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C9050-042 Developing with IBM Enterprise PL/I

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C9050-042 exam Dumps Source : Developing with IBM Enterprise PL/I

Test Code : C9050-042
Test denomination : Developing with IBM Enterprise PL/I
Vendor denomination : IBM
exam questions : 140 actual Questions

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IBM Developing with IBM Enterprise

Modernizing IBM i Apps with Microservices | killexams.com actual Questions and Pass4sure dumps

November 7, 2018 Alex Woodie

application modernization potential different things to different people. For some, it could live turning a 5250 monitor into a web or mobile interface, or changing database entry with SQL. but for others in the IBM i community, together with the seller OpenLegacy, modernization refers to exposing latest commerce common sense as APIs via a microservices structure.

Microservices refers to a software construction technique whereby applications are broken down into varied self-contained accessories and served by means of APIs in a loosely coupled however coordinated method. The leading skills of this strategy is each microservice is constructed independently of others, that could raise productivity and result in more resilient applications. It’s pretty plenty the direct philosophical balky of the monolithic strategy at the back of many (if not most) IBM i functions.

The up to date distributed microservices structure is equivalent in some respects to the provider oriented structure (SOA) method that rose to prominence in the early 2000s, including the componentization of enterprise method and reliance on APIs. although, there are faultfinding distinctions that set microservices, including the employ of lighter weight API protocols comparable to leisure (as a substitute of soap and XML) and the employ of containerization applied sciences fancy Kubernetes and Docker.

while microservices had been within the news just a little, they’re nevertheless particularly fresh and there is lots of drudgery being accomplished at the moment to improve the tooling that companies can employ to build and expose their personal microservices. A fresh survey with the aid of microservices software provider Perficient discovered that 70% of groups are investigating microservices architectures, however are facing IT headwinds as the companies shift to revolve into greater agile and DevOps-concentrated.

Microservices are being adopted with fresh functions, but that doesn’t hint they’re irrelevant to existing ones. A recent crimson Hat survey discovered that about practically eighty% of clients of its Kubernetes platform, called OpenShift, were microservices as fraction of their efforts to re-architect existing purposes.

To acquire sure, there are plenty of stories of companies adopting microservices technologies and innovations to benefit more cost from legacy techniques. In its contemporaneous whitepaper “How APIs Can Modernize Legacy programs,” API management enterprise MuleSoft discusses how a number of colossal groups fancy Siemens and Mount Sinai health rig re-architected enterprise methods housed in legacy systems fancy IBM mainframes round APIs, which enhanced access to the techniques whereas reducing protection expenses.

MuleSoft supports the IBM i platform with its API management platform. that you could additionally locate IBM i support with one of the vital precise-tier API administration providers, similar to IBM with its connect offering, CA technologies and its Layer 7 offering, and Google with its Apigee providing.

APIs are a core enabling factor of microservices. however more and more groups are searching for microservices structures to assist quicken up the advent of a microservices structure of their atmosphere. One seller developing this nature of microservice platform for IBM i is OpenLegacy.

A microservices structure allows company common sense to live referred to as by the employ of APIs in decentralized and resilient vogue. (photo courtesy Smartbear.)

the fresh Jersey-primarily based commerce has been plying the application modernization waters for IBM mainframe and IBM i with its API-centric offering since it burst onto the scene just a few years in the past. on the time, the enterprise become espousing its capacity to re-kit and expose commerce procedures on IBM i and mainframe systems as particular person soap and relaxation APIs.

but as momentum has developed around microservices, OpenLegacy has tailored its API strategy and adopted the microservices method to legacy modernization, in line with OpenLegacy Chief Product Officer Zeev Avidan. “Two years ago they were in the beginning of that adventure,” Avidan tells IT Jungle. but now we’re presenting a complete microservice structure out of the box.”

The enterprise’s microservices-primarily based utility integration platform has a yoke of components, Avidan says. There’s a Java-based utility structure package (SDK) that exposes an individual enterprise system as an API and additionally allows users so as to add fresh capabilities, such as analytics or protection. This JDK generates a common Java kick that live served from the IBM i server or any other atmosphere with a JVM. The runtime ambiance instantiates what’s known as a microservices “mesh” that makes it possible for the capabilities to live invoked. There’s also a management console that lets administrators wield what’s happening.

