IBM earns less – but maintains dividends

San Francisco This was not how Arvind Krishna imagined his entry. Born in India, he has been CEO of IBM. The disaster began in March. In the first two months of the year, IBM was still on target with its self-set goals. But then the full corona braking came.

IBM is the first company in the tech industry to present its figures. Giants like Microsoft, Amazon, alphabet, Alibaba or Oracle will follow. They will not be able to avoid every negative trend either.

On Monday, as expected, Krishna canceled all forecasts for 2020 due to the extreme uncertainty and at the same time emphasized the healthy balance sheet and financial situation of the company: “We will emerge from the pandemic more than we entered”, he promises to investors.

The cloud business is growing strongly. And the high dividend is also certain, he emphasizes. But Wall Street doesn’t want to hear about it at the moment. The stock plummeted by a good four percent.

March turned everything upside down. First, new business broke away because customers across the world suddenly changed their priorities. It was no longer about breaking into a new, digital millennium. Instead, the existing IT systems had to be prepared for the emerging corona crisis in an almost panic.

Within a few days, entire companies were converted to home offices that had never heard of them. IBM cites an insurer as an example, in which 40,000 employees were converted to remote work within a few days.

Overall, there have been clear shifts on the customer side. Above all, industries that predominantly rely on transactions, such as retail or car trading, suddenly saw themselves against nothing. Contracts have been canceled or not concluded.

Many contracts believed to be void

Financial institutions, payment processors, government organizations and important authorities in turn had to expand their IT in order to cope with the extreme increase in demand. For a children’s hospital in Atlanta, according to Krishna, IBM used the artificial intelligence “Watson”, for example, to set up a digital assistant to handle the countless calls from concerned parents. The system can answer over a thousand different inquiries. This greatly relieved the hospital and the staff.

But none of this was enough to compensate for the loss of contracts for business software that were actually believed to be safe. The industry traditionally brings contracts under wraps in the last two weeks of a quarter, said CFO James Kavanaugh. Now the signature dates had been canceled. Competitors Microsoft, Amazon, Google and Oracle may be affected.

The break-away was particularly noticeable among retail and automotive customers, it is said. But the CFO also emphasized that “around 70 percent” of IBM customers come from industries that, according to data from market researchers such as Gartner and IDG, are only “minimally” or “moderately” affected by Corona, such as credit card or utility companies.

In the end, from January to March, IBM had consolidated sales of $ 17.57 billion, compared to $ 18.18 billion a year earlier. Factset analysts had predicted $ 17.59 billion. Net earnings are reported at $ 1.18 billion, or $ 1.31 per share. Last year it was $ 1.59 billion, or $ 1.78 per share.

The new cloud division went particularly well with the acquisition of the software manufacturer “Red Hat”. $ 5.24 billion in sales are up five percent.

Red Hat had $ 1.1 billion in sales, which would have been an increase of 20 percent in isolation. But for accounting reasons, only 719 million of them can be reported, explains CEO Krishna. Nevertheless, the acquisition is still of crucial importance.

Good liquidity

IBM relies on the “hybrid cloud”. Here, the old existing IT infrastructure is merged with new IT in a cloud. The US group believes that it can offer companies fast and affordable cloud solutions. IBM sees a potential trillion market in the hybrid cloud.

“Global Business Services” performed well with $ 4.14 billion. Analysts had expected $ 3.91 billion. For example, strategic advice, system integration and all programming work are summarized here. Services that are in demand now. All in all, however, was not enough to compensate for the failures in business software.

Even if IBM does not provide a forecast for the further course of business, the CEO remains cautiously optimistic. Recurring sales from long-term contracts now accounted for 60 percent of IBM’s business, ten years ago it was less than 50 percent.

In April, the CEO also points out, there were “no significant deviations” in the subscription business with software or services, Krishna encouraged in an interview with analysts. He feels “pretty good” with it. That’s why IBM maintains the fairly high dividend yield of over five percent. Krishna is “very confident” that she is not in danger.

