Seeking Alpha: The Dell And Market Pessimism For EMC Is Too Much

Buyouts are generally supposed to produce upside for the shareholders of the company being acquired, but that hasn't been the case for EMC (NYSE:EMC) since the company announced its merger agreement with Dell back in October of 2015. While it has indeed been a lousy market for a few months now, EMC's 12% drop since the time of the deal is worse than the performance of the Nasdaq, as investors have grown increasingly worried about the weak performance of EMC's storage business, the poor performance of VMware (NYSE:VMW), and concerns that the deal may not go through at all.

I believe that the deal gets done, but even if it does not, I believe EMC would walk away with at least $4 billion in cash in its pocket and an underestimated PaaS business in Pivotal. I wouldn't expect EMC's reported storage results to improve much until mid-2016, but with a stand-alone value above today's price and very low implied value to VMware, I believe there's still upside in these shares that is worth the risk that the deal unravels.

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The Dell And Market Pessimism For EMC Is Too Much

Seeking Alpha: Can Cisco Pull Its Weight As A Barbell-Type Pick?

A stock like Cisco (NASDAQ:CSCO) isn't really part of my normal beat, as I prefer to write about far more obscure companies. And yet, I do like to have stocks like Cisco in my portfolio - I find a lot of value in looking for well-established companies trading below long-term fair value, as I find they help reduce the volatility in portfolios that include far riskier stocks. This is basically a barbell strategy where one "bulge" is higher quality, lower-risk picks and the other is lower quality, higher-risk picks; when you can get a better return out of the high-quality end, it can really add to your returns.

In my view, Cisco seems like a reasonable (if imperfect) candidate. It doesn't take particularly generous assumptions to drive a fair value about 10% above today's level, but if management can cut costs and/or drive better sales of higher-margin products, there could be worthwhile upside. There is a well-known and widely reported risk that the basic operating environment Cisco serves is in the early stages of a fundamental transformation that will devalue high-margin hardware, but I believe Cisco is already taking some reasonable steps to offset the risk.

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Can Cisco Pull Its Weight As A Barbell-Type Pick?

Seeking Alpha: Lenovo Facing Headwinds, But Managing Them Well

The core markets that Lenovo (OTCPK:LNVGY) serves haven't been in the greatest of health lately. PC sales continue to fall, and smartphone sales in China and large emerging markets have weakened. Despite that, the company continues to focus on building share and refining a lean model that keeps constant pressure on its rivals.

The key priorities for Lenovo's management need to be the improvements of the server business (acquired from IBM (NYSE:IBM)) and the mobile business acquired from Google (NASDAQ:GOOG). Both can support the company's basic functional value philosophy, but both need their cost structures further "Lenovo-fied". I continue to be bullish on the company's prospects for achieving these endpoints, but the shares aren't an obvious bargain today.

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Lenovo Facing Headwinds, But Managing Them Well

Seeking Alpha: EMC Not Exactly Making Its Case

Several large tech players, including Microsoft (NASDAQ:MSFT), Cisco (NASDAQ:CSCO), and Hewlett-Packard (NYSE:HPQ), have gone through multi-year stretches where their shares underperformed due to persistent concerns about their long-term competitiveness and growth potential. To varying extents these companies have changed the tone around their businesses, but it doesn't automatically follow that EMC (NYSE:EMC) will be able to go that same route. While EMC has managed to do a credible job of keeping itself relevant within its core storage market, there are persistent concerns about whether that market is truly valuable anyway and whether EMC can reposition itself for future growth.

I'm increasingly on the "cautious yes" side of that question. EMC has historically done a good job of buying the pieces it needs to remain at the top of the market, as well as identifying assets like VMware (NYSE:VMW) and RSA that can grow the business. Expectations are not particularly demanding today, but then EMC's performance doesn't call for aggressive projections and there are increasing risks (in my view, at least) that the company will respond to the pressure its under with a larger acquisition.

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EMC Not Exactly Making Its Case

Seeking Alpha: Lenovo's Strong Operating Results Likely Won't Quiet The Doubters Yet

I expect that for any sufficiently large company, there will inevitably be analysts and investors who are negative on the stock. In the case of Lenovo (OTCPK:LNVGY), though, I continue to be surprised at the conviction expressed by the bears that Lenovo will fail to successfully integrate and improve the x86 server business it acquired from IBM (NYSE:IBM) and the Motorola phone operations it acquired from Google (NASDAQ:GOOG) (NASDAQ:GOOGL) and somehow lose its touch in the PC business along the way.