OpenLegacy is gaining traction with its microservice providing within the banking and coverage box, Avidan says. The company has dissimilar clients around the globe that are exposing IBM i and mainframe commerce techniques as microservices by the employ of leisure APIs.

“It makes it possible for them to create digital providing and digital interfaces that tug facts benign their mainframe, and doing it devoid of using any middleware,” Avidan says. “so that they don’t exigency MQ or any of those issues. It’s a prerogative away connection. It’s scalable and it performs very smartly.”

There’s nothing stopping IBM i and mainframe valued clientele from establishing their own microservices. “It’s no longer unattainable to do. you could fully create APIs using those strategies,” Avidan says. “The issue with it is whole that drudgery is guide.”

To pickup a headstart on microservices, many organizations pay programs integrators to generate APIs for them, which they could then expose as fraction of a microservices architecture. while that may also work, it doesn’t depart the consumer with the skill to exchange and conform these microservices going ahead, Avidan says.

“What you really want is not somebody to vanish and construct it for you,” he says. “What you really want and what their consumers understand, is you want that muscle of developing the features yourselves, because that's a core competency today. if you’re no longer able to plug speedy and waiton the enterprise in terms of growing those services, then that’s an issue . . . . You want the muscle and the ultimate solution to finish this is to suffer a set of tools and technology to finish it yourself.”

OpenLegacy isn’t the simplest dealer targeting IBM i APIs and microservices. Rocket application additionally has an providing during this enviornment, referred to as Rocket API, while LANSA additionally has the means to generate RESTful functions with its “low code” construction ambiance. Rogue Wave software‘s Zend subsidiary is additionally chasing the market with its XML Toolkit, and there are surely others.

Whichever tools and suggestions you employ to generate microservices, there’s an excellent haphazard that microservices will play a more swank role in IBM i application modernization in the foreseeable future.

connected studies

visual LANSA Goes Low-Code With unreasonable Tech update

One IBM i Route Into the API economic system

Goodbye, Java commercial enterprise version. howdy, Jakarta EE

Don’t live the Eeyore of Digital development, OpenLegacy Says

What’s Legacy Now: WSDLs and kept methods

For OpenLegacy, Modernization Is whole concerning the APIs


IBM groups with CLS for unveil fresh LedgerConnect financial capabilities blockchain | killexams.com actual Questions and Pass4sure dumps

IBM Corp. referred to today it has teamed with international change features provider CLS group Inc. and a few banks to unveil a brand fresh proof-of-concept blockchain platform for the economic features business.

referred to as LedgerConnect, the blockchain platform has been designed for monetary services providers, together with banks, financial technology corporations and application companies, to installation, partake and devour functions hosted on a shared dispensed ledger community.

a non-public blockchain as antagonistic to a public one, LedgerConnect on the other hand is concentrated on applying the technology in the back of bitcoin to a number of financial commerce transactions together with understand-your-customer strategies, sanctions screening, collateral management, derivatives submit-exchange processing and reconciliation and market statistics.

“by means of internet hosting these services on a single, commercial enterprise-grade network, companies can focal point on company objectives in zone of software construction, enabling them to know operational efficiencies and cost discounts throughout asset courses,” IBM stated in a media unlock.

IBM is pitching LedgerConnect as a means to overcome the expenses concerned with individual blockchain implementations by providing a unique shared and totally secured network on which diverse features may also live deployed and consumed. That, the company referred to, will permit “financial institutions to focus on reworking commerce approaches rather than creating assorted fresh blockchain applications.”

nine fiscal institutions are observed to suffer signed up to a affliction of the carrier, including Barclays plc and Citigroup Inc. with assist from vendors including Baton systems Inc., Calypso expertise Inc., Copp Clark Ltd., MPhasis Ltd., OpenRisk applied sciences LLC, SynSwap Ltd., Persistent programs  Ltd. and naturally IBM itself.

