Annex Newsflash 2005-20                             May 24, 2005

 

INDUSTRY TRENDS

Updated 5/24/05, 12:15 AM PDT (adds "Neither Too Bleak Nor Too Bright")

Various Industry "HeadTurners"

IBM Trumps Trump...

...Is Trumped by Camilla; 

GM Joins Former Offspring in (Credit) Junk Pile

Neither Too Bleak Nor Too Bright

PHOENIX, May 24He's built buildings, owned casinos and airlines, written books, married models and stars in a reality TV show.  And on Monday, Donald Trump, the "Apprentice" show's star, announced in New York his latest venture: Trump University.

One day later, IBM trumped Trump.  In story datelined in Las Vegas, Big Blue announced the "IBM Services University," a new academic curriculum designed to develop the skills required in the world's increasingly services-based economies.

The new course, replete with a characteristic IBM acronym (Services Sciences, Management and Engineering - SSME), has been created through close collaboration between IBM, universities, industry partners and government agencies, the company said.

"The Academic Initiative, which is designed to help educators teach students the open standards technology skills necessary to compete for the jobs of tomorrow, is currently used by universities and colleges to offer more than 2,000 courses to over 280,000 students worldwide," IBM said in a statement.

Just like Trump, who is also trumpeting the jobs of tomorrow.  Trump University will consist of online courses, CD-ROMS, consulting services and Learning Annex-type seminars.

"In today's hyper-competitive business climate, the need for the highest quality education has become more crucial than ever," Trump said. "But people are looking beyond the traditional business education model, which involves hours in the classroom and relies primarily on book learning."

The for-profit university will not offer degrees or grades. Courses will cost $300 and will take one to two weeks to complete. Trump said longer courses of two to three months would be offered in the future.  The school would emphasize "learning by doing."

Michael Sexton, a former management consultant with Accenture in New York, will serve as president of Trump University.  Roger Schank, professor emeritus and founder of the Institute for Learning Sciences at Northwestern University, will act as a "chief learning officer."

Not to be outdone by the corporate magnates like Trump or multinationals like IBM, British royalty raised the bar a notch in the quest for knowledge.  Former Camilla Parker, now Duchess of Cornwall, trumped both Trump and IBM in a news from London this morning about her opening a new medical research center.

She did it at the Southampton General Hospital where she unveiled the Medical Research Council Epidemiology Resource Centre in her capacity as President of the National Osteoporosis Society.  It was her first public appearance since marrying last month Prince Charles, the British heir to the throne.

GM Joins Former Offspring in (Credit) Junk Pile

PHOENIX, May 24 - Birds of a feather flock together.  Fitch Ratings downgraded this morning the senior unsecured credit of General Motors Corp. , GMAC and the majority of affiliated entities to "junk" (BB+ from BBB-).  Last summer, major credit agencies also did it to Electronic Data Systems (EDS), a GM offspring that left the car maker's nest in 1996 (see "Moody's Lowers the Boon on EDS," July 2004, and "EDS Stock Drops Like a Rock,” Oct 1996).

Fitch said the GM move reflects declining sales volumes and profitability, coupled with lack of tangible progress in attacking manufacturing and legacy costs, that will result in negative cash flow through at least 2006. The rating outlook for GM remains negative, Fitch said.  And GM, like the ailing airlines, is one of EDS' biggest customers.

Ironically, the GM stock has been trending UP despite its credit woes, while EDS' has been trending down (see the chart).  In the latest quarter, EDS' GM revenues were $465 million, down 8% from the year before (see the chart and "EDS Misfiring on All Cylinders," Apr 2005). 

And just think... once upon a time, people used to say, "as GM goes, so goes the nation."  Nowadays, one has to qualify that saying by asking - which nation?  The nation of Iraq?  Or of North Korea?

The higher they fly, the harder they fall.  Especially the icons of big business.  They tend to crash with a real thud.

Neither Too Bleak Nor Too Bright

PHOENIX, May 24 - Bill Snyder has got it right.  The IT market was neither as bleak as investors thought in mid-April, nor is as bright as some of them seem to think today.

The Street.com financial columnist wondered in his today's piece ("Tech Trend; Friend or Fantasy?", "How could the sector heal itself so quickly?"  Then he answered his own question. "Actually, it didn't. Technology companies aren't much different in May than they were in April. Simply put, the first quarter was never as bad as some people thought, and the next quarter or two may not be as good as some are thinking now. "

Indeed.  The market's negative overreaction in mid-April was the main reason we started our Annex 19 IT Index on April 19.  It is a market cap-weighted composite of the top 19 IT firms' stock prices that we follow (see the above chart which you can also find every day a our home page).