IBM paid $ 1.4 billion in dividends in the prior-year quarter that were covered by free cash flow. In the twelve months to the end of March combined, total free cash flow was $ 11.6 billion.

Free cash flow not only pays dividends, but also share buybacks or acquisitions. IBM stopped buying back shares in mid-2019. Cash and cash equivalents were three billion dollars higher than last year. Such numbers are currently important to survive in these times.

More: Many companies are back on or near their record prices. But the choice for investors is not easy. What investors should know.

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Xerox withdraws billion dollar offer for HP

HP headquarters

The hostile takeover of the computer manufacturer was canceled.

(Photo: AFP)

San Francisco The US printer manufacturer Xerox In the middle of the corona virus pandemic, the planned hostile takeover of the computer company HP stops. Xerox described Tuesday night’s move as disappointing, but necessary to focus on addressing the current crisis.

Xerox had $ 35 billion for the much larger one HP offered, which makes about six times as much annual turnover. The group should have largely financed the acquisition through new debt.

Not only the financial uncertainty caused by Corona seems to have made the deal impossible, but also the impact of the pandemic on the business of both companies: Xerox mainly sells large printers that are used in offices and are currently hardly used and least of all are bought. HP, on the other hand, benefits more from the trend towards home office.

The Silicon Valley pioneer makes two thirds of its sales with home computers, and its printers are also aimed at private individuals. In the crisis, Xerox’s business is under more pressure than HP’s.

The value of Xerox stock has halved in the past five weeks, while HP’s share certificates have fallen by around a quarter, about the same as the overall market.
Both papers suffered from the end of the takeover fantasy: Xerox shares fell by more than two percent in morning trading in New York, and HP shares fell by more than nine percent.

Icahn is already moving on

The streak puller behind the deal was the activist investor Carl Icahn, who at least temporarily held larger shares in both companies. Icahn already seems to have shifted his focus: In an interview with CNBC, the billionaire said recently that the shares of some corporations are now being “given away”. He had long considered the stock market overvalued, but now there are stocks of some solid companies to buy cheap.

The withdrawal is considered a victory for HP boss Enrique Lores, who had rejected the takeover offer published for the first time in November as too low. In February, Xerox increased its offer again, whereupon Lores showed unwillingness to talk.

Now the Spaniard, who has only been leading HP since November, is confident that HP can survive the crisis on his own: “We have a healthy cash position and a balance sheet that enables us to tackle unexpected challenges like a pandemic while at the same time being strategic To keep options open for the future. ”

HP has invested heavily in the development of industrial 3D printers in recent years. These were used in the times of Corona in the production of face or respiratory masks.

More: Follow the current developments in the corona crisis in our news blog.

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Huawei expects a difficult year and threatens the US government

Huawei

Last year the group felt the effects of export restrictions.

(Photo: AFP)

Shenzhen For the world’s largest network supplier, Huawei, the current year could be the most difficult in its history due to the US sanctions. Eric Xu, Chairman of the Board of Directors, warned on Tuesday that further export restrictions could destroy global supply chains.

Huawei already felt the problems last year. The profit increase weakened significantly to 5.6 percent, which Huawei brought in the equivalent of almost 8.1 billion euros. It was the smallest plus in the past three years. Things were not going so smoothly, especially outside of China.

US-led Western intelligence agencies accuse Huawei of inappropriately connecting to the Beijing government. You suspect that the manufacturer’s equipment or cell phones could be used for espionage purposes. Evidence for this has not yet been presented, Huawei rejects the allegations.

Even so, the US government blacklisted the company and warned other countries against using Chinese equipment to build its 5G networks. In addition, the government in Washington also wants to take action against chip sales to Huawei.

“The Chinese government will not just watch and see how Huawei fillets are filleted on the kitchen board,” Xu warned. In return, China could also ban the use of 5G semiconductors or other products from US companies.

So far, Huawei has always stressed that it operates completely independently of the Chinese government. With the open threat to the United States, Xu now led reactions from Beijing.

