International Business Machines Corporation Team 3: Austin Conklin, Camille Hawkins, Jordan Redden, and Stephanie Thomas
Proposed Strategy: To expand the capabilities of IBM's cloud computing platform by performing a strategic acquisition of a small firm
Initial Strategy Cost: $30 million
ROE Increase of 2.78%
ROA increase of 1%
IBM's Current Status
- Slow decrease in annual revenue across all business segments
- Strategic Imperatives that focus on the 3 main forces of "digital"
Current strategy focuses on long-term success
According to the infinite io website:
- $24 billion cost of inactive data storage in 2016
- 80% of data is inactive
- There will be 650% of big data growth in the next five years
- New solution to control and manage large amounts of inactive data
- Offers a competitive advantage to the cloud storage market
- Privately held company
The Acquisition Process
- Identify potential acquisitions
- Secure necessary third-party services
- Prepare for the transaction
- Negotiation and Finalization of Acquistion
- no changes in this statement because implementation is in 2017
- IBM’s revenue has been declining for the last 18 quarters
- Acquisition will not change the decline in revenue
- Increase in Services by 0.0001% and Sales by 0.002%
- Revenue is higher than the projected without strategy in 2017 but it is still a decline from 2016
- Rise in cost and expenses for implementation
- Projection for growth in Services is 0.0002% and Sales 0.004%
- Decline total expenses from 2017
- Financed by debt; long term debt increased by $30 million
- $15 million increase in goodwill and inventory
- Only accounts that changed from the 2016 without strategy
2017 and 2018
- The total of assets and liabilities will go up because of the addition of infinite io
- Accounts that there is a major growth is cash and cash equivalents, inventory and property, plant, and equipment
- With the addition of employees, the liability accounts of compensations and retirement will increase
Statement of Cash Flows
- The changes on this statement due to the strategy would be to the payments for property, plant and equipment, investment in software, acquisition of businesses, and proceeds from new debt.
- Current Ratio: The current ratio for IBM has steady with it stay above 1 but has not been above a 1.30 in the past 3 years.
- The ratio in 2018 is valued at 1.23 with the strategy.
- Long Term Debt to Equity Ratio: This ratio affected by the strategy because it is being financed by long term debt.
- The rise in non current liabilities lowered this ratio to be 2.16 in 2018 (with strategy) and it is a big decline from the 4.28 value in 2015.
- Average Collection Period
- Operating Profit Margin
Our proposed strategy will:
- Increase the bottomline
- Increase customer satisfaction
- Add value to IBM