By Laura Saunders Egodigwe
Staff Reporter of The Wall Street Journal
On the heels of one of International Business Machines Corp.'s
best-ever
quarterly earnings reports, several top IBM executives took profits of
their
own.
The selling of IBM stock by executives is the most at the company
since 1994,
according to Bob Gabele, president of CDA/Investnet, a Rockville, Md.,
company
that tracks insider transactions.
On Oct. 22, seven IBM officers sold 353,957 of the Armonk, N.Y.,
computer
giant's shares, just two days after IBM reported third-quarter earnings
that
topped analysts' estimates. The selling was completed Oct. 29,
according to
Federal Filings Business News, a news service in Washington.
IBM insiders had been accumulating shares since Louis V. Gerstner Jr.
took
the helm as chairman in 1993 and began buying when the stock was
trading as low
as $24 on a split-adjusted basis, noted CDA's Mr. Gabele.
But now, some profit-taking in IBM shares should be expected,
analysts said,
with stock up from below $100 a share in mid-March to a closing price
yesterday
of $155.25. "The stock has had a pretty good run," said Steven
Milunovich, a
Merrill Lynch & Co. analyst. "I can understand some people wanting to
take
profits."
An IBM spokesman said the sales were the result of routine financial
planning. "They took the action largely to diversify their individual
portfolios," he said. The company said that executives are barred from
buying
or selling shares during certain blackout periods that typically end
just after
earnings are reported.
Even so, the sales by Mr. Gerstner and the other insiders this year
are the
reverse of the pattern of buying that prevailed in 1994, Mr. Gabele
said.
"Insiders again seem to be following suit and are now taking profits at
a pace
we haven't seen at the company this decade," he said.
CDA's Mr. Gabele added, "Just as the insider =buying! profiles marked
the
1994 bottom for IBM, I wouldn't be surprised if the current insider
picture is
a signal that we're near the top of that move that began in 1994."
The sellers included Mr. Gerstner, who sold 142,000 shares on Oct. 22
at
$140.92 each. That sale represents a very small percentage of his
holdings of
company stock and exercisable options, but marks only the second time
in five
years that Mr. Gerstner has sold IBM stock.
Nicholas Donofrio, senior vice president of technology and
manufacturing,
sold 67,772 shares at $144.65 apiece on Oct. 27. Thomas Bouchard,
senior vice
president of human resources, sold 58,578 shares on Oct. 22 at $141.83
each.
Bruce J. Harreld, senior vice president of strategy, sold 17,653
shares at
$140.51 each on Oct. 22, while corporate secretary Daniel O'Donnell
sold 4,011
shares at $148.56 on Oct. 29. Samuel J. Palmisano, who heads the
company's
global-services business, sold 20,526 shares at $10.43 to $140.50
apiece on
Oct. 22. The same day, general counsel Lawrence Ricciardi sold 73,417
shares at
$140.10 each. IBM has 933 million shares outstanding.
Industry trends are favoring IBM for the first time in 15 years, the
Merrill
analyst adds. Customer surveys indicate they want one-stop shopping for
computer solutions, and competitors are starting to imitate IBM by
offering
more products and services.
The company had a good third quarter and issued a bullish outlook on
its
customers' information-technology budgets. Mr. Milunovich has raised
his
12-month price target on IBM to $180 from $165. Still, he acknowledged
that, in
general, when insiders sell stock, "you always worry that maybe
somebody inside
the business sees something you don't."
Some experts who track patterns of insider buying and selling also
noted the
timing of the more-than-usual selling at IBM. "The timing of this round
of
selling seems a little inconsistent with the Street's almost wild
optimism for
the stock right now," said Craig Columbus, vice president of research
at
Disclosure Inc., Bethesda, Md., which tracks insider activity for
institutional
investors.
Mr. Columbus added, "I think this selling is very much a function of
the fact
that we've gone too far too fast in this recent market rally."
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