IBM + SUN - An $8 Billion Server-OPOLY ?

According to the Wall Street Journal, 'tech conglomerate' International Business Machines Corp. (IBM) is in talks to purchase storage systems industry peer Sun Microsystems (JAVA). While terms are still being negotiated, rumors suggest IBM is willing to pay up to $8 Billion in cash to acquire its one-time rival. If true, the acquisition would easily surpass the company's $5 Billion purchase of Cognos in January 2008 to become the most expensive deal in IBM's near 100 year corporate history (FYI, Sun currently has about $2.5 Billion in cash sitting on its balance sheet so the real/net cost of the deal to IBM would probably be somewhere around $5.5 Billion).

With the acquisition of Santa Clara, California-based Sun Micro, IBM would immediately be adding some 35,000 new employees and about $13 Billion to annual company sales. More importantly though, the purchase of Sun would allow #1 IBM to significantly increase its lead in worldwide server marketshare over #2 Hewlett Packard (HPQ). Per the below pie chart, IBM's server marketshare would increase by 10.1% and total 42% as a result of the acquisition...meanwhile, HP's share number holds steady at 29.5%. Scary as that might be, perhaps an even more daunting prospect for the rest of the server industry would be the potential $8 Billion deal's impact on IBM's worldwide UNIX server marketshare. If the deal were to go through and of course pass regulatory approval then IBM's UNIX share would instantly soar an enormous 28 points to a MONOPOLISTIC 65.3% !




Per the below link, IBM appears interested in doing the deal for several reasons, including:


1.) INSTANT MARKETSHARE - IBM will immediately gain 10 points of marketshare in overall worldwide server sales


2.) 'HOT' END USERS - Many of Sun's customers operate in the telecommunication and government sectors of the economy...two end user industries IBM is explicitly targeting and focused on growing during today's relatively tepid macroeconomic backdrop


3.) LEVERAGE IBM's CORE S + S - IBM will attempt to sell its carefully-crafted, higher margin bundles of server-oriented Software + Services to its newly acquired storage system customers


4.) LEVERAGE SUN's CORE R + D - IBM will seek to leverage the fruits of SUN's widely regarded Research + Development efforts (JAVA, Solaris, SQL, solid state storage drives, advancements in cloud computing, etc.) into its own existing and future products/solutions


online.wsj.com/article/SB123742081606578475.html


Data Courtesy: The Wall Street Journal
Full Disclosure: I own shares of IBM.

WW 3Q08 Smart Phone Marketshare

According to tech survey firm Canalys, the global Smart Phone market grew 3rd quarter shipments by 28% year over year (from shipping 31 million units in 3Q07 to 40 million units in 3Q08). In terms of Handset marketshare during the most recently completed quarter - Nokia placed first, Apple (maker of the iPhone) took second and Research In Motion (maker of Blackberry) finished third.

* WW 3Q08 Smart Phone Marketshare:
1. Nokia (NOK) - 38.9%
2. Apple (AAPL) - 17.3%
3. Research In Motion (RIMM) - 15.2%
4. Motorola (MOT) - 5.8%
5. HTC - 5.8%
6. Others - 17.0%

http://www.canalys.com/pr/2008/r2008112.htm

Data Courtesy: Canalys + CNNmoney.com
Full Disclosure: I own shares of AAPL.

IBM's #1 2Q08 SERVER MarketShare

According to industry survey group IDC, U.S.-based IBM ranked #1 Worldwide in overall SERVER MarketShare during the 2nd Quarter of 2008.

