Big techs have been largely ignored in the recent run-ups.
Their relative safety is a no-brainer. Their futures are assured (at least in most cases). Just look at this list of assets IBM has going forward, for example. I'm sure the same type of list could be compiled for LU, MSFT, WCOM and others. All I'm saying is that when someone like me is terrified of losses but sees a tech rally continuing for a little while anyway, this is where I'm putting my money. Undervalued is also the word for LOR which is building the internet delivery system of the future in the sky, not to mention wireless telephony, defence systems, etc. IBM has a very low PE and makes more money than almost any company on the planet yet it remains a relative "dog". Last week's bounce off 100 though was followed by many upgrades and positive write-ups. In the meantime the fibre optics stocks have soared to all-time highs. I get a nosebleed up there. I may only make 10-20% short term (if I'm lucky) but after losing big a few weeks ago I am turning cautious. Hence my loading up on IBM and others of its type. Is IBM the next INTC in terms of stock performance? PSFT the next ORCL? LU the next NN? LOR the next Gilat? CPQ the next AAPL? ESHR the next Kana? I don't know but I don't see much downside in these stocks. And that goes for the Baby Bell stocks too and the ISP's. Would anyone argue these undervalued plays are not the companies of the future? Or that those with 500% run-ups need to take a rest? Or that nervous fund managers might opt for safety over chasing high-fliers? Again, I don't know for sure and it's all about timing but right now in this volatile market I'd like to sleep nights because I can't afford the time to watch tick by tick. Here's the amazing list of IBM assets courtesy of a poster on MF. If nothing else it's interesting reading:
Long-Term IBM Potential, Update 9
IBM has tremendous growth potential over the next decade. The following document has two parts. The first lists a number of long-term hardware component and manufacturing contracts, as well as outsourcing contracts (services). The second section describes a number of areas in which IBM technology is leading the way into the 21st century, both in terms of cutting-edge products and patent licenses.
Long-term Contracts
Here are just some of the long-term contracts (those worth $200M or more) IBM has signed up just since December '98 (updated since the last posting, with new listings/hyperlinks), in order of decreasing contract value. (The list shows company name, contract amount, type of product or service and contract duration.)
Dell - $16B in component sales; $6B in outsourcing [multi-year]
Acer - $8B, components [7 years]
EMC - $3B, components [5 years]
Cisco - $2B, components [7 years]
Bell Microproducts - $2.0B, components [multi-year]
Galeries Lafayette - $1.2B, outsourcing [15 years]
Nissan - $1.0B, outsourcing [9.5 years]
Nintendo - $1.0B, components (for Jupiter) [multi-year]
Portugal Telecom - $1.0B, outsourcing [10 years]
Bank One - $558M, outsourcing [7 year]
Honeywell/Allied Signal - $550M, outsourcing, hardware, software [7 years]
Meiji Life Insurance (Japan) - $533M, outsourcing [10 years]
Mazda - $480M, outsourcing [10 years]
Ford Europe - $300M, outsourcing [5 years]
Daishi Bank (Japan) - $270M, outsourcing [10 years] *** New Addition ***
Musashino Bank (Japan) - $260M, outsourcing [10 years]
Mitsui Marine Insurance (Japan) - $235M, outsourcing [10 years]
Telephonica Italia - $200M, outsourcing [multi-year]
CGU (UK) - $200M, outsourcing [7 years]
Sega - (I don't recall how much, but major), components and manufacturing (for Dreamcast) [multi-year]
Apple - (undisclosed, but major), components (copper-based PowerPC G4 chip) [multi-year]
Cazenove (UK) - (undisclosed), outsourcing [10 years]
Vodafone AirTouch (UK) - (undisclosed), Internet portal creation/management [multi-year]
(I believe that EDS and AT&T both signed large outsourcing deals, but I don't recall the details. And I think there was another foreign telephone company. There are probably others I have forgotten as well.)
Here is a great Business Week article about IBM's e-commerce potential: businessweek.com.
According to an article discussing recent outsourcing deals, there is presently a backlog of $58B in IBM long-term outsourcing contracts just waiting to be completed. So it looks like IBM Global Services will be sitting pretty for the next decade. The long-term component deals kick in another $35B-$40B. That's $90 to $100B already locked in, without even including computer and software sales!
