IBM Message Board - Msg: 6163503

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Technology Stocks : IBM

IBM 291.29

+1.0%

2:06 PM EST

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To: Skeeter Bug who wrote (4131)	10/26/1998 11:17:00 AM
From: Rob Bowerman	Read Replies (2) of 8218

Hi SB, Ok, I'm still at a loss. The downside of a "lost 5% of the return" is an imaginary number in my mind. They chose to go into the financing side of the IT industry because they saw a need and a way that they could profit from it. By using someone else's money, they have pretty much eliminated any risk to the IBM shareholders. IBM is just a middle man, nothing more in these financial transactions. They get to keep the 7% net difference AND get to write off the 5% loan interest payments on their taxes (business interest deductions) and have closed countless deals that might have not gone through otherwise or might have gone to IBM's competitors. It's kind of analogous to getting the rebate on all your purchases through the Discover Card as long as you pay off the full amount each month. And I see NO evidence that IBM can't do that. The other point you make about (to paraphrase) "what if IBM stock drops in half?" Well, what if it does? Are you saying "that's it, that's all she wrote", that it will never go back up again? In the 80+ years of IBM history, name just one time that has EVER happened? I strongly disagree that such a scenario would constitute a "major blunder". Since history has ALWAYS demonstrated that IBM stock will recover from ANY dip, by reducing the number of outstanding share, the recovery as measured by EPS will be stronger with the fewer shares of stock than it would be without the cumulative stock buybacks from previous years. Thoughts? --Rob

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