IBM (IBM) versus everyone else? That's pretty much how Tuesday night shook out. Everyone knows that Netflix (NFLX) was a blow-out -- a reminder that when Reed Hastings misses his forecast from a previous quarter and blames his errant forecasting, and NOT demand for their programming, you should believe him. His content may seem like a firehose to you, but I find their artificial intelligence makes it so you can consume product through a garden hose if you navigate the site right.
The airlines are generally doing well -- and they are, surprisingly, making decent money with oil so high. But United Continental (UAL) is just killing it. This one was not hard to get. When I sat down with CEO Oscar Munoz last month in San Francisco it was pretty darned obvious that the company would raise numbers. Sometimes you just get that overwhelmingly positive vibe. This is the third time (third time!) he has had to raise. That's travel and leisure demand writ large.
IBM is not pulling off this transition as well as it should. Yes, some of its incumbent businesses, ones that are systematically eroding, had some decent margins. But the pivot, the strategic imperative pivot -- which accounts for about half the business now -- is not as strong as I would have expected it to be. The real bummer is cognitive solutions: down 5%. Watson Health and blockchain are in that division. But now we learn so is their transaction processing software, which is part of a declining market.
Here's the issue. If it is strategic, if it is imperative, it should be there. If it isn't strategic, if it isn't fast growing, then what is it doing in the portion of the business that is? I found it disappointing.
There seems to be no leverage to the model.
The flipside though, Lam Research, was nothing short of spectacular versus expectations. A couple of quarters ago, CEO Martin Anstice said there would be a pause in orders as the supply chain fixes itself, but the demand for new machines was not cyclical -- it was secular -- and shareholders would be fine.
In truth, both the bulls and the bears were right. You had to ride the stock down from $229 to $138 to get to the better-than-expected promise land. But you are there now -- with a 3% yield, to boot.
And just in case you think it is isolated? We got a really good number from ASML Holding (ASMLF) last night, verifying that the big customers are back buying huge, bus-sized equipment.
It was a pause, there was tremendous discipline shown by the producers, as Martin predicted, and even China ordered a ton of product.
Despite the most visible disappointment in ages, IBM, the bulls won the night.