As you can see, the Annex 19 IT Index is up about 5% since a month ago, with most of the gains having been racked up since Dell's earnings announcement on May 12 (see "Dell Rings the Bell," May 2005).  Here's what we said about it at the time (May 13):

"Dell rang the bell this morning on the New York Stock Exchange with its first quarter fiscal year 2006 business results.  Not only did Dell’s stock surge by over seven points; it also pulled by the bootstraps various other competitors’ shares in the process (see the chart).  The “Annex 19 IT Index” was up 1.5% for the day even though the Dow Jones industrials declined almost 50 points (see the chart)."

(An excerpt from "Dell Rings the Bell," May 2005).

Ever since, the Annex 19 IT Index has also been tracking pretty closely the Dow Jones industrials' average.  On May 17, the market and the tech stocks also got a kick in the pants from HP (see "Hurd's First RBI," May 2005).  

Which suggests that Dell first picked up the sagging tech stock market by its bootstraps and pulled it up.  Then HP's hit four days later added to its upward momentum, sending the Big Blue blues back to the Armonk dugout.

Happy bargain hunting!

Bob Djurdjevic

For additional Annex Research reports, check out... 

2005 IT: IBM Trumps Trump (May 2005); Tweaking Big Blue (May 2005); Hurd's First RBI (May 2005); Dell Rings the Bell (May 2005); Stock Buybacks: The Phantom Is Back (May 2005); EDS Misfiring on All Cylinders (May 2005);  HP Surges, Dell Slumps; Lenovo Completes IBM Deal (May 2005);  Capgemini Jettisons Healthcare in N.A. (Apr 2005); HP: From India to Poland (Apr 2005); IBM: Slammed and Dunked (Apr 2005); Hurd Advice: Up Mount Market Cap (Apr 2005); Accenture: Roaring Ahead (Apr 2005);  Fujitsu Unveils New Servers (Mar 2005);  EDS Executive Suite; HP's New CEO (Mar 2005);  An iSeries Revival (Mar 2005); EDS Booster Club Fees Rise (Mar 2005);  An Upside-Down View (Mar 2005);   The Worst of Both Worlds (Mar 2005);   Octathlon 2005: Accenture Wins (Mar 2005);  IBM Global Services: Smaller, Shorter - Better? (Mar 2005);  IBM 5-yr Forecast: Quality over Quantity (Mar 2005); Rumor Lifts EDS', Fujitsu's Shares (Mar 2005); Capgemini: Turning the Corner (Feb 2005);  IBM Servers to Grow Again (Feb 2005);  Carly's Fickle Fans (Feb 2005);  CSC: Gearing Down on Purpose (Feb 2005);  EDS: Grossly Overpriced Stock (Feb 2005);  IBM Historical Update: 2004 Shot in the Arm (Feb 2005); New HeadTurners Series #1 (Feb 2005); IBM: A Crescendo Finale! (Jan 2005); Accenture: Strong Finish, Better Start (Jan 2005); Annex Coverage 2004: IT Services Dominate (Jan 2005)

2004 IT: EDS: The Titanium Stock (and other Wall Street tales) (Dec 2004); IBM PC: Good Riddance (Dec 2004); Fujitsu: Recovery Continues (Nov 2004);  IBM Server Renaissance (Nov 2004);  HP Hits Home Run (Nov 2004); Capgemini: Revenue, Stock Soars (Nov 2004); EDS: Jordan's Swan Song? (Nov 2004);  To Russia with Love and $ (Oct 2004); IBM: Slow Quarter No Longer (Oct 2004); Accenture: Revenues, Profits Up, Stock Down (Oct 2004); Capgemini: A Takeover Target? (Oct 2004); Sellout of America (Oct 2004); Spy Wars (Sep 2004); Outsourcing Boomerang (Sep 2004); EDS to Cut Up to 20,000 More Jobs (Sep 2004); Capgemini Stock Plummets on Unexpected Loss (Sep 2004); HP Savaged by Wall Street (Aug 2004); Moody's Lowers the Boon on EDS (July 2004); HP: Delivering Value Horizontally (June 2004); Accenture: Revving Up a Notch (June 2004); Beware Your CFO! (May 2004)IBM: Changing of the Guard (May 2004); Capgemini: Texas-size Home Run (May 2004); Following the Money (May 2004);  EDS: On a Wink and a Prayer (Apr 2004); HPS Wins by a Nose! (Octathlon 2004); Accenture: Burning the Track (Mar 2004);  IGS: "Crown Jewel" Restored? (Mar 2004); HP: Still No Cigar (Feb 2004); Cap Gemini: Another, Smaller Loss (Feb 2004); CSC: Good Quarter Gets Boos (Feb 2004); EDS: "Hot Air Jordan" Flaunts Flop as Feat (Feb 2004); IT Industry: Whither Goeth It? (Jan 2004); Cronyism Is Alive and Well at EDS" (Jan 2004)

Or just click on and use "financial engineering" or similar  keywords.

Volume XXI, Annex Newsflash 2005-20
May 24, 2005

Bob Djurdjevic, Editor
(c) Copyright 2005 by Annex Research, Inc. All rights reserved.
e-mail: annex@djurdjevic.com

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