During 2Q08, 'Big Blue' captured about 33% of the GLOBAL Servers market...or almost 6% more SHARE than #2 ranked Hewlett Packard (HPQ) who possessed 27% of the market. Dell came in at #3 with 13%, followed by Sun Microsystems (JAVA) at #4 with 11%. All together, the 'Big 4' accounted for approx 84% of total global Server sales during the second quarter of 2008 (can you say oligopolgy?).




http://money.cnn.com/news/newsfeeds/articles/marketwire/0428768.htm


* IBM ranked #1 across the following 2Q08 Server Sales categories:

1.) All Unix Servers - 36% Share

2.) Servers Costing $250,000 or more ('High-End' Servers) - 62% Share

3.) Servers Costing $10,000 or more ('Low-End' Servers) - 48% Share


* Related + also according to IDC, let it be noted that IBM is growing its overall Server revenues faster than anyone else in the industry as IBM's 2Q08 Server sales were 27% higher vs. 1Q08. Overall WW Server shipments rose 11% during 2Q08.


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* Lastly + also Related to IBM, check out the below fascinating Wikipedia link that provides a pretty comprehensive (although NOT complete) List of Acquisitions and Spinoffs completed by 'Big Blue' since its foundation in 1889 (needless to say but IBM wasn't built in a day):


http://en.wikipedia.org/wiki/List_of_IBM_acquisitions_and_spinoffs






Data Courtesy: CNNMoney + IDC + Wikipedia
Full Disclosure: I own shares of IBM.

RTOB: Six Reasons To BANK On Goldman

Six Fundamental LONG TERM Reasons to Own Goldman Sachs (GS) :


1.) The IN$IDE Boys :
Please refer to my 7/21/08 post titled 'Goldman Sachs - Inside Boys To The Rescue' for more information on this (use the ETB 'Archive Keyword Reference' on the right to search for this post using keyword 'Goldman Sachs'). Bottom line, GS is on the INSIDE...and EVERYONE else seems to be on the OUTSIDE.


2.) The UNSCATHED (What Credit Crisis ??) :
GS is one of the select FEW financial players that have, thus far, been relatively UNSCATHED by the ongoing U.S. Credit Crisis. Because of disciplined, proprietary RISK MANAGEMENT and execution Goldman has NOT had to take on significant 'write downs' on shoddy assets...UNLIKE the majority of global financial peers including: Lehman Brothers (LEH), Citigroup (C), Bank of America (BAC), Merrill Lynch (MER), Wachovia (WB), Wells Fargo (WFC), UBS, etc.


3.) ONCE In A Lifetime MARKETSHARE Opportunity :
Because Goldman has been relatively UNSCATHED by the recent Credit Crisis (see point #2 above), GS is in an IDEAL position of being able to use its assets MUCH more productively than its peers. Instead of having to use its assets and existing capital to internally 'patch holes'/shore up the soundness of its Balance Sheet, GS is able to use its capital more productively and actually take advantage of the market's current Asset 'Fire Sale' (kinda like a 'clearance' shopping event...just about all of GS's peers are unloading assets in a 'Everything must GO!' fashion) to GROW its business. The departure of Bear Sterns (BSC) ALONE is a great reason to own Goldman. Throw in the CARNAGE currently being suffered by competitors Lehman Brothers, Merrill Lynch, etc. and Goldman Sachs is in PRIME position to soak up some Attractive LONG TERM brokerage MarketShare (whether its in Asset Management, Equity/Bond Underwriting, Commodities Trading, Mergers and Acquisitions, etc.).


4.) The Massive Stock Buyback :
While most U.S. financials are scrambling to RAISE Capital (mostly by diluting the shares of stock owned by existing shareholders), Goldman is doing the exact opposite via BUYING BACK ITS OWN STOCK and returning Capital to its shareholders. Which financial would you rather own - An investment that is RETURNING you money vs. One that is DILUTING/reducing your money?! For the record and per my 6/22/08 post titled 'GS 2Q08 Earnings Recap', Goldman has 62 million shares remaining in its authorized share repurchase program...this represents about $9.5 Billion or 16% of the company's total FLOAT/shares outstanding.


