IBM Message Board - Msg: 4302849

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Technology Stocks : IBM

IBM 307.94

0.0%

Dec 5 3:59 PM EST

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To: Hsien W. Chang who wrote (3027)	5/3/1998 10:18:00 AM
From: Mark Brophy	Read Replies (3) of 8218

You already understand it. Since I'm considering BV/share, repurchases reduce the denominator and it's a wash. If the company pays a dividend, the numerator is reduced without a reduction in the denominator, so the company looks bad. My focus on this metric unfairly punishes a company that pays a dividend, so it's only an approximation. The metric also unfairly punishes a company that repurchases a large amount of shares because they pay more for the shares than book value. IBM's has repurchased a significant amount of shares, but growth in BV/share is still a good metric, albiet an approximation. Since IBM stock has quadrupled in the past few years, the no-brainer decision to repurchase stock requires reconsideration. Revenues and earnings haven't grown very much, so the company could use the cash better by making acquisitions.

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