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

NPV: $6,338,070

IRR: 23%

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

  1. Identify potential acquisitions
  2. Secure necessary third-party services
  3. Prepare for the transaction
  4. Negotiation and Finalization of Acquistion
  5. Implementation
Timeline

Income Statement

2016

  • no changes in this statement because implementation is in 2017

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

2018

  • Projection for growth in Services is 0.0002% and Sales 0.004%
  • Decline total expenses from 2017

Balance Sheet

2016

  • 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.

Ratios

  • 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

Credits:

Created with images by Patrick H~ - "CeBIT 2011 - IBM Logo" • blickpixel - "board electronics computer" • lorenzocafaro - "programming computer environment" • UliSchu - "handshake hands shaking hands" • ptanpm - "asphalt texture material" • heladodementa - "technology servers server" • quapan - "labyrinthine circuit board lines" • Key Foster - "advancing with time in feverish pursuit" • cote - "Answers are in the cloud"

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