5.) DEMONSTRATED Competence of Management :
The executive management team of Goldman Sachs is often referred to as 'the Smartest Guys in the Room'...regardless of WHO's in the room. With all due respect to Google (GOOG), Goldman is probably the smartest company in the WORLD. For validation's sake, look NO further than how GS has executed its brokerage business during arguably one of the country's most HISTORICALLY trying times for financial institutions. Save The 1990 U.S. Savings and Loans Crisis (fyi + for more info on this ERA you can refer to my 7/14/08 post titled 'The U.S. Savings and Loans Crisis'), most banks have never seen a market environment THIS difficult. For empirical evidence of GS's track record of execution during the ongoing Credit Crisis, please refer to the ETB 'Archive Keyword Reference' under 'Earnings' or 'Goldman Sachs'...in there you will find the details behind a couple of impressive, recent GS quarterly reports courtesy of my proprietOHRI GS quarterly 'Earning Recap' posts.


6.) The CHEAP, Single Digit P/E Multiple :
While 'cheap' is of course relative, it should be noted that Goldman Sachs is trading at just 7.5 x 2008's expected earnings. Goldman's Forward 2009 P/E is currently 10. Despite its EXECUTION BRILLIANCE as a company, GS as a stock has been taken down like the rest of its financial cohorts...the company's stock is currently Down 28% year to date (GS is down 13% year over year). Anecdotally saying, If you're looking to build a CORE investment position in GS then you gotta believe that 10 x 2009 Earnings (or $150/share) represents an attractive entry point.


Full Disclosure: I own shares of GS.

OPEC's Worldwide SHARE of Crude OIL

According to Bloomberg, OPEC's (The Organization of Petroleum Exporting Countries) Share of WW Crude Oil Production is about 42%.

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Somewhat Related (and also according to the below Bloomberg link) :

* The GULF of Mexico is responsible for producing about 14% of the United States' total Oil + Gas PRODUCTION

* The U.S. Gulf coast along Louisiana and Texas is home to about 42% of the U.S.'s total Crude Oil REFINING CAPACITY


bloomberg.com/apps/news?pid=20601087&sid=awi3JTmcVadg&refer=home

Data Courtesy: Bloomberg

Alan Greenspan On Fannie and Freddie

Former Federal Reserve Chairman Alan Greenspan was recently interviewed by CNBC and commented on the U.S. federal government's 'rescue' of the country's Government Sponsored Entities, Fannie Mae (FNM) and Freddie Mac (FRE) :


" You cannot have a type of organization which is half public, half private. Essentially the profit turns out to be for the private sector and the losses are socialized. That is NOT capitalism. That is NOT the way our system functions and Fannie and Freddie are a major accident waiting to happen. "


* FYI + According to U.S. Treasury Secretary Hank Paulson, Fannie Mae and Freddie Mac together finance about 70% of ALL U.S. residential mortgages (70% MarketShare in the U.S. mortgage financing industry)

Data Courtesy: CNBC

Natty Gas Buses-A-Move

According to the CEO of Chesapeake Energy (CHK), Aubrey McClendon, 20% of All buses operating in the United States are fueled by Natural Gas.

Looking Overseas, currently 1/7 of all cars in Argentina and 1/4 of all cars in Italy run on natural gas. According to T. Boone Pickens, there are a total of 8 million vehicles in the world that run on Natural Gas but only 142,000 of these are in the U.S. (Can you say 'GROWTH market appeal' ?)

Anecdotally thinking..Maybe the Pickens Plan has a chance AfterALL ? (Or at the very least give US something resembling an ENERGY PLAN focused on switching OUR country's transit fuel of choice to something Cheaper, Cleaner, Domestic and More Abundant like Natty Gas.)

* For more info on the Pickens Plan you can visit: http://www.pickensplan.com/ (...Also feel free to check out my 7/18/08 post titled 'REF - The (Revolutionary) Pickens Plan...)

A Windy Proposition - MarketShare + Cost

According to the Brussels based industry group, Global Wind Energy Council, WIND Power made up 1% of the World's Electricity Production in 2007 and is expected to make up 3% in 2012.


