RESEARCH TRIANGLE PARK – IBM Chair and CEO Arvind Krishna took an upbeat view of the tech giant’s prospects in a conference call with analysts Monday after an earnings report that topped expectations and despite a possible recession while inflation mounts.
“If I look at our pipelines, our pipelines are remaining pretty healthy. So, I would tell you that right now, what we are seeing is that the second half at this point, looks pretty consistent to the first half,” Krishna said, according to a transcrpit published by The Motley Fool.
“When we look at our pipelines, whether it’s in Red Hat or mainframe software or Automation, Data and AI, Security, and by geography. So, this is a little bit different, which is why you’ve heard me often say I’m a bit more optimistic than many of my peers, both within the industry and across the board, because we see that technology, and [CFO] Jim [Kavanaugh] has also said that this has of AI is deflationary. So, in an inflationary environment when clients take our technology, deploy it, leverage our consulting. It acts as a counterbalance to all of the inflation and all of the labor demographics that people are facing all over the globe.
“So, that is the reason on software. Second, on consulting correlated to the economic cycle, and maybe we see much less of that this time around because of the nature of our consulting. If you look at it, a lot of our consulting is around deploying back-office applications, critical applications, supply chain resilience, worrying about cash conversion, worrying about optimization of our — of the costs within our clients. Those tend to get more attention actually in, I’ll call it, at least a slight down cycle.
“They’re not. Third, look, consulting is very labor-based. Jim talked a lot about the demand and the supply. But to be completely clear, in a business where you do hire tens of thousands of people because of the scale of it, you do churn in the neighborhood of tens of thousands each year.
“That gives you an automatic way to hit a pause in some of the profit controls because if you don’t see the demand coming, you’re going to slow down your supply side. … On M&A, actually, I’ll say it before Jim will. We have said that our model is about a point to point and a half each year based on M&A.
“And if you look at last year, that was pretty consistent. If you look at this year, look, the year is not over, but you should expect it to stay in that range. And it’s a mix between consulting acquisitions and software acquisitions, and the multiples that we’ve been getting them at still imply that range. So, I think we’ll give you that answer, and we expect it to stay there.”