Skepticism is fine; healthy, even. In the case of Lenovo, I think it also points to an ongoing opportunity for the shares to perform. I believe that Lenovo can continue to leverage its leading position in PCs and use its extensive operating leverage to reduce costs in the IBM server business. I'm less certain that Lenovo can break out from the pack and become a #3 smartphone player with enough leverage to seriously threaten Samsung (OTC:SSNLF) or Apple (NASDAQ:AAPL), but I nevertheless do believe that the company's mobile operations are a long-term growth opportunity.

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Lenovo's Strong Operating Results Likely Won't Quiet The Doubters Yet

Seeking Alpha: Patience With EMC Has Yet To Pay Off

Buying large-cap tech can be tricky, as investors are unforgiving in their demands for growth. I have long liked EMC (NYSE:EMC) and regarded it as a long-term play on the evolving enterprise IT world, but owning these shares has offered no particular boost to my portfolio returns.

I continue to believe that EMC is undervalued and that growth-oriented businesses like NSX, Pivotal, XtremeIO, and Airwatch offer good potential. I also think that ownership/control of VMware (NYSE:VMW) is an asset and not a drawback as some believe. That said, there are real questions as to whether the changes in traditional storage markets will take away growth faster than these new ventures can add it back. An acquisition offer from another enterprise player like Hewlett-Packard (NYSE:HPQ), Cisco (NASDAQ:CSCO), or Oracle (NYSE:ORCL) would be an easy exit opportunity, but I suspect that EMC's decision to stick to its guns regarding its outlook/prospects will make a deal too hard to reach and force investors to continue to exercise patience to see this stock deliver adequate returns.

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Patience With EMC Has Yet To Pay Off

Seeking Alpha: Lenovo Making The Right Strategic Moves To Build Value

Lenovo (OTCPK:LNVGY) has come along nicely since I wrote about the company as a Top Idea in late July of 2013. Up more than 30%, Lenovo has done well on continued PC, handset, and tablet growth. The shares were rocked when Lenovo followed up the long-expected acquisition of IBM's (IBM) x86 server business with the not-nearly-so-expected acquisition of Motorola from Google (GOOG). Integrating one damaged business was doing to be hard enough, but now Lenovo is paying more than $5 billion for two sizable businesses that need a lot of TLC to turn around.

I continue to be bullish on Lenovo (and a shareholder), as I believe the company does have relevant experience in integrating large acquisitions. What's more, I think the IBM and Google deals address a lot of the remaining deficits in Lenovo's portfolio from a strategic perspective, while Lenovo's demonstrated capabilities in sourcing, manufacturing, and distribution efficiency can fix a lot of what ails these businesses. With a fair value in the high $20s on an elevated discount rate, I continue to believe Lenovo can be a good stock from here.

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Lenovo Making The Right Strategic Moves To Build Value

Seeking Alpha: Growth Is The Question, Answer, Problem, And Solution For CA, Inc

The story remains frustratingly consistent at CA, Inc. (CA). In a software investing world, where share price performance is often correlated pretty closely with revenue growth and margins, CA scores strongly on the second metric, but consistently poorly on the first. The basic investment thesis at CA hasn't really changed much in several years now - the mainframe business is an excellent source of high-margin revenue and cash flow, but the company just cannot seem to generate enough growth in the Enterprise business. Talking about improved go-to-market strategies and more consistent sales execution hits the right buzzwords for the sell-side community, but it's hard to say that the implication in CA's price of little-to-no growth unfairly maligns the company.

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Growth Is The Question, Answer, Problem, And Solution For CA, Inc

Seeking Alpha: ARC Document Solutions Still On A Recovery Path

ARC Document Solutions (ARC) is barely followed on the Street, but this small cap document services company has undergone some pretty compelling changes even as its traditional core market (reprographic services for architecture/engineering/construction) has seen severe stress over the last six or seven years. With the company still generating around three-quarters of its revenue from that AEC end market and non-residential construction picking up, there could be good revenue and margin growth potential for a company that has already shown a good knack for maintaining FCF through tough times.

