additionally, Enterprise Value is a better metric to use than Market Capitalization since it also takes into account debt and cash. Here's how the SaaS high growers are valued:
Datadog is the 3rd most expensive company from this data set (26X), while the median multiple for this data set is around 11.5X. However, the company has one of the biggest 2021-2023 revenue CAGR, sitting around 47%.
Datadog is expensive. No doubt about it. But giving that Datadog is a leader in terms of revenue growth and ability to generate free cash flow, I believe that the company will always trade at a premium to the software median, especially as long as the company continues to execute and deliver on its guidance. The management shown a trend of consistently delivering on their estimates, which instills confidence for potential investors.
When considering historical valuation, Datadog's stock is as cheap as it has ever been, sitting around 18X EV/Revenue, in the ballpark of its March 2020 multiple, decreasing from a high of more than 50X EV/Revenue:
Ideally, I want to pick a slowly downgrading company. I don't want a stock so beaten up that it sits now below $5 and can swing wildly between $1 and $5. Firstly, I need to decide which industry I want to short. Generally, I try to pick a pair of stocks from the same industry, as a way of eliminating the industry-specific risk. Let's imagine I'm long a software company and short an EV stock, my returns could suffer in the case of EV-specific news that will lift all the EV stocks. But picking both stocks from the same industry removes, at least partially, this unsystematic risk.
This is the most difficult part for me since I am a permabull. I don't generally look for shorting opportunities since there are so many stocks that offer outsized returns by going long. Still, here are some characteristics that I want to see for a short pick, starting with the fundamentals: slow revenue growth anticipated, low-margin business - I really don't want to short a company with 80% gross margin (perhaps only if it decreased from 90%) since this translates into significant operating leverage, high S&M spending (especially without growing revenue fast; this shows that its sales team's efforts don't provide a good ROI), high G&A spending - a sustained trend is even better, negative free cash-flow or decreasing earnings per share, if positive. I probably won't find a company that has all these, but I'll do my best.
Next let's turn to the technical analysis. This is an important filter that will tell me if the declining company has also a declining stock. Remember, for a high growing company (yearly revenue CAGR > 30%), many of the things that I've listed above are common. In terms of technical analysis, I'm looking for:
Now that I've highlighted what I'm looking for, let's see why I've chosen to short IBM:
IBM has multiple revenue streams. The one that competes directly with Datadog is in the enterprise observability and APM space after IBM bought Instana at the end of 2020. This fits into IBM's software segment, which also includes solutions like: switching from legacy to cloud architecture, creating data-driven business insights, automatization of end-to-end processes across IT and business environments and keeping the applications and data secure.
IBM grew its Software revenue 5.3% in 2021, while the gross margin for this segment is the highest from all the business segments, around 79%. Moreover, the Software segment is the biggest by revenue, with around 42% of IBM's total revenue. Moreover, most of the growth came from the Red Hat solution, which is the leading hybrid cloud software platform, and the only one that is fully integrated and open source:
Fundamentally, IBM fits the pattern. It's an old, established company that couldn't surprise the market much in terms of growth and innovation. The stock has a 24 months beta of around 0.57, which is ideal for the scope of my investment. Moreover, its forward revenue growth is actually negative as the company is expected to have revenue below its 2021 numbers for the next two years:
Gross margin is around 55%, which shows some operating leverage, but it's way lower than the 80% that a software company usually has:
Regarding operational costs, the company has a cumulative S&M and G&A costs of around 34.5% of revenue at the end of 2021. These have been elevated during the last 3 years compared to the historical trend, which shows that IBM didn't manage to sustain its operational leverage during the last financial years:
Moreover, if we look at the earnings per share estimates, IBM shows the opposite trend as compared to Datadog. Their earnings forecast has been adjusted on the downside, which shows that the business might have a rough patch in the next couple of quarters:
In terms of cash-flow, the company has an extraordinary ability to generate cash. Using the same formula from above, where we expense the SBC, FCF sits around $9.75 billion at the end of 2021, while the FCF margin is ~ 17%. Moreover, IBM has a strong cash position that will provide the company liquidity in case of unexpected economy turbulences:
One thing that is worth noting for IBM is the $45 billion that the company has in debt. This is above the company's average debt balance, and it might be concerning in the current interest rates environment, especially since the company has historically used debt as a way of financing:
To conclude the fundamental analysis of IBM, I'm not banking on the fact that IBM will crumble. It has enough cash on its balance to keep its operations going and it has already reached a mature stage that makes it easier to optimize costs in case of a recession. My bet is that the company's better days are behind it and there is no transformative growth in sight for the next couple of years.
