IT Spending: Sentiment weaker than last quarter
Technology
SPR’s latest channel checks reveal disappointment that the second half pick up that many expected has not materialised. Stock specific feedback includes: ServiceNow - all very positive - probably the strongest indications for any vendor. Crowdstrike channels and end users see the vendor moving quickly past its recent crash. SPR has picked up mixed feedback re. Fortinet’s recent security breach and whether it negatively impacted Sept Qtr end deal flow. Outside of security, the vendors seeing an increase in positive comments include IBM, Oracle, Microsoft, Arista and Juniper/Mist. It has been easy to pick up comments on share loss by Cisco.
Edition: 197
- 18 October, 2024
Technology
Software revenue growth falls short of expectations and FCF misses in 2024 - some on the Street appear to have become more sceptical of the way IBM’s management has gamed its growth targets. Besides excluding acquisition costs from the FCF calculation, OWS notes that IBM moved its declining security software business from Software to Consulting in 1Q24 to show ‘strong’ Software segment growth. Over the past year, bulls have been arguing that the firm is an AI value play. OWS counters that IBM is no such thing. Revenue growth, whether from AI or otherwise, has been ~3% with acquisitions and the EV/FCF is 30x if one were to include acquisition costs. TP $85 (50% downside).
Edition: 185
- 03 May, 2024
Broadcom's uplift in pricing shocks VMware users
Technology
SPR provides recent field feedback on AVGO’s actions, users reactions and vendors who are benefitting. While many acquisitions do not produce the increases in revenue and cost synergies that were promised, based upon AVGO’s aggressive approach, SPR expects it will immediately deliver strong results for both metrics. Despite the disruption and animosity it is creating, SPR is picking up many examples of end users who are paying much more to AVGO then they were prior to this acquisition (price hikes of 100-1000% have been reported). These end users are locked into some or all the VMware products. The cost of switching is very high and, in some cases, will take years. Other vendors discussed include Nutanix, IBM Red Hat and HashiCorp.
Edition: 183
- 05 April, 2024
2024 Enterprise Tech Demand: Technology Spending Intentions Survey
ETR highlights the vendors best and worst positioned for the year ahead based on spending intentions data collected from their Jan 24 TSIS, which saw participation from 1766 IT Decision-Makers, including 308 Fortune 500 and 423 Global 2000 organisations. Respondents are, on average, more optimistic on 2024 spending than 3 months ago, with full year spend anticipated to grow +4.3% vs. 2023. However, Q1 is slightly tempered, now sitting at +2.4% y/y growth. Vendor outlook upgrades include Gitlab (has seen a sharp rebound in its Net Score), SentinelOne, Elastic and IBM. While there are downgrades for Datadog (Net Score hits an all-time low), CyberArk and HashiCorp.
Edition: 178
- 26 January, 2024
Tech Trends: Key themes and questions for 2024
Technology
Areas of focus for Sales Pulse in the year ahead will include: 1) Cybersecurity - changing end user priorities and competitive dynamics. 2) UC/CC/CP - will a reduction in seat count negate increased ARPU from AI features? How will continued M&A impact this market? 3) Vendors benefitting from the rapid growth in DevOps / DevSecOps. 4) Gap in orders in 1H24 for networking market as end users digest backlog and we await ramp of next generation. 5) Broadcom acquisition of VMware driving end users to look at alternatives, to the benefit of IBM Red Hat and Nutanix. 6) Ramp of funding for Broadband Infrastructure. 7) Impact of CSP Marketplaces on Distributors and VARs.
Edition: 177
- 12 January, 2024
Advanced AI: Sink or swim time for cybersecurity vendors
Technology
How are AI advancements and hype affecting the cybersecurity industry? What are data security vendors doing with AI/ML and cybersecurity automation, and can they protect their market from the major cloud operators with their investments in AI-driven security for their own platforms? During the interviews conducted by Blueshift, industry sources were also asked how they would play the sector near to mid-term and out over time. Companies discussed include Amazon, CrowdStrike, Cisco, CyberArk, Fortinet, Google, IBM, Microsoft, Okta, Palo Alto and Zscaler.
Edition: 158
- 14 April, 2023
Technology
Accounting games create illusion of earnings growth - IBM is “misleading” investors into believing the company is growing EBIT at a considerable pace following the spin-off of its IT services business, Kyndryl Holdings. The perception of growth in the RemainCo has been the primary driver of the stock’s material outperformance. However, “real” EPS power is more like ~$8/share and applying IBM’s long-term average ~10x P/E multiple results in a TP of $80 (45% downside).
Edition: 152
- 20 January, 2023
Giant layoffs loom as Tech firms face customer budget freezes
Blueshift’s IT sector sources are pointing at Oracle’s plan to cut c.30k jobs as the crack in the dam that is going to trigger a resizing of workforces across all of tech - as one recruitment executive said, “They have literally been making up jobs for the past several years to beat each other to talent. It had nothing to do with rightsizing. It was a competition to impress investors.” Sources were unanimous that earnings forecasts for the rest of the year across most vendors in all verticals of DIY enterprise networking are going to be poor. Companies covered include Arista Networks, Cisco, CrowdStrike, Dell, Fortinet, IBM, Palo Alto and Zscaler.
Edition: 140
- 22 July, 2022
Earnings Quality Matters
Increasingly aggressive accounting practices means it is only a matter of time before these companies face a day of reckoning:
Keurig Dr Pepper (KDP) - touts its debt reduction efforts, but a closer look reveals the company is simply moving debt to unorthodox short-term financing instruments.
Iron Mountain (IRM) - many integral cash costs are ignored by the company’s REIT metrics and are set to rise when the impact of Covid wanes. If these costs are subtracted from AFFO, IRM is not covering the dividend.
IBM (IBM) - large, never-ending charges and non-operational benefits have significantly eroded the quality of reported profit growth.
Edition: 119
- 17 September, 2021
Lack of customer expertise hurts Enterprise IT sales
Technology
Blueshift primary research finds the effectiveness of cloud-based applications is swiftly diminishing the need to retain in-house IT staff, leaving a dwindling pool of experienced workers clinging to familiar last-generation technologies, instead of staying current on newer IT capabilities. Hence, enterprise technology sales are likely to miss a hoped for rebound in H2 to the direct benefit of the public cloud operators. Positive: Amazon, Datadog, Microsoft. Negative: Cisco, IBM, Snowflake.
Edition: 111
- 28 May, 2021