According to EIA data, U.S. Electricity from --- COSTS :
* WIND: costs about 8 cents per kilowatt-hour

* SOLAR: costs about 15 cents per kilowatt-hour

* COAL-fueled electricity: costs 4 cents per kilowatt-hour


Also worth noting, Rising material costs (steel) have driven up wind turbine prices by about 20% since July 2007.


http://www.bloomberg.com/apps/news?pid=20601109&sid=a9B6qZ11iwwc&refer=home


Data Courtesy: Bloomberg

WW + U.S. 2Q08 PC MarketShare

According to the latest data from PC survey firm Gartner, Apple (AAPL) has passed Acer to now become the 3rd Largest Seller of PC's in the United States, behind #1 Dell (DELL) and #2 Hewlett Packard (HPQ).


* U.S. 2Q08 PC Marketshare Leaders:
1. Dell (32% - 5.3K shipments...12% Growth)
2. HP (25% - 4.2K ships...6% Growth)
3. Apple (9% - 1.4K ships...38% Growth)
4. Acer (8% - 1.3K ships... -21% Growth)
5. Toshiba (6% - 0.9K ships...3% Growth)
6. Others (20% -3.4K ships... -5% Growth)


* Worldwide 2Q08 PC Marketshare Leaders:
1. HP (18% - 13K ships...17% Growth)
2. Dell (16% - 11.2K ships...22% Growth)
3. Acer (9% - 6.7K ships...19% Growth)
4. Lenovo (8% - 5.6K ships...14% Growth)
5. Toshiba (4% - 3.1K ships...29% Growth)
6. Others (45% - 32.2K ships...12% Growth)

Per the Fortune article:
fortune.cnn.com/2008/07/17/reports-apple-is-no-3-pc-maker-in-us-no-6-worldwide/

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* Apple's 2Q08 U.S. PC Share: 8.5% (up from 6.4% 1 year ago)

* Apple's 2Q08 U.S. Mac Sales: Up 38% year over year

* According to IDC, Apple is now #6 in Worldwide Sales

Data Courtesy: Fortune, Gartner and IDC
Full Disclosure: I own shares of AAPL.

ALUMINUM - Abundant + Energy Expen$ive

Despite being the world's most abundantly available metal, ALUMINUM is the MOST-Energy Intensive to produce. Aluminum makes up about 8% of the Earth's solid surface weight and is the 3rd most abundant of all elements, behind oxygen and silicon. However, because of its strong affinity to oxygen, it is almost never found in the elemental state; instead it is found in oxides or silicates.

According to Wikipedia, Electric Power represents about 20% to 40% of the total cost of producing aluminium, depending on the location of the smelter. As a result, Aluminum Smelters tend to be situated where electric power is both plentiful and inexpensive, such as: South Africa, the South Island of New Zealand, Australia, China, the Middle East, Russia, Quebec, Canada and Iceland.

According to Bloomberg, the energy used by China's aluminum smelters each week is enough to provide electricity for more than 2 million people for a year.

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The Chinese Are Cutting (and Prices are Rising) :

* According to the British Geological Survey, China was the World's Largest Producer of Aluminium in 2005 with almost 20% world market share..followed by Russia, Canada and the U.S.

* China's largest aluminum smelters agreed on 7/10/08 to cut output by as much as 10%

* As a result of China's recently announced production cut, the research arm of Goldman Sachs (GS) cut their 2008 forecast expectations for a global aluminum surplus of 275,000 tons this year to 62,000 tons because of power shortages in China and South Africa...Because of a tightening supply environment Goldman Sachs also RAISED its 2008-2010 Aluminum Price Forecasts:

- Raised 2008: From $1.30 to $1.39 a pound (+7%)
- Raised 2009: From $1.32 to $1.60 a pound (+21%)
- Raised 2010: From $1.25 5o $1.45 a pound (+16%)

* Goldman Sachs also believes Chinese aluminum demand will rise 20% in 2009 and 15% in 2010, resulting in deficits (of supply)

bloomberg.com/apps/news?pid=20601087&sid=aHuHv.qdqDTY&refer=home

Data Courtesy: Bloomberg + Wikipedia
Full Disclosure: I own shares of GS.

