Mike & Will,
Here's a good look at IBM's cash flows:
ibm.com
What's interesting is that even though IBM is moving toward services, it's "Payments for plant, rental machines and other property" increase by $2 billion, or 45% (!), between 1995 and 1997.
This could also explain why their tax rate is decreasing. If for the purpose of WS they are choosing to capitalize expenses (which makes their earnings look better), while for the purpose of the IRS they are choosing to expense the same items, then the tax rate on reported earnings would decline.
Also, note that if you take "Net cash provided from operating activities," less "Payments for plant, rental machines and other property," plus "Proceeds from disposition of plant, rental machines and other property," you get cash flows of $7.6 billion in 1995, $5.7 billion in 1996, and $3.3 billion in 1997: a drop of $4.3 billion, or 57% (!), over the last 2 years!
Now, I haven't really been following IBM, other than cursing its high stock price, but since you are a couple of razor sharp Siamese twins, you should be able to get to the bottom of this twice as fast!
Best regards, John. |
