To start, activism in IBM is unlikely for a few of reasons:
The shear size
The Buffett overhang
Most activist theses are financial engineering, and that’s already something IBM is masterful at
IBM has been a shareholder returns leader, no lie here, with it having one of the top three records of dividends/buybacks over the last decade among tech companies. It’s likely that IBM is only surpassed by Apple.
Now, generally, activists want more shareholder returns, but the case could be made that IBM needs to keep more of that money and funnel it into R&D spending. It’d have to be a longer-term activist, one that can help guide IBM toward a more transformational acquisition as well. Not talking bolt-ons, rather, the $30B type that can really transform a business.
In terms of Buffett, he’s a long-term shareholder and generally frowns upon activism. An activist would need the backing of shareholders, but not all. Buffett went against Kraft when it was buying Cadbury back in 2010. He said he’d vote against it. Kraft got the deal done and Buffett quickly sold his stake.
The typical activist play of pushing a company to distribute more cash to shareholders won’t work here. The company has been returning a lot of cash to shareholders in an effort to hide the breakdown in its business. The possible play? Break up its products and services business. A move we’ve seen HP undertake.
Yet, it would take is a sizable activist (think: a Jebb Ubben at ValueAct or Bill Ackman at Pershing). But, apparently some large IBM shareholders have already approached both these guys about getting involved at IBM, and both made a pass.
There are still a few activists with the fortitude and wherewithal to tackle such a company, including a Dan Loeb at Third Point, Barry Rosenstein at Jana Partners, Nelson Peltz at Trian Partners, Carl Icahn and even a Paul Singer at Elliott Management. Although Singer isn’t known for having the vagarity to take on such a large target. Icahn doesn’t have the operational prowess to take on an IBM, assuming a split or further buyback is out of the question. Peltz doesn’t know much about tech, that leaves a Loeb or Rosenstein.