BHP, RTP and RIO - The Iron Ore OligOpoly

According to Bloomberg, 3 companies control about 80% of the WORLD's seaborn (exported) IRON ORE marketshare.


These companies are (in order of marketshare):

1. Brazil's Vale (RIO...$163 Billion marketcap) - WORLD's LARGEST producer

2. England's Rio Tinto (RTP...$162 Billion mCap) and

3. Australia's BHP Billiton (BHP...$223 Billion marketcap)

FYI, Iron ore is an essential input/raw material for producing STEEL. According to Wikipedia, 98% of all mined iron ore is used to create steel.

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Anecdotally, No wonder China and India (ArecelorMittal Steel - MT) are concerned about a potential merger between mining giants BHP and RTP...can you say PRICING POWER !!

Lastly, for lists of the World's Largest Steel Producers (countries + companies), please refer to my archived 4/05/08 posts titled 'REF - World's Largest Steel Producers' and 'REF - World's Largest Steel Producing Companies'.

bloomberg.com/apps/news?pid=conewsstory&refer=conews&tkr=MT:US&sid=akBEPNWVyi7o

Data Courtesy: Bloomberg + Wikipedia
Full Disclosure: I own shares of MT.+ Wikipedia

Top U.S. Crude OIL Producing States

Top U.S. Crude Oil Producing States + Marketshare per 2006 EIA data:

1. Texas: 21% domestic U.S. share
2. Alaska: 15%
3. California: 12%
4. Louisiana: 4%
5. Oklahoma: 3%
6. New Mexico: 3%

Data Courtesy: EIA

U.S. Internet Browser MarketShare

According to research firm Net Applications, U.S. Internet Web Browser Marketshare (as of May 2008):

1. Microsoft's Internet Explorer (MSFT): 74% (79% a year ago)


2. Mozilla's Firefox: 18% (15% a year ago)


3. Apple's Safari (AAPL): 6% (5% a year ago)

Data Courtesy: Net Applications
Full Disclosure: I own shares of AAPL.

U.S. 1Q08 Smart Phone Marketshare

U.S. 1Q08 EMAIL-capable Mobile Phone Marketshare:

1. Research In Motion's BlackBerry (RIMM) --> 45% (up from 41% in 4Q07)

2. Apple's iPHONE (AAPL) --> 19% (down from 28% in 4Q07)

3. Palm's Treo + Centro (PALM)--> 13% (up from 9% in 4Q07)

4. OTHER --> 23% (up from 22% in 4Q07)

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*Anecdotally, I'm not too concerned abot Apple's quarter over quarter loss of smart phone marketshare as CEO Steve Jobs is expected to announce + demo Apple's new 3G iPHONE TOMORROW !

Data Courtesy: International Data Corp. (IDC)
Full Disclosure: I own shares of AAPL.

U.S. 4Q07 SMART Phone Marketshare

According to Reading, England-based researcher Canalys, U.S. 4Q07 EMAIL-capable Mobile phone Marketshare:

*Research In Motion's BlackBerry (RIMM) --> 41% share (accounted for 41% of U.S. shipments for email phones in 4Q07)

*Apple's iPHONE (AAPL) --> 28% share

*Palm's Treo (PALM)--> 9% share

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Related Stats:

*About 2/3 of RIMM's customers are Business/Enterprise consumers

*About 2/3 of RIMM's customers are in North America

*According to Canalys, Global shipments of phones with 'computer-like' functions (aka 'SMART PHONES') climbed 72% in 4Q07 to 35.5 million devices (including a TRIPLING in U.S. sales) vs. a much smaller 13% growth rate for handsets/mobile phones over all

Full Disclosure: I own shares of AAPL.