“building on the success of CLSNet and leveraging the strong relationship CLS has with the realm’s main economic institutions, LedgerConnect is uniquely positioned as a blockchain market for the fiscal capabilities trade, that will quicken up innovation throughout the ecosystem with value delivered capabilities for blockchain networks,” stated Marie Wieck, common manager for IBM Blockchain.

IBM has been all-in on establishing blockchain systems for a number of years because the fledgling market continues to extend, peculiarly with fiscal solutions akin to its move-border blockchain funds answer. The focus on next-era expertise is beginning to repay for great Blue, with IBM turning the nook by sustaining income boom for the third successive quarter.

image: Victorgrigas/Wikimedia Commons considering you’re here … … We’d want to inform you about their mission and the route which you can assist us fulfill it. SiliconANGLE Media Inc.’s enterprise mannequin is in keeping with the intrinsic cost of the content material, not advertising. unlike many online publications, they don’t suffer a paywall or hasten banner promoting, as a result of they want to maintain their journalism open, without impact or the exigency to chase traffic.

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constructing commercial enterprise dispensed systems with IBM Blockchain | killexams.com actual Questions and Pass4sure dumps

On the sixteenth August, Farhan Shahzad, a Blockchain and Cognitive retort Architect at IBM, gave a talk about Blockchain, Hyperledger cloth and Composer, and IBM’s position in actualizing Blockchain within the UAE, in collaboration with sensible Dubai.

Hosted at Astrolabs, a shared drudgery zone for startups in Dubai, people starting pouring in at 6:30.

The IBM Cloud Developer undergo crew kicked off the experience, talking about what they do, and going over the global Entrepreneur software and whole its perks and merits.

Farhan took over from Aoun, emphasizing the value of Blockchain, explaining the technologies at the back of Blockchain, and giving a discussion about Bitcoin. After the breakout session, he went over the merits of Blockchain over incurious centralized types of recording transactions. because the talk wore on, dozens of Blockchain lovers, bankers, and developers turned up in what turned into considered one of Astrolabs’ biggest turnout.

The leisure of the time changed into spent going over use-situations, as the developers and lovers requested questions, clarified doubts, and acquired an incurious account of the Blockchain scene in the UAE.

The meetup wrapped up with a networking session, as like-minded people interacted, and it became an usual unique event for everybody concerned.

in case you neglected this meetup, that’s nice! There are extra coming. Head over to their meetup web page to subscribe to their activities, and live tuned:

Slides:


C9050-042 Developing with IBM Enterprise PL/I

Study sheperd Prepared by Killexams.com IBM Dumps Experts


Killexams.com C9050-042 Dumps and actual Questions

100% actual Questions - Exam Pass Guarantee with elevated Marks - Just Memorize the Answers



C9050-042 exam Dumps Source : Developing with IBM Enterprise PL/I

Test Code : C9050-042
Test denomination : Developing with IBM Enterprise PL/I
Vendor denomination : IBM
exam questions : 140 actual Questions

Very easy route to pass C9050-042 exam with questions and examination Simulator.
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Developing with IBM Enterprise PL/I

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How IBM and Red Hat Will impact Your Cloud Strategy | killexams.com actual questions and Pass4sure dumps

Barring a heavy-handed approach to the recent acquisition, IBM and Red Hat can finish some improbable things in the market.

IBM is a long route from making physical machines. That fraction of the commerce went with Lenovo several years ago. So, what has been their focus ever since? Software and services. And, among those software pieces and services has been the cloud.

Until today, you may suffer heard Little about IBM’s cloud presence. Although I can assure you it’s there, it was really struggling to compete with the likes of AWS, Azure, and even GCP. Now, with predictions fancy those from Gartner stating that by 2020, 90% of organizations will adopt hybrid infrastructure management capabilities and that the market in common could live worth $240 billion or more – this was as excellent a time as any to really remove a dive into the cloud management and delivery ecosystem.

Image: Shutterstock

Image: Shutterstock

And IBM definitely took the plunge. In fact, this was the biggest acquisition or deal that IBM has ever gambled on during its 107-year existence. In knowing the technology they just took under their titanic Blue wings, it could really pay off.

