restructuring
The fortunes of IBM Global Financing (IGF) are linked so deeply
to those of its parent that usually it is hard to separate one from
the other. However, since IGF has gone through so much
restructuring of late it is now easier to do so.
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Despite market turmoil revenues have grown by a marginal six per
cent and the company is on target to beat the total originations it
achieved in 2007 of $45bn.This is unsurprising considering how
embedded IGF is with its parent. Its penetration levels are on a
par with Pitney Bowes’ financing arm, although there is a
significant difference in the size of the two companies.
Its three business arms – global asset recovery services,
commercial financing (supply chain financing and accounts
receivables), and its client financing business (direct loans and
leases to clients) – have roughly equal revenues. It recently
merged two separate businesses – technology lifecycle management
and PC lifecycle management – into its client financing arm.
Profit margins of 36.9 per cent are not bad considering the
business has undergone an expensive restructuring with the
worldwide centralisation of its back offices. For instance,
Budapest now manages the back offices of operations in 50
countries. This process has reaped benefits already, including
reducing the time the company takes to make a package ready for
settlement from nine days in 2006 to three days by year end last
year. Also, in 2006 47 per cent of its invoices were paid within 30
days, from the time the invoice was presented to settlement dates.
By the end of 2007 this was improved to 51 per cent. End-to-end
cycle times saw an average reduction from 43 days in December 2006
to 40 days in December 2007.
It has also reaped the benefits of its new rapid online finance
tool which was launched in 2005. This resource enables dealers and
resellers to book deals with customers online. Business sourced via
this route totalled $3.2bn during the first half of 2008, and IGF
claims business introductions have grown as a result of this
technology, which operates across 32 countries and 17 languages,
and has 8,000 users.
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By GlobalDataIGF has made no acquisitions although it has sought additional
growth through signing up new third party financing parties. A
recent sign-up includes Infor, a supply chain management company,
and other partners include Lenovo, Barco, Juniper, APC and
Nortel.
H1 2008 revenues: $25.2bn (+6% year on
year)
H1 2008 profit margins:55.3% (+9.3%)
H1 2008 pre tax income profit margin: 36.9% (up
1.5%)
2007 originations: $45bn
Brendan Malkin