Cutting-Edge Technology
All of this money in guaranteed-income contracts doesn't even include the additional billions to be made in patent licensing for advanced technologies, including:
- Copper chips, advances in optical lithography, switch-on-a-chip, and other advanced manufacturing technologies (http://www.research.ibm.com/topics/serious/chip/). Eventually all computer chips will use copper interconnects. (IBM makes the copper PowerPC chips for the Apple G4 computers.)
- Silicon-on-Insulator technology (http://www.chips.ibm.com/bluelogic/showcase/soi/).
- Spray-on flexible transistors (http://www.haifa.il.ibm.com/info/news_spray-on.html).
- Interlocked Pipelined CMOS circuits (http://biz.yahoo.com/bw/000207/ca_ibm_res_1.html), offering five times the speed of current chips, with half the power usage. *** New Addition ***
and other high-performance/power-reducing/ergonomic technologies that no one else has, but will need in order to compete in the next century (including dailynews.yahoo.com. *** Updated ***
IBM has led the world in US patents received for the last 7 years in a row. This press release talks about some of the 1999 patents received: biz.yahoo.com. The press release discussing IBM's 1998 patents can be found at:
ibm.com. It's still worth reading, as it contains a lot of interesting material. According to the release, IBM's patent portfolio accounts for over $1B per year in licenses. (For more information about U.S. patents in general, go to the IBM Patent Server at patents.ibm.com. This server lets you access over 26 years of U.S. Patent & Trademark Office (USPTO) patent descriptions as well as the last seventeen years of images.)
IBM is now the largest supercomputer vendor on the planet. IBM used the technology pioneered in the development of Deep Blue, the computer that beat world chess champion Garry Kasparov (http://www.research.ibm.com/deepblue/home/html/b.html) to develop the next generation of IBM supercomputers, surpassing Sun and Cray/SGI with nearly a third of the world's 500 most powerful computer installations (http://www.netlib.org/benchmark/top500.html). Now IBM is going even further with Blue Gene (http://www.nytimes.com/library/tech/99/12/biztech/articles/06blue.html), a 1 million processor computer that will eventually process more than 1 petaFLOP (quadrillion floating point operations) per second. It will be used in biological research for the Human Genome Project. (Blue Gene will put not one, but 32, microprocessors in each chip. Each motherboard will contain sixty-four such chips Each of Blue Gene's 64 computing towers will hold eight of these motherboards.)
IBM is a strong up-and-comer in the Storage Area Network field, selling more than 1,000 IBM Enterprise Storage Servers (code-named "Shark") in the first 95 days on the market in late 1999, with total disk storage of more than 1.5 petabytes (quadrillion bytes). Here is a link: biz.yahoo.com.
IBM has the biggest/smallest/densest hard drives on the market:
- The first 73GB 3.5" drive (http://biz.yahoo.com/bw/991015/ca_ibm_1.html).
- The revolutionary 340MB microdrive (the size of a quarter dollar) that can be used in digital cameras, MP3 music players, and other small devices (http://www.storage.ibm.com/press/hdd/micro/990617.htm).
- The third world record in the last year for drive storage density (http://www.storage.ibm.com/press/hdd/991004.htm).
40% of all new laptop hard drives are made by IBM, and IBM ships more state of the art Giant Magneto-Resistive read/write heads for hard drives than anyone else (http://www.storage.ibm.com/press/mrheads/981217.htm).
IBM has demonstrated a prototype wearable computer (http://www.ie.ibm.com/ie121198.html), about the size of a portable CD player, with a headset (about the size of a pair of glasses with one lens) for video output, with voice recognition. See jp.ibm.com for pictures. Here are a couple of updated articles: yahoo.cnet.com and yahoo.cnet.com.
For another interesting future technology, how about the PAN (Personal Area Network) (http://www.research.ibm.com/resources/magazine/1997/issue_1/pan197.html)?
With all the focus on hardware and services, many people don't know that IBM is one of the world's largest software vendors as well, with revenues of over $13B in 1999 (including such products as the DB2 multi-platform database, VM and MVS mainframe operating systems, and CICS, MQSeries, LCCM and Netfinity Director "middleware" software). IBM's Lotus subsidiary has more than 50 million users for its Notes e-mail/database/software development system. Tivoli, another IBM subsidiary, provides much of the world's systems/network management software, including its flagship TME 10 product, and ADSM storage backup system. |
