Skeeter, in response:
>>..if long term debt went up $5 billion since 1996..<<
No. Because as I have explained, the debt is being used to fund the
ICC Subsidiary. It works this way. You borrow money at a low rate,
leverage it, and lend it back at a higher rate. The difference is called profit. Its a novel idea, and banks have been doing it for years. Some even are profitable (Ya, Ya, don't tell me about the ones that go belly up because of bad loans). :-(
>>..btw, will ibm be able to continue to buy $7 billion..<<
Yes. In 1997, net cash provided from operating activities was $8.8 billion, more than enough to cover the repurchase costs. However, for 1998, only $2.7 billion remained authorized for stock repurchases so I expect to see the rate of repurchase slow quite a bit.
You do make an excellent point. Does a 7% growth rate warrant a P/E of 23? No, I don't think it does and IBM will have to return to double digit growth to maintain that multiple. I guess those of us who are bullish on the stock believe that they will. Only time will tell.
Gerstner's first order of business was to stop the bleeding, restore the company to profitability, and to restore investor and customer confidence. I think he has done that, and now will focus on growth. Changing IBM is like changing the course of a battleship, takes a little time. However, once that sucker gets on course I wouldn't want to be in its way sitting in a rowboat!
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