IBM, HPE Make List of Activist Investor Targets

While activist hedge fund Jana Partners may be getting all the attention for a stance on #WholeFoods Market Inc. (WFM) that prompted it to sell to #Amazon.com Inc. (AMZN), there are a lot of other targets investors with a penchant for change may be eyeing. In fact, The Deal, via TheStreet.com, is out with a list of 20 potential targets for activist investors with two technology icons making it to the list: International Business Machines Corp. ( #IBM ) and Hewlett Packard Enterprise Co. ( #HPE ). While these two are now viewed as staid, stodgy companies compared to the other tech players and the rise of the social media darlings like #Facebook Inc. (FB), they have been making strides to stay relevant. Still, judging from The Deal, their efforts may not be good enough, potentially prompting calls from big investors for change. (See also: Hewlett Packard's Sales Decline Mirrors IBM's Fall.) Wither Watson? Take IBM, which last week reported second-quarter earnings that came in below Wall Street’s views on the revenue front but beat on the earnings side. The three-month period ended in June marked the 21st consecutive quarter that revenue declined at the Armonk, N.Y., technology company. According to The Deal, with double-digit revenue declines, the activists are circling, reportedly prompting Big Blue to tap two investment banks to come up with a defense to push back from any investors that demand change. It doesn’t help that the IBM, which was at the forefront of artificial intelligence with its Watson platform, appears to be losing on that front as well. Earlier this month, Jefferies analyst James Kisner cut his price target to $125 from $135 a share, saying the company is “outgunned” in the war for AI talent and and argued that it's a problem that will only get worse. “Our checks suggest that IBM’s Watson platform remains one of the most complete cognitive platforms available in the marketplace today. However, many new engagements require significant consulting work to gather and curate data, making some organizations balk at engaging with IBM,” wrote Kisner in the report, which was covered by 24/7 Wall Street. (See also: How Much Money Would You Have if You Followed Buffett into IBM?) As for HPE -- another huge player in the PC, printing and computing services markets back in the day -- The Deal pointed out that Jana has recently acquired a 0.3% stake in the company and that it already counts Third Point Capital, Starboard Value and Frontfour Capital as investors. They all have one thing in common -- they run activist funds. The Deal noted the number of activist investors in the stock implies a campaign for change could be launched soon. Like IBM, revenue at HPE has been on a steep annual decline and is projected to get worse over the next two years. The results for the fiscal second quarter of 2017, ended April 30, supported that sobering outlook, falling short of analysts' estimates.

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