The statements made by Huawei’s chairman are the latest high point in the dispute. Huawei had to launch its latest top devices outside of China without the Google Android operating system. Industry experts therefore fear a drop in sales. In Germany or other countries, consumers might not be willing to pay hundreds of euros for devices on which they cannot simply use popular services such as Google Maps or YouTube.

The Group’s sales climbed last year, primarily due to the flourishing smartphone business in Germany, by 19 percent to the equivalent of around 110 billion euros. According to market researcher Canalys, Huawei, as the industry leader, now has a market share of 39 percent in the People’s Republic. Huawei benefited from the fact that many Chinese wanted to buy smartphones from a domestic provider after the US blacklisted the company.

Huawei had actually announced that it would no longer use components from the United States for its products. When analyzing the new flagship smartphone P40, the Financial Times however, after components from US companies continued to be used.

More: Huawei builds first factory outside of China in France.

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Apple fined billions in France

Apple in Paris

In France, the US technology giant faces a fine of billions.

(Photo: dapd)

Paris The French competition authority has opposed Apple imposed a fine of a good EUR 1.1 billion for what they consider to be illegal distribution agreements. Apple had agreed with two wholesalers and thereby brought the market into line, said head of government Isabelle de Silva on Monday. In addition, the group ensured, among other things, through restrictive contractual clauses that devices from specialized Apple retailers were not sold cheaper than in its own stores. It is about various Apple products such as iPad tablets – but not about iPhones. Apple wants to file an objection.

For the French competition authority, Autorité de la Concurrence, this is the highest penalty ever against a single company. The two wholesalers Tech Data and Ingram Micro got away with significantly lower penalties of just under 63 and a good 76 million euros. The investigation triggered a complaint from Apple retailer eBizcuss in 2012. The company had withdrawn from France that year and is still active in Belgium.

Apple contested the allegations on Monday. The decision affects business practices that are over a decade old and contradicts more than 30 years of legal standards that all companies operating in France rely on.

Trading partners raise serious allegations

The competition authority denounced, among other things, that the role of the two wholesalers was reduced to the forwarding of quantities of items stipulated by Apple. There was no competition between them. Apple has set narrow limits for promotions at dealerships.

The agency quotes eBizcuss with the statement that Apple has asked Apple to increase prices if devices have been sold cheaper than the company itself. At the same time, Apple contractually prevented its specialized retailers from opening stores across Europe that sold exclusively competing brands.

Most recently, competition fines in Europe have cost billions Google get puffed up. The EU Commission accused the internet company of unfair competition for the Android smartphone system and the product search on its platform, among other things, and imposed fines totaling more than eight billion euros in three cases.

More: Apple on trial – A test case for EU tax rules

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USA extend exemption for trading in Huawei

Huawei

The United States extends an exception rule for doing business with the Chinese network supplier.

(Photo: AP)

Washington The US government has again extended an exception for trading with the Chinese network supplier Huawei by 45 days. The deadline now runs until May 15, the Ministry of Economy announced.

The US government blacklisted Huawei last May. This prohibits US corporations from doing business with Huawei. A few days later, however, the government decided to grant an exemption that would allow some US states to continue doing business with the Chinese company.

This was intended to ensure the regular operation of certain existing network technologies and devices in rural regions. This exception has been continuously extended since then.

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HP continues to resist Xerox acquisition

HP headquarters in Palo Alto

Management recently said it wanted to talk to Xerox to explore a possible combination in the interests of shareholders.

(Photo: AFP)

Palo Alto The PC and printer manufacturer HP Inc continues to resist the takeover efforts of the much smaller printer and copier manufacturer Xerox. Xerox’s offer reflects the value of HP not sufficiently reflected, announced on Thursday in Palo Alto, California. In addition, given the resulting debt, the acquisition would result in significant financial risks for HP shareholders.

Xerox has been trying to get HP since the fall, but it was down. In February the group increased its offer and since then has offered $ 24 per share in cash and Xerox paper. In total, Xerox would pay almost $ 35 billion for HP. The driving force behind a possible deal is the controversial US investor Carl Icahn, who holds large shares in both groups.