What this means for IBM, Red Hat, and your cloud

Let’s start with IBM. It’s been a challenging ride for this organization. Once known for constant growth and innovation, IBM has been struggling in terms of keeping up with major industry players. This stagnation was fresh and definitely uncomfortable for IBM’ers and fans alike. So, what to do? Purchase a powerful, multinational, open-source software company that’s been developing some leading solutions. This includes Red Hat Enterprise Linux, middleware solution JBoss, CloudForms, and the very powerful cloud and container management system – OpenShift.

For IBM, this means opening the aperture into a fast-paced and growing hybrid cloud market. Most of all, this means targeting enterprise customers and arming them with leading tools around cloud management. In fact, using one of the industry’s best container management solutions (OpenShift) will give IBM customers the types of tools and services to approach digital transformation efforts as well as entire technology modernization shifts.

The entire notion of "monolith to microservices" can live encompassed by this IBM+Red Hat deal. Technology fancy OpenShift will give IBM a leading Kubernetes management platform capable of delivering real-world cloud-native solutions. This isn’t just IBM paperware any longer, with Red Hat, the ammunition is absolutely there. Combine this with a bigger portfolio of middleware and powerful cloud-ready (and validated) developer tools and you suffer a really strong record for hybrid cloud deployment and management.

“With IBM’s recent plug to containerize its middleware, today’s landmark partnership between IBM and Red Hat provides customers with more option and flexibility. Their common vision for hybrid cloud using container architectures allows millions of enterprises – from banks, to airlines, to government organizations - to access leading technology from both companies without having to pick between public and private cloud.”

- Arvind Krishna, Senior Vice President, IBM Hybrid Cloud

For IBM, Red Hat (and OpenShift) is a direct gateway into a developer community that’s literally designing the architecture for enterprise organizations and their hybrid cloud initiatives. Did IBM pay a premium for Red Hat? You better believe it. Was it worth it? Time will tell. Coming from behind is never easy, but this is a powerful route to assign a turbo engine in your cloud business.

For Red Hat, there are pretty titanic benefits, too. Aside from the massive amounts of resources and scale capabilities, Red Hat is entrenching itself even further into an enterprise market that’s primed and ready for the cloud. Now, imagine leveraging Red Hat tools to impact whole of those wonderful IBM customers that suffer been itching for an IBM-ready hybrid cloud architecture.

“By extending their long-standing collaboration with IBM, we’re bringing together two leading enterprise application platforms in Red Hat OpenShift Container Platform and IBM Cloud Private and adding the power of IBM’s software and cloud solutions.”

- Paul Cormier, President, Products and Technologies, Red Hat

According to a recent Red Hat statement, through the acquisition, IBM and Red Hat customers can now:

  • Maximize their existing technology investments and plug them more easily to the hybrid cloud with IBM Cloud Private and Red Hat OpenShift serving as the common foundation;
  • Build and deploy containerized applications on one single, integrated container platform IBM Cloud Private providing a unique view of whole enterprise data;
  • Allow developers to design, modernize, and deploy fresh applications more quickly while taking advantage of IBM’s cloud-based services such as synthetic intelligence (AI), Internet of Things (IoT) and blockchain with IBM Cloud Private on Red Hat OpenShift Container Platform.
  • “Joining forces with IBM,” said Red Hat CEO Jim Whitehurst, “will provide us with a greater level of scale, resources and capabilities to accelerate the impact of open source as the basis for digital transformation and bring Red Hat to an even wider audience, whole while preserving their unique culture and unwavering commitment to open source innovation.”

    This is where I exigency to pump the brakes, just a bit. I really hope that IBM doesn’t vanish heavy-handed in trying to change Red Hat’s market definition and culture. Because if it tries to propel Red Hat to adopt a broader IBM cultural and corporate model, I don’t really notice it ending well. Plus, I’m confident there are now additional concerns from existing Red Hat customers: What’ll occur to RHEL? How does this impact licensing and the tools that I use? finish I exigency to explore at competitors fancy Pivotal or other solutions fancy Cloud Foundry? Again, time will repeat how this will whole play out. My hope is for an easy integration, while keeping Red Hat just as awesome as it is today.

