Credit Suisse said IBM is making positive changes and is bullish on their acquisition of Red Hat
“IBM is standing on the precipice of change, with the pending Red Hat (RHT) acquisition marking a landmark shift in strategy and bringing a potential return to true revenue-driven EPS growth vs. years of over-reliance on lower-quality drivers. The combination significantly improves IBM’s positioning in the rapid push toward hybrid cloud, bringing together the platform, incumbency, and expertise necessary to help customers with the vast majority (~80%) of applications that have yet to migrate to the public cloud. We see meaningful financial opportunity longer term, as we estimate ~10% FCF accretion within three years that should enable sustained dividend growth (4.4% yield currently) despite rapid debt repayment. We see a potential negative surprise from sizeable near-term EPS dilution (~11% impact in CY20E); we are undeterred, as the biggest drag is from the required writedown of Red Hat’s deferred revenue under GAAP accounting which has no material impact on FCF and should fade quickly thereafter. Further, the acquisition has yet to close; while IBM is confident in a 2H19 timeline, we nonetheless acknowledge it represents risk to our view.”
from Viral News Updates http://bit.ly/2KBcAXg
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