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ARC Document Solutions Still On A Recovery Path

The Motley Fool: Lenovo Group Ltd: Taking Short-Term Pain For Long-Term Gain

Chinese PC, smartphone, and tablet manufacturer Lenovo (NASDAQOTH: LNVGY  ) has a knack for surprising analysts and investors that goes back a while. Lenovo defied skeptics who thought its acquisition of the IBM (NYSE: IBM  ) PC business was a losing move, leveraging that deal to build the world's largest PC business and continuing to grow its PC business at a time when the market is shrinking.

Now Lenovo is doubling down in a big way. The company's acquisition of IBM's server business was well-telegraphed and well-liked, but then the company shocked the market with the nearly $3 billion acquisition of Motorola Mobility from Google (NASDAQ: GOOG  ) . The latter has proven quite controversial, with some sell-side analysts speculating that Lenovo will never turn Motorola around and the shares down around a quarter since the announcement.

I believe that the near-term skepticism ignores the substantial long-term opportunities at Lenovo and some significant undervaluation in these shares.

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Lenovo Group Ltd: Taking Short-Term Pain For Long-Term Gain

The Motley Fool: EMC Corporation's Transition Issues Have It Stuck in a Value Trap

These are not particularly enjoyable days to be an EMC (NYSE: EMC  ) shareholder. While the company's market share in its bread-and-butter storage offerings is quite strong, and EMC has launched numerous products/platforms with good long-term growth potential, the storage market itself has seen a lot of change and turbulence. With that, the Street seems virtually indifferent to the company's good margins and strong cash flows and is focused instead on short-term revenue growth concerns. EMC looks exceedingly cheap on a DCF basis, but readers thinking of buying today need to be prepared to ride out the transition issues of 2014.

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EMC Corporation's Transition Issues Have It Stuck in a Value Trap

The Motley Fool: Are Lenovo And IBM Finally Close To Another Deal?

It has taken a long time, but Lenovo (NASDAQOTH: LNVGY  ) and IBM (NYSE: IBM  ) may be about to finally strike a bargain for IBM's x86 server business. Lenovo has openly acknowledged its interest in this business, but the companies have been at odds on deal terms. With ongoing share loss in the server business and a desire to reallocate capital to higher-returning businesses like software and services, IBM would do well to close this deal.

The good news for Lenovo is that it can do well with or without IBM's server business. The company has built the No. 1 PC business in the world and has already grown its tablet and smartphone business to be No. 4 in terms of market share, without aggressively targeting the U.S. Lenovo looks meaningfully undervalued, and sealing a deal with IBM would only help matters.

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Seeking Alpha: Can A Commercial Rebound Rebuild ARC Document Solutions?

The multi-year decline in commercial construction has been particularly painful for ARC Document Solutions (ARC) (formerly known as American Reprographics). Despite having the only national reprographic services business in the country and five to 10 times the market share of its closest competitor, revenue in 2012 was only 40% of what it used to be in 2008 as the company's core architecture/engineering/construction market has gone into deep hibernation.

Although I've been writing on companies that I believe can leverage improving construction activity into higher share prices, I'm not completely sure where ARC Document fits into that group. I updated my research and models on ARC hoping to find an overlooked potential gem, but I'm just not sure that's what this is. The reprographics industry is changing and I'm not confident that the margins in the managed print services business will come close to what the company has achieved in the past. Although I can construct a bullish argument that would put ARC Document's potential fair value into the double-digits, my base-case assumption is much lower and not as much of a bargain relative to today's price when factoring in the risks of the company's changing business and end-markets.

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Can A Commercial Rebound Rebuild ARC Document Solutions?

Seeking Alpha: Monotype Imaging May Be On Hold For 2013, But The Long-Term Outlook Is Solid

Given that Monotype Imaging (TYPE) is up about 16% since I recommended it in mid-March (against 6% for the S&P 500), I'm feeling pretty good about that call. Likewise, I still like the long-term opportunity for this company. Fonts and typefaces are one of those businesses that fits in with Peter Lynch's philosophy of targeting overlooked businesses that provide essential products/services that nobody thinks about much, if ever.

All told, I still believe that Monotype has less than 20% of its potential market, and the revenue opportunity for the company could be as high as $1 billion. On the other hand, demand for consumer and business electronics like handsets, tablets, and printers has been softer lately and the company has had to reduce guidance on the basis of higher/worse-than-expected FX headwinds and taxes. I don't believe that investors need to freak out over the lower guidance for 2013, but it does suggest that these shares may be just marking time until revenue growth reaccelerates.