    Finally, it’s distinguished to understand what this will weighin for your hybrid cloud and overall cloud management solution. Barring a heavy-handed approach to this acquisition, IBM and Red Hat can finish some really improbable things in the market. This is honestly the first time in a long time that IBM pushed itself into the forefront of cloud, container, and hybrid cloud innovation. The exciting fraction is how IBM will integrate other solutions, Watson for example, into Red Hat products. If done right, there can live a lot of benefits for the customer, enterprises, and the cloud in general. I’m staying optimistic.

    Bill is an enthusiastic technologist with undergo in a variety of industries. This includes data center, cloud, virtualization, security, AI, mobility, edge solutions, and much more. His architecture drudgery includes great virtualization and cloud deployments as well as ... View complete Bio We welcome your comments on this topic on their companionable media channels, or [contact us directly] with questions about the site.

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    IBM Scores Another Lab Win With 'Sierra' Going Online At Lawrence Livermore National Labs | killexams.com actual questions and Pass4sure dumps

    With its Power9 technology, IBM has been on a roll in the HPC segment. We’ve been covering these efforts extensively at Moor Insights & Strategy, from IBM’s partnership with Google and the Department of Energy to Power9 powering the apex supercomputer . Now IBM has announced another lab announcement with “ Sierra ,” a joint supercomputer project with the U.S. Department of Energy’s National Nuclear Security Administration (NNSA) and the Lawrence Livermore National Lab (LLNL). Let’s remove a closer look.

    The details

    Sierra is being hailed as the sister system to the IBM POWER9-based “Summit,” and it replaces the previous “Sequoia” supercomputer (which only uses CPUs). Sierra is currently ranked as the third-fastest supercomputer in the world, and it was announced terminal week that the system is now operational and in the final testing before “acceptance.” Acceptance is a term used by the U.S. government proverb to IBM “you delivered what they asked and paid for.” It will serve the NNSA’s three nuclear security laboratories, which, in addition to LLNL, include Sandia National Laboratories and Los Alamos National Laboratory.

    IBM says this computer is approximately 1 million times more powerful than a high-end laptop and built from the ground up (like Summit) for traditional HPC and future AI applications. Its footprint spans 7,000 square feet, and it is made up of 4,320 nodes on 240 computing racks. Each node of the supercomputer includes two IBM POWER9 CPUs and four NVIDIA V100 GPUs, making Sierra the NNSA’s first large-scale production heterogenous system. It claims an impressive peak performance of 125 PetaFLOPS, or 125 quadrillion floating-point operations per second. This puts it leaps and bounds ahead of Sequoia’s performance—potentially 6-10 times more powerful when you factor in its honest AI performance.

    Additionally, Sierra is backed by 154 petabytes of IBM Spectrum Scale storage, spread across 24 racks of Elastic Storage Servers. According to LLNL, the system delivers 1.54 terabytes per second (in both read and write bandwidth) performance and is capable of managing an impressive 100 billion files per each file system. The Spectrum Scale enables the system to meet scaling demands.

    LLNL partnered closely with IBM and NVIDIA not only on the hardware but the software stack and helped optimize the heterogeneous system’s performance through prep drudgery on applications and developing optimized code. LLNL has also purportedly been working closely with the Oak Ridge National Laboratory, where the apex supercomputer is housed, which makes sense and glad to notice as the budget whole comes from U.S. taxpayers.

    Applications

    Sierra will live assign to employ towards national security—NNSA’s Stockpile Stewardship Program, ongoing life extension programs, weapons science, and nuclear deterrence. whole this is code for performing nuclear and nuclear defense simulations, eliminating the exigency to test nuclear bombs in the middle of the desert or underground. It’s distinguished to note that that Sierra will also live assign to employ for other scientific research benefitting society. The LLNL says Sierra will live utilized in projects such as cancer drug research, precision medicine, seismology, climate, astrophysics, materials science, and more.  This makes perfect sense as Sierra is the third fastest supercomputer on the planet regarding classic HPC performance.

    Why this matters

    I root IBM for not abandoning its country’s defense in its time of exigency fancy other technology companies have. I find it ironic that Google, who benefits from the freedoms the U.S. military has provided it, is stepping away from supporting their country’s defense and its citizens.

