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Pastimes : Clown-Free Zone... sorry, no clowns allowed
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To: Alias Shrugged who wrote (173792)6/19/2002 11:54:40 AM
From: reaper  Read Replies (1) of 436258
 
<<Don't expect IBM's pension income to drop very quickly going forward >>

while their pension "income" may not drop, that "income" is an accounting fiction as you are well aware (and point out) and has nothing to do with CASH FLOW at the business. IF IBM has to actually start contributing CASH to shore up the pension fund (my best guess is that that day is +/- a year away if markets stay broadly flat) that's going to take a big bite out of their business. IBM has a ton of debt (and as Earlie points out, much of it is backed by leased equipment of dubious residual value) and also has supported its stock over the year via massive buybacks. This debt and buybacks require CASH to service, not accounting "income". So even if IBM is still spouting the ridiculousness of their 10% return assumption, that won't change the fact that they won't have as much cash as they used to, and that will take the stock down as investors begin to figure that out.

Cheers
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