IBM Message Board - Msg: 6156635

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Technology Stocks : IBM

IBM 288.49

-0.5%

3:59 PM EST

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To: Skeeter Bug who wrote (4117)	10/25/1998 5:45:00 PM
From: Bill Martin	Read Replies (2) of 8218

Re: Let me ask you this. if ibm didn't buy back their stock, could they have used the stock buyback money to lend out and received much more profit from the loans since they didn't have to pay interest to a third party? At least try a little rudimentary analysis Skeeter. Read Jim's post again. For the sake of argument let's assume your position is correct that IBM is borrowing money to buy stock (it's wrong, but let's assume it's right). Even in this case, as Jim pointed out IBM spent $17.8M to buy stock now worth $25.8M. To do this they passed up the opportunity (as you see it) to make an "investment" at a 6% return by not borrowing money. Ignoring everything else, it's still an excellent deal for the shareholders and a wise investment by the board. I understand that there's lots of room to argue about wheter IBM stock will go up down or sideways. Is there any way we can get off the kick though that IBM is borrowing money to buy stock, and the implied criticism that this must be wrong if they're doing it? There are certainly larger issues that can be belabored -- is the current P/E rational for example? What are their sales prospects? Etc. Bill

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