    All in all, this is another solid HPC operational win for IBM’s POWER9. I suffer called the POWER9 architecture the “Swiss army knife” of acceleration and as it is the best compute acceleration platform with support for five different ways to accelerate, even in a remembrance coherent manner. For some applications, coherency is distinguished as it makes the accelerator (GPU, FPGA, ASIC, etc) an equal citizen for remembrance access, which simplifies software evolution and minimizes latency. This should weighin faster performance and quicker app time-to-market.

    Financially, this is a win, too.  Together, the deal IBM gash with the DOE was worth over $300 million—a number that IBM says contributed to IBM’s Cognitive Systems 17% Q3 revenue growth this year.

    In addition to the financials, it’s also just powerful optics for its POWER9-based enterprise line. IBM is employing this selfsame AI-optimized architecture in Sierra in its commerce product line, using the IBM AC 922 POWER9-based server family. What enterprise wouldn’t want to pronounce they employ the technology behind two of the most powerful supercomputers in the world to solve their commerce problems?

    Note: Moor Insights & Strategy writers and editors may suffer contributed to this article.  

    Disclosure: Moor Insights & Strategy, fancy whole research and analyst firms, provides or has provided paid research, analysis, advising, or consulting to many high-tech companies in the industry, including Advanced Micro Devices, Apstra, ARM Holdings, Bitfusion, Cisco Systems, Dell EMC, Diablo Technologies, Echelon, Ericcson, Frame, Gen Z Consortium, Glue Networks, GlobalFoundries, Google (Nest), HP Inc. HewlettPackard Enterprise, Huawei Technologies, IBM, Jabil Circuit, Intel, Interdigital, Konica Minolta, Lenovo, Linux Foundation, MACOM (Applied Micro), MapBox, Mavenir, Mesosphere, Microsoft, National Instruments, NOKIA (Alcatel Lucent), Nortek, NVIDIA, ONUG, OpenStack Foundation, Peraso, Portworx, Protequus, pure Storage, Qualcomm, Rackspace, Rambus, Red Hat, Samsung Technologies, Silver Peak, SONY, Springpath, Sprint, Stratus Technologies, TensTorrent, Tobii Technology, Synaptics, Verizon Communications, Vidyo, Wellsmith, Xilinx, Zebra, which may live cited in this article.  


    IBM Is Going Down - But It Can live Saved | killexams.com actual questions and Pass4sure dumps

    Image result for ibm

    Introduction

    In September, I wrote an article that chronicled the slack decline of International commerce Machines (IBM). The article focused on the company’s declining revenues and margins and the fallacy that is Watson that has been overhyped and over-marketed. Since the article was published, things suffer gotten worse for the company. Its stock cost has declined from $145 to the current $123.

    As a result, its market valuation has declined from more than $130 billion to the current $112 billion. This valuation makes IBM reasonably valued compared to other technology companies. In IBM, investors are paying 19X trailing earnings and 8X forward earnings. This is significantly lower than what investors are paying for other former tech companies fancy Oracle (ORCL), Microsoft (MSFT), Apple (AAPL), and Cisco (CSCO) which suffer an incurious forward PE ratio of 15. Similarly, IBM has a forward PS ratio of 1.41, which is lower than the incurious of these companies of 4.65.

    During IBM’s decline, many investors – including Warren Buffet – suffer invested in the company, hoping that it will achieve a turnaround. They suffer whole been disappointed as the company’s stock has continued to notice lower lows. Short sellers on the other hand suffer been rewarded as the stock has lost 17% of its value this year. The short interest has increased from 14 million in January to the current 21 million.

    In my view, IBM will continue to underperform because it lacks a ferment that will remove the stock higher. This analysis will live a ensue up to the previous article and will highlight more problems that the titanic blue is facing and how it can live saved.

    Elephant in the Room: RHT

    When great companies are in decline, they suffer a utilize of making needy decisions especially in terms of acquisitions. Two examples of this are the decision by Sears Holdings (SHLD) to acquire K-Mart and the decision by common Electric (GE) to acquire Baker Hughes (BHGE). Sadly, IBM decided to ensue the footsteps of these companies.

