International Business Machines Corp. (IBM) Seeks Help Of Investment Banks To Calm Down Worried Investors
International Business Machines Corp. (NYSE:IBM) is reportedly worried about a possible activist hedge fund attack and the company has reached out to investment bankers to help it figure out a defense strategy well in advance. Some top shareholders in the Big Blue have expressed dissatisfaction with the company’s performance in the past several quarters and they harbor feelings that a change in leadership might be necessary. IBM has preferred not to comment on the speculations that it is working out a plan to put off possible attacks by activist investors.
For 11 quarters in a row, International Business Machines Corp. (NYSE:IBM) has posted disappointing results, as revenue continues falling. The company is trying to make a shift from the low-margin hardware business to high-margin services and software businesses. However, the transformation has been somewhat slow, to the dislike of some of its prominent shareholders.
The disgruntled shareholders are reportedly trying to woo prominent activist hedge funds, such as ValueAct and Pershing Square, to back their course. These hedge funds are known for their notoriety when it comes to pushing for management shakeups.
Two banks involved
So far, people with insider knowledge cite that no deal has been reached with activist hedge funds to try and push for drastic changes in IBM. However, the Big Blue is not taking chances, as it has turned to Wall Street investment banks to formulate a defense strategy. There is no word about the specific banks the company is working with on the defense plan, but at least two banks are said to be involved in the program.
Why hedge fund attack is remote
Although disappointed shareholders believe that changing the management would help towards unlocking shareholder value in IBM, the view doesn’t appear popular. One concern is that, with shares trading at about $159, International Business Machines Corp. (NYSE:IBM) is too expensive even for prominent hedge funds to tackle. Additionally, the other concern is that even hedge funds that could help drive some managers out of IBM believe that the existing executive team is doing its bit and cannot be termed as ‘underperforming.’
A dedicated CEO
International Business Machines Corp. (NYSE:IBM) brought in Virginia Rometty as CEO in 2012 and she has been trying to focus the company in high-growth and high-margin markets. She has also been able to lead IBM into inking deals with companies like Apple Inc. (NASDAQ:AAPL), to expand into the enterprise IT segment.
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