IBM has a high valuation grade, which might be misleading in my opinion. The company seems to have both P/E and Price / Cash Flow lower than the sector median. This implies that the stock is "cheap", but that's not always a positive. In this case, the stock is cheap because as I've highlighted before, most of its growth is in the past. Moreover, having a dividend yield much bigger than the sector shows that IBM can't find as many investment opportunities that can offer a high ROI. As a result, the company prefers to just pay back its shareholders.
I don't own Datadog yet. But it's not because of the company, but because of the economy and the fact that the stock didn't reach my target. I see $74 as a really strong support during the last 2 years, so that's obviously where I want to open a position. Considering the recent drawback in all assets, not buying Datadog has been a real test of patience, but I do believe that the price will hit that $74 level sooner rather than later, depending on the broad economy:
On the other hand, the more convincing reason for which IBM is a good short is the technical side. Let's look at the weekly chart for IBM's stock:
Firstly, the trend is obviously bearish. Moreover, the company has been in a consolidation stage since the end of 2018, when it dropped below $142. This level represents a very strong resistance, that rejected the price action on several occasions. On the other hand, we have the $102 support that has also been hit several times. IBM stock did absolutely nothing during the last 3 and a half years. I know what a trader might think: the bigger the consolidation area, the stronger the breakout. But I do not think this will be the case unless IBM will have a significant breakthrough from an operational perspective.
Even when using the adjusted for dividends price, the stock still didn't go anywhere for the last couple of years, as the range between its support ($102) and resistance ($142) has a span of only $40.
Considering we are currently in the middle of a multiples' compression, there is no way to anticipate how much more the software multiples will decrease. For now, this is an important element for all software stocks. Secondly, I believe that my spread will create beta only if the economy doesn't go into a recession in the next couple of quarters. If that would be the case, my long stock will be much more impacted than my short one and the spread will offer negative returns.
However, in the scenario where the economy doesn't crumble, Datadog stock might not offer the expected return because of a couple of reasons: investments in the company's expansion aren't as successful as expected, Datadog fails to expand beyond the US, its execution isn't as good as it was in the past, the R&D investments don't provide a good ROI, which leads to less new products and less upselling opportunities or the company's go-to-market strategy is not as successful as the management anticipated.
Another important risk is that IBM stock will behave better than I anticipated. The reason might be either fundamental (IBM makes operational breakthroughs after aggressive investments and reignites its growth) or technical (stock breaks out its consolidation phase and the stock rallies). Still, since IBM has a low beta, I believe that the most significant risk is that Datadog underperforms. For IBM I'm only betting on the fact that the company won't provide outsized returns as compared to Datadog.
This pair of stocks will offer outsized returns only if the overall market will regain its bull trend. My long pick carries a high degree of volatility and there's a high chance that the multiples compression isn't done. As a consequence, I expect Datadog stock to have more downside on the short-term, which will offer investors the opportunity for a better entry, so please be aware of these unprecedented market conditions before investing.
IBM and the All England Lawn Tennis Club have revealed new ways in which Wimbledon fans around the world can experience The Championships digitally, powered by artificial intelligence (AI) running on IBM Cloud and hybrid cloud technologies.
Co-created by the All England Club and IBM for Wimbledon.com and the Wimbledon app, the new features join a comprehensive suite of digital fan experiences – including the IBM Power Index with Watson, IBM Match Insights with Watson and Personalised Recommendations and Highlights Reels – all designed to help global audiences stay more informed and engaged with players, matches and the tournament.
New features for 2022 include:
• ‘Win Factors’ brings enhanced explainability to ‘Match Insights’: Building on the existing Match Insights feature of the Wimbledon app and Wimbledon.com, IBM is providing an additional level of explainability into what factors are being analysed by the AI system to determine match insights and predictions. Win Factors will provide fans with an increased understanding of the elements affecting player performance, such as the IBM Power Index, court surface, ATP/WTA rankings, head-to-head, ratio of games won, net of sets won, recent performance, yearly success, and media punditry.
• ‘Have Your Say’ with a new interactive fan predictions feature: For the first time, users can register their own predictions for match outcomes on the Wimbledon app and Wimbledon.com, through the Have Your Say feature. They can then compare their prediction with the aggregated predictions of other fans and the AI-powered Likelihood to Win predictions generated by IBM.