    Two weeks ago, the company announced that it would expend $34 billion to acquire Red Hat (RHT). IBM would acquire RHT for $190, which was a 63% premium. In its announcement, IBM’s CEO said that:

    The acquisition of Red Hat is a game-changer. It changes everything about the cloud market. BM will become the world's #1 hybrid cloud provider, offering companies the only open cloud solution that will unlock the complete value of the cloud for their businesses

    This announcement reminded me of what GE’s Jeff Immelt said when he announced the acquisition of Baker Hughes.

    BHGE is an industry leader positioned to deliver in any economic environment and assist their customers in driving productivity. This deal capitalizes on the current cycle in oil and gas while also strengthening their position for the market recovery. As they vanish forward, the fresh fullstream offering accelerates their skill to extend a digital framework to customers while delivering world-class technical innovation and service execution. They explore forward to continuing a seamless integration for their customers.

    What is different in the two statements is that Immelt was prerogative about the scale of Baker Hughes. On the other hand, Virginia Rometty’s statement was demonstrably wrong. First, in the press conference, IBM used the word cloud 43 times and according to Rometty, the deal will waiton IBM remove an improved market partake in the cloud industry. However, a explore at Red Hat’s revenues shows a different picture. Most of its revenues forward from infrastructure-related offerings while the next revenue comes from application evolution and other emerging technology offerings. In its 10K, it describes the subscription offerings as: revenue generated from Red Hat Enterprise Linux and related technologies such as Red Hat Satellite and Red Hat Virtualizations.

    Source: Red Hat

    This point was also noted by Barron’s article that interviewed an analyst from Bernstein who noted that:

    More than half of Red Hat’s revenue was generated by its traditional on-premise server operating-system business, which isn’t directly tied to the cloud and has a slowing growth rate.

    Further, while Amazon’s (AMZN) cloud grew by 46% in 2017, Red Hat’s cloud-related revenues rose by just 14%. At the selfsame time, the annual revenues of Red Hat are just under $3 billion with the net income being below $300 million. Worse, IBM is paying 55 times RHT’s estimated sales, which is a hefty valuation considering that many companies in the sector are acquired at 4.5 times forward sales.

    Therefore, whole this does not justify the hefty $34 billion. Also, this is not the first time that IBM has overpaid for its cloud services. In 2013, when it announced the acquisition of Softlayer, it declared that:

    As businesses add public cloud capabilities to their on-premise IT systems, they exigency enterprise-grade reliability, security and management. To address this opportunity, IBM has built a portfolio of high-value private, public and hybrid cloud offerings, as well as software-as-a-service commerce solutions. With SoftLayer, IBM will accelerate the build-out of their public cloud infrastructure to give clients the broadest option of cloud offerings to drive commerce innovation.

    Even with the SoftLayer acquisition, IBM has lagged other cloud computing companies. It is number 5 in the industry behind Amazon, Microsoft, Alibaba (BABA), and Google (GOOG). In public cloud, it has a market partake of 6%, which is miniscule compared to Amazon’s 46% market share.

    In short, IBM is following the selfsame trend followed by common Electric when it acquired Baker Hughes or the disastrous $10.3 billion acquisition of Autonomy by HP in 2011.

    A silver lining in whole this is that there is a possibility that the deal will not close. In the press statement, IBM said that it will pay $190 for the company. As of this writing, the company is trading at $172, which is 10% lower than the proposed $190. In merger arbitrage, this is a symptom that a excellent number of investors don’t believe the deal will close.

    Next Elephant in the Room: Debt

    The Red Hat acquisition is the first among many challenges I did not address in my previous article. This deal however presents IBM with a poise sheet problem. To finance the all-cash transaction, IBM will exigency to raise additional debt.

    Before the deal is closed, IBM has a debt to equity ratio of 2.372, which is higher than that of the peers mentioned above. Microsoft, Oracle, Apple, and Cisco suffer a debt to GDP ratio of 0.8867, 1.527, 1.068, and 0.59 respectively. Their incurious is 1.01. Therefore, this will worsen when the company issues more debt to finance the acquisition.