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Monotype Imaging May Be On Hold For 2013, But The Long-Term Outlook Is Solid

Investopedia: Is Improving IT Demand Enough To Maintain Teradata's Rebound?

The rise and fall of Teradata (NYSE:TDC) over the past two years is a good lesson in the pitfalls of theme investing in tech. Teradata enjoyed a great run on the back of “Big Data” hype and shares of this data analytics company definitely overshot fair value. Once IT budgets came under pressure, though, Teradata's reported results showed just how sensitive the company remains to on-the-ground IT demand. While the shares have bounced off their 52-week lows and the company is a credible player in an important market (the collection and analysis of enterprise data), it's hard to call this stock a bargain today.

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Investopedia: HP Still Looks Cheap, But Execution Issues Are Part Of The Reason Why

There's a big difference between “cheap” and “cheap for a good reason”, and it's not always easy to tell the two apart. While Hewlett-Packard (NYSE:HPQ) shares still appear to be undervalued on the expectation of any growth at all, the ongoing execution issues do mean that a return to growth shouldn't be taken for granted. At a minimum, there's still quite a lot of work for management to do make this turnaround a success, and I do have my concerns about the the effect of competition on those plans. On the other hand, today's valuation doesn't exactly presume that those efforts will end in major success.

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Investopedia: Dell Scratching And Clawing For Share

The situation around Dell (Nasdaq:DELL) continues to churn, as the company scratches, claws, and fights for market share and relevance in its end markets, with Carl Icahn spearheading efforts to disrupt the planned go-private transaction. While Dell has shown that it can improve revenue by trading margin for share, it's unclear to me that the company can win over the long-term with this strategy. As I think management overestimates the extent to which customers will stick with them, and that there are competitors better suited to win on both the price/margin and feature/performance ends of the spectrum, I see Dell stuck in a long-term squeeze play that makes value creation very difficult.

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http://www.investopedia.com/stock-analysis/081913/dell-scratching-and-clawing-share-dell-hpq-ibm-lnvgy.aspx

Investopedia: NetApp Underwhelms, But Still Looks Undervalued

There is a risk that investors and analysts are going to start viewing NetApp (Nasdaq:NTAP) less as an undervalued tech stock in an attractive market and more of a “cheap for a reason” underperformer that has gone about as far as it can against its major rival EMC (NYSE:EMC). I don't really share that view per se, but it's harder to argue for the bull case on NetApp when the company continues to leave the Street wanting more.

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http://www.investopedia.com/stock-analysis/081513/netapp-underwhelms-still-looks-undervalued-ntap-emc-ibm-hpq.aspx

Investopedia: The Market's Panic On Cisco Seems Overdone

Over time you eventually get used to the idea that the market seldom looks past one or two quarters (except, of course, when it's convenient to do so). So insofar as that goes, I can see how some investors may have listened to the Cisco (Nasdaq:CSCO) conference call, thought they heard a sniffle or two, and rushed to hit the panic button. Though I'm not going to say that Cisco is fully out of the woods and everything is wonderful again in IT-land, I think the long-term valuation on Cisco is getting pretty interesting now.

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http://www.investopedia.com/stock-analysis/081513/markets-panic-cisco-seems-overdone-csco-jnpr-hpq-ibm.aspx

Seeking Alpha: Forget The Temporary Worries, Lenovo Built To Continue Winning

Every time a new consumer tech gadget comes out, it seems like investors forget a simple a rule - sooner or later, everything becomes a commodity and success comes down to who can design, build, and ship at the most appealing cost structures. That's something that Lenovo (LNVGY.PK) has quite a bit of experience with, as it has used internal execution and significant acquisitions to become the world's #1 PC vendor and the #3 handset company.

I don't see any reason to believe that Lenovo is done. The company has started to build its server business, and may ultimately strike a deal with IBM (IBM) that would vault it into the #3 slot almost overnight. Likewise, the company is looking to take its growing mobile device business into the U.S. in 2014, and Lenovo's past success in the PC business suggests that investors shouldn't ignore the potential there.

There are risks that the Chinese PC market leads to some noise in the shares over the next quarter or two, but waiting for that to settle down could mean missing a few points in the stock. With long-term appreciation potential of more than 30% to 60%, Lenovo looks like a good play on emerging markets consumer and business spending.

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Forget The Temporary Worries, Lenovo Built To Continue Winning