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IBM Opens IT Services Center in U.S. – Analyst Blog

Zacks Market Commentaries — Wed, 26 Aug 2009 22:48:34 +0000

In addition to expanding its international footprint, IBM (IBM) is also expanding domestic operations. The company has announced the opening of a services delivery center in the U.S.

The new facility will maintain, monitor and support computer hardware, software and manage IT services for IBM's clients. The new center joins an extensive network of more than 80 IBM delivery centers worldwide.

For the new facility, IBM intends to hire up to 1,300 people by the end of 2010.

With an investment of $300 million in 2008, IBM built 13 Business Resilience service delivery centers in 10 countries, increasing its ability to address surging demand from businesses and governments from around the world seeking to keep their operations safe from disruption. IBM also plans to open a new collocation data center at its Greenock facility in Scotland and three new global delivery centers in Argentina.

To further bolster its presence in India, the company earlier opened a new Global Delivery Center (GDC) in Pune, India, which will act as the regional hub for IBM Tivoli service management software and strategy, and will provide clients with business consulting and application services.

We expect these centers to help increase revenue going forward. While IBM's initiative to expand its footprint in both domestic and international markets has helped it to win a number of IT deals, the IT services business is becoming increasingly competitive. In particular, IBM is facing pricing pressure from Hewlett-Packard (HPQ), Sun Microsystems (JAVA), Intel Corporation (INTC) and Dell (DELL).

Despite this, we believe IBM's new IT initiatives position the company for long term growth. Thus we maintain our Outperform rating on the stock.

Read the full analyst report on "IBM"
Read the full analyst report on "HPQ"
Read the full analyst report on "JAVA"
Read the full analyst report on "INTC"
Read the full analyst report on "DELL"
Zacks Investment Research

ArvinMeritor consolidates in China – Analyst Blog

Zacks Market Commentaries — Wed, 22 Jul 2009 17:52:00 +0000

Auto parts supplier ArvinMeritor Inc. (ARM) recently entered into a strategic partnership with Yutong Group Co. of China.

ArvinMeritor will provide parts and components of power transmission and basic braking systems to Yutong for the production of Yutong buses and chassis. Under the agreement, in addition to continually providing high-end axle products to Yutong, ArvinMeritor will also offer differential carriers and brake calipers made in its production plant in Wuxi, China, for application in Yutong’s self-made axles.

The final product will be assembled at Yutong's plant in Zhenzhou, China. As part of this partnership, ArvinMeritor and Yutong will also sell and distribute standard aftermarket service kits for its products.

The project will commence at the end of 2009 and the investment is expected to exceed $50 million in the next five years. Meanwhile, both parties will also further strengthen the cooperation in a wider area.

ArvinMeritor expects the alliance to consolidate its position in the Asian markets and strengthen its existing partnership with Yutong. The company has been focusing on low cost countries across Asia and South America. It aims to achieve revenues of $1 billion in Asia in the next 5 years.

ArvinMeritor also plans to open new plants in leading cost-competitive countries, including India and Mexico. It plans to open a plant in Pune, India in the near term to support light vehicle customers. Recently, ArvinMeritor opened a new production facility in Monterrey, Mexico. The new plant will provide the infrastructure to support targeted growth areas in off-highway components and the CVS market. The new plant is expected to reduce costs and provide flexibility to meet higher demand anticipated in North America in 2009.

In South America, the company is growing by winning several significant business propositions in Venezuela.

We rate the shares a Hold with a six-month target price of $4.00.

Read the full analyst report on "ARM"
Zacks Investment Research

Hedge Funds in India

Richard C. Wilson — Sun, 31 Aug 2008 17:15:21 +0000

Hedge Funds in India

The Benefits of Offering Hedge Funds in India

Here's a short article on how the Committee of Financial Sector Reforms in India might introduce hedge funds and why this would be a positive move for the Indian markets and fund industry as a whole.
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The Draft Report of the Committee on Financial Sector Reforms headed by Professor Raghuram Rajan was issued for comment in April 2008. Among the proposals that the high-level committee made was the introduction of domestic hedge funds. The committee feels that, “The presence of hedge funds would induce greater competitive pressure for other regulated fund management channels such as mutual funds.”

This week’s article discusses the benefits of introducing hedge funds in the Indian market. It shows how hedge funds could improve asset price efficiency. Besides, such funds, by virtue of their diverse investment styles, could provide investors an opportunity to enhance their risk-adjusted portfolio returns.

Of different genre

Suppose a long-only (mutual fund) manager and a hedge fund manager both have a negative view on SBI, a positive view on HDFC Bank and a neutral view on ITC.

Long-only active managers will buy ITC in the same weight as their benchmark index, may overweight HDFC Bank and may not take any exposure in SBI. There is a reason for such a strategy. Active managers strive to beat their benchmark index. But they do not take too many active bets, lest their bets go wrong. Often, active funds tail the benchmark index with few active bets. Importantly, such managers cannot short-sell to take advantage of their negative view on a stock.

Hedge fund managers’ do not suffer from such constraint. In the above example, the hedge fund manager may overweight HDFC Bank, short-sell SBI and not take any exposure in ITC.

Better still, to neutralise any market risk, the hedge fund manager may buy HDFC Bank and short-sell SBI in such a way that the market risk in HDFC Bank is offset by short-selling SBI. Often, neutralising market risk on a portfolio would mean short-selling Nifty futures.

Exploiting price inefficiency

Hedge funds identify mispriced assets and exploit any price inefficiency. One way to do this is to employ statistical arbitrage.

Suppose a hedge fund manager finds that combination of one share of HDFC Bank and two short shares of SBI (1HDFC – 2SBI) has a stable statistical distribution. If the “spread” wanders far away from its mean, a hedge fund manager would set-up this strategy with a view that the “spread” will tighten. Such relative-value strategies can help arbitrate away asset price inefficiencies in a “normal” market. Read more...

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