    This would not live a problem for a company that is growing. Sadly, as I wrote before, the company’s growth has slowed, revenues are declining, and the titanic bets on Watson are not working out. As it has been noted, many Watson customers are thinking of scaling down.

    As you recall, IBM under Rometty has become a great financial engineering company. To improve self-confidence in the market, the company has borrowed heavily to finance buybacks. In the past ten years, the company has spent more than $40 billion in partake buybacks. The chart below shows the reducing partake counts for the company in the past ten years.

    Compare this with the growth in long-term debt as shown below.

    In other words, the deal by IBM to acquire Red Hat will dramatically increase its debt even though RHT’s free cash tide is increasing. This will likely lead to reduced dividends. In fact, because of the acquisition, the company has announced that it will halt the buybacks in 2020. Therefore, it will halt buybacks to finance a deal I believe will not waiton it in future. yoke whole this with the hefty $18 billion pension liability which is higher than that of comparable companies.

    IBM Can live Saved

    In this article, I suffer ignored other concerns that I raised in the previous article. These concerns include the slowing growth, thinning margins, and the increased competition from companies fancy Alibaba, Amazon, and Google.

    While things seem shadowy for IBM, I believe that it can live saved. Other former technology companies suffer whole been in a similar situation fancy IBM and recovered. Before Satya Nadella, Microsoft was dying. Similarly, before Steve Jobs, Apple was dying.

    A excellent zone for IBM to start is to recognize that it is in trouble. After this, it should start by establishing the reason of the problem. I believe that the reason of IBM’s problems was its lateness in the cloud computing industry. This detain allowed Amazon and other companies to enter the industry and acquire customers. In cloud, the churn rate is so low that when a company acquires a client, it can live confident that the company will not defect to its competitors.

    Next, as with other tech companies that suffer recovered, IBM should account changing its management. The fact is that Verginia Rometty has not been an effectual CEO. Under her leadership, the company’s stock has declined by more than 30% as shown below. At the selfsame time, she has been paid more than $120 million. If Rometty has not changed the company in 6+ years, what makes the board confident that she will revolve it around in future?

    Next, as discussed above, IBM should account giving up the acquisition of Red Hat. While this will attract a hefty divorce bill, it will live worth than the calamity that awaits if the deal goes on. recollect that 83% of whole M&A deals fail and there is no reason why this will succeed. To live clear, IBM will exigency to acquire acquisitions to compete with Amazon. In fact, with the $34 billion, the company can acquire alternative investments. For example, it can expend about $3 billion to acquire a company fancy Box (BOX) that counts 61% of Fortune 500 companies as clients.

    Better, it can employ its ventures arm to invest in small startups in a similar route that Google has done it with Google Ventures. As shown below, IBM Ventures has not made any meaningful investments in the recent past.

    Source: Crunchbase

    Finally, IBM should account divesting its Global commerce Solutions (GBS) segment. This is a segment that provides consulting, application management, and global process services. In 2017, the segment generated $16.38 billion in revenues, which was lower than $16.7 billion in 2016. The segment’s margins are the least among the other segments.

    The low margins are 25%. This is almost similar to other companies in the sector fancy Accenture (CAN), Wipro (WIT), and Cognizant Technologies (CTSH) which suffer low margins of 30%, 30%, and 39%. Therefore, on a sum-of parts basis, this segment lonesome can live worth more than $30 billion when you compare it with its peers.

    It is estimated that GBS has more than 120K employees. Therefore, divesting the segment will waiton the company reduce the headcount and improve margins.

    Final Thoughts

    IBM’s stock has continued to decline after the announcement of the Red Hat acquisition. As I suffer explained, the company continues to countenance major headwinds that will likely remove it lower. However, I believe that the directors can serve the company well by getting out of the RHT deal and finding better acquisition targets, replacing the CEO, investing in early stage cloud companies through IBM Ventures arm, and diversifying the Global commerce Services arm.

    Disclosure: I am/we are long AAPL, BOX.

    I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I suffer no commerce relationship with any company whose stock is mentioned in this article.



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