Art:
No more office space and no more bean counters, I agree (g)
Maybe a lot more money into research, especially on new software applications. I worry that the company is throwing out a bunch of engineers, and hiring a bunch of service related people. Used to be that IBM was a proud engineering oriented organization that developed plenty of new products and applications. It looks like there is a lot less today. I also worry about the way in which the service contracts are booked. Unfortunately, one can't get access to that but it sure is suspicious that the revenues seem to come in flat every quarter, even as hardware, maintenance and software revenues fall. Somehow, the company just manages to bring in enough new service revenue to make up the deficit. That makes me suspicious.
With respect to multiple, if you go back 18 months, stock was at $49.. The revenues and earnings were essentially the same then as now, but the revenues were of higher quality (higher margins). The price of the stock has doubled to purchase the same revenues and earnings, which means the multiple paid for those revenues and earnings has doubled.
I totally agree with you that Gerstner has done a great job with the stock. Last year he spent $8.0 billion to keep it up. That will prove to have been an expensive and ultimately foolish use of the money. ( Rainy days, and all that)
Best, Earlie |