Most recently, HP management had said it wanted to hold talks with Xerox to explore a possible combination in the interests of shareholders, but at the same time had increased its share buyback program to $ 15 billion to help investors in the event of a hostile takeover attempt.

More: HP boss Enrique Lores is under pressure

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Microsoft issues sales warning for PC division

Microsoft

The Microsoft logo can be seen on a screen behind a group of people: Because of the corona virus, the software company has issued a sales warning for its “More personal computing” division.


(Photo: AP)

Redmond The computer giant Microsoft has canceled its previous sales target for the PC division due to the consequences of the novel corona virus. Microsoft warned on Wednesday after the US market closed that the forecast previously issued should not be achieved in the current business quarter due to burdens on the supply chain.

The stock reacted afterwards with losses and turned negative. Microsoft had forecast sales of between $ 10.75 billion and $ 11.15 billion for the division at the end of January. At the time, the group had deliberately specified an exceptionally wide range due to increased uncertainties due to the virus.

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HP boss Enrique Lores is under pressure

San Francisco, Dusseldorf Enrique Lores has only been CEO of HP since November – and possibly the last in the company’s history, which is considered the forefather of all garage start-ups. In front of the garage at 367 Addison Avenue in Palo Alto, where Bill Hewlett and David Packard developed the first electronic measuring devices, there has been a bronze sign since 1989: “Birthplace of Silicon Valley”.

1989 was also the year in which Enrique Lores began his career HP started. The electrical engineer started as an intern, never changed employers and instead worked his way up over three decades. He experienced and shaped two splits: 1999 the spin-off of the medical technology and measuring instrument business, which went public as Agilent.

And in 2015 the separation from the business customer division HPE. The business with computers, printers, scanners and software for private customers remained. At this point in time, the company no longer looked like the pioneer, but rather like the old Uropa of Silicon Valley.

When the group was split up, Lores headed the “Separation Management Office”, then he took over the business area for printers and printing solutions, where he was responsible for taking over Samsung’s printing business in 2017. When Dion Weisler left the HP chief position for personal reasons in November 2019, Lores moved to the top of the group.

It was not an easy start: Lores has to implement a billion-dollar savings program in which up to 9,000 out of 55,000 jobs worldwide are to be cut.

There was hardly any improvement in the quarterly figures that the company published on Monday after the US stock market closed: In the three months to the end of January, profit fell 16 percent year-on-year to USD 678 million. Revenue decreased nearly 1 percent to $ 14.6 billion.

struggle with Xerox and Icahn

Now Lores also has to fight for HP’s independence. Shortly after taking office, the significantly smaller printer manufacturer Xerox made a takeover offer for HP, supported by activist investor Carl Icahn, who holds shares in both companies and publicly emphasized the great savings potential of a merger. HP management at Lores has repeatedly rejected the Xerox offer as too low.

However, Xerox was not satisfied with this, the copier manufacturer secured a line of credit of $ 24 billion from several banks and increased the offer to $ 35 billion. HP is open to talking about a merger, Lores said when he first presented quarterly figures – at least if the deal created value for shareholders and contributed “to HP’s strategic and financial plan”. The manager doubts that.

The product ranges of the two companies complement each other. Xerox manufactures large printers and copiers for offices, HP products for private users. However, business has been shrinking for years: In times of digitization, less and less printing is taking place.

Lores must now convince the shareholders that his company is doing better on its own. HP has announced an extensive share buyback program: Instead of five, he plans to invest $ 15 billion to increase the price, financed with new debt.

It doesn’t sound like a great strategic idea. More like the fear of the end.

More: HP had previously resisted being taken over by rival Xerox. Now HP is open to discussions.

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HP talks to Xerox about merger after slump in profit

Palo Alto The PC and printer manufacturer HP earned significantly less in the most recent business quarter. In the three months to the end of January, earnings fell 16 percent year-over-year to $ 678 million (€ 625 million), the company said on Monday after the US market closed in Palo Alto, California. Revenue decreased nearly 1 percent to $ 14.6 billion.

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