The Wimbledon digital features are underpinned by IBM Watson and leverage a hybrid cloud approach – using a combination of on-premises systems, private clouds, and IBM Cloud – enabling increased flexibility and efficiency. IBM Cloud provides the foundation and scalability for these digital experiences. It hosts and processes data from matches that is fed into AI models built using IBM Watson Studio and IBM Watson Discovery to produce insights for fans, commentators and media.
Alexandra Willis, communications & marketing director, The All England Club, said: “Leveraging technology to help fans become more informed, engaged and involved throughout the Wimbledon Fortnight is at the core of our strategy to ensure we are leveraging innovation to keep Wimbledon relevant and deliver outstanding digital experiences for fans, wherever they may be. In partnership with IBM, we are thrilled to bring an even more dynamic and interactive digital experience to fans around the world this year as Wimbledon returns to full capacity. Core to these experiences is our ambition to help fans get closer to Wimbledon by understanding which players to follow and analyse, and inviting them to get involved with new match predictions and insights features, alongside our extensive scoring, news and video content across our channels.”
Kevin Farrar, sports partnership leader, IBM UK & Ireland, said: “The digital fan features on the Wimbledon app and Wimbledon.com, beautifully designed by the IBM iX team and powered by AI and hybrid cloud technologies, are enabling the All England Club to immerse tennis lovers in the magic of The Championship, no matter where they are in the world. Sports fans love to debate and we’re excited to introduce a new tool this year to enable that by allowing people to register their own match predictions and compare them with predictions generated by Match Insights with Watson and those of other fans’.”
As the Official Technology Partner of The Championships for the past 33-years, IBM has developed solutions to modernise and streamline workloads, and delivered innovative digital experiences to engage sports fans around the world through IBM iX, the experience design arm of IBM Consulting. Leveraging the same technologies IBM uses with businesses across industries and around the world, Wimbledon continues to accelerate innovation and Improve the digital fan experience. The full suite of IBM-powered digital experiences on Wimbledon.com and the Wimbledon App includes:
IBM Power Index with IBM Watson
IBM Match Insights with IBM Watson
Personalised Recommendations and Highlights Reels
The Championships, Wimbledon will run from June 27 to July 10, 2022. To see the technology in action, visit Wimbledon.com or download the Wimbledon app on your mobile device, available on the App Store and Google Play Store.
IBM was among the first companies to help shape the parameters of the IT department and the ever-evolving role of CIO, and IBM CIO Kathryn Guarini has had a front row seat to watch the role change throughout her 22-year career with the technology giant.
Prior to becoming CIO last year, Guarini was COO of the IBM Research Division, arming her with extensive experience working with emerging technology and other innovations coming from IBM.
“Back in around the 1950s is when the first CIO roles really emerged," Guarini said. "And it was just beginning to be clear that technology would be a differentiator for us — IBM was advocating on behalf of our clients to elevate the role that IT leaders would play in enterprises."
And elevate CIOs have. From their early days as IT operations managers, CIOs have evolved to hold a firm place in the C-suite where they now are “sitting at the table and influencing decisions, whether that be the investment or the strategic decisions, and reacting to those decisions by putting the right investments and priorities in place to support the needs of the business,” Guarini said.
With a background working directly with some of the biggest innovations to come out of IBM, Guarini occupies a unique space at the intersection of technology and business, even among CIOs.
Like most CIOs, Guarini has a strong focus on emerging technologies, sustainability, and employee experience — key facets in delivering business value to her organisation. But in helming IT at IBM, she is also tasked with identifying what technologies make the most sense not only for IBM but also its CIO clients.
The evolving CIO role
In the past decade, IT has catapulted from back-office function to a vital department key to the success of nearly every business.
As strategic business partners, CIOs must now ensure the organisation’s technology agenda is “driving the most meaningful impact to the business,” Guarini said. And today that means not only having a firm grasp on business priorities and how to lead IT to achieve them but also a clear understanding that today’s CIOs must make sure the tools in place are effective and don’t stand in the way of employees getting their jobs done, Guarini said.
“We try to bring the technology to Improve the overall outcomes that we’re trying to achieve, … and if we can stay focused on that user experience it usually points us in the right direction on those things that matter most,” she said, adding that a large part of the role of CIO involves ensuring technology can “drive efficiencies, reduce friction, and Improve user experience” in the workplace.
There may be no greater example of how vital IT is to employee experience than the COVID-19 pandemic. Overnight, organisations around the globe had to pivot to remote work, whether they were prepared to or not. At IBM, which operates globally in 170 countries, the pivot to remote work was “relatively seamless,” said Guarini. The company had already been operating in a largely hybrid model, with flexible workplace best practices in place.
But even with a mostly seamless transition, there were still “additional requirements” that the pandemic put on the IT department, Guarini said.
IBM IT had to evaluate how to support that many “concurrent remote employees” with networking solutions, how to manage workflows that used to take place in person with product development and incident response, and other “interesting new challenges, both technical and process” that had to be dealt with due to the shift to remote work, she said.
Bridging the client/vendor divide
But a key remit for today’s CIOs, and one Guarini is uniquely positioned to understand, is helping organisations figure out where to make the right investments to “drive the innovation agenda,” she said, adding that CIOs must “shape the direction and influence the investments” as they are ultimately the ones responsible for ensuring that those investments adequately support business initiatives.
Here, Guarini operates in an interesting nexus — she is CIO of IBM, but as CIO, she’s also an IBM client.
“I am using the same technology that IBM develops and brings to our clients," she added. "And I want to be a few years ahead of where our clients are. I want to be an early adopter of that technology, help to validate it, make it better, demonstrate how it can scale, and meet the kind of challenges of a large-scale complex enterprise like IBM. When it can work for IBM, it will work for our clients as well."
Key to prioritising emerging technology, Guarini said, is being able to sift through the noise and identify technology that will be valuable to the organisation. Here, the CIO leans on her experience in the research arm of IBM, where evaluating trends to identify technology that will impact business was a central facet of the job.
“I think both automation and AI offer so much promise,” she said. “And we are beginning already to realise that promise and to see the benefits. But it’s not the technology in isolation — we need to think about ‘how do we marry that technology with the business process and the opportunity to really drive something that’s of value’?”
For example, IBM has deployed automation software such as Turbonomic, Red Hat Ansible Tower, and Konveyor Tackel to handle various aspects of IT automation to Improve reliability, efficiency, and scale, while also cutting down on human interactions with IT systems.
The company has also embraced IBM robotic process automation (RPA) across several business areas, including management, finance, compliance, and procurement, ultimately reducing manual labor by 234,000 hours and minimising the risks that can come from human error. They have also used RPA to automate invoice processing, to link system identities, to verify access requests, to notify managers for approval, and to spot potential conflicts with assigned duties across different users.
IBM has also deployed bots to help HR employees manage tasks such as job changes, department transfers, and salary adjustments. Chatbots are also being used to Improve IT support, answer simple questions, manage customer feedback, and manage invoicing.
The vendor has also integrated AI into its pricing process to remove inconsistencies or inherent bias. Since deploying AI for customer support issues, Guarini said IBM has seen a 26 per cent reduction in time-to-resolution of customer support cases.
Adopting emerging technologies at IBM
Having come from the IBM Research Division, which consists of around 3,000 technical scientists and engineers who help shape the future of AI, cyber security, quantum computing, and hybrid cloud, Guarini knows a lot must happen between identifying transformational technology and deploying it.
And that responsibility is even more important when internally vetting emerging technology as an enterprise IT provider — because as any client CIO knows, no matter how promising a technology may be, there are several hurdles to clear before it can be adopted and deployed at enterprise scale.
“We have ideas of what technology should do, but sometimes the complexity of deploying some of this technology becomes more challenging than we anticipated in a design dreaming session," she said. "When we begin to deploy it as an early adopter, a sponsor user, or an anchor client; that’s when we can figure out what it will take to make this work in practice in a real-life environment. And that’s really powerful."
Guarini feels her research background makes her more likely to “partner with IBM’s RD functions, to leverage emerging technologies at scale, and to question how we can drive innovation into our agenda,” she said.
She finds herself in a “unique position to be able to validate enterprise IT use cases,” while also ensuring that the IT department itself is an “early adopter of IBM’s own innovations,” which can ultimately help make the company’s solutions even better.
Moreover, sharing with IBM customers these real-life use-cases of IBM technology in action at scale helps “demonstrate what’s possible, brings credibility to our offerings, and builds confidence with our clients and partners,” said Guarini, who has also launched a blog, Making IT Real, where she details the various technologies IBM has embraced and how they’ve helped the organisation.
“I’ve both learned a lot and been able to bring a new perspective based on my experience in the rest of the company," she said.
"Certainly, the challenge of meeting the unique needs of our large, complex enterprise means that not all innovations are ready for large-scale production deployment. That’s okay. It’s been instructive to experiment with emerging technologies and determine what’s suitable for our needs and where we can provide feedback to enhance solutions."
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