Welcome, Mao II -- that's quite a moniker for a capitalist --!!!!:>
As you know, IBM and AT&T are two of the components of GADR's Model Dow Value Portfolio (the other two being Boeing and GM).
In the past, IBM has tried to become a long distance phone company (via SBS Skyline), and AT&T once tried to become a computer company, via NCR. IBM's effort didn't fit into its long term goals, and AT&T's diworsification into computers was a multi-billion dollar fiasco.
Now, with both companies under different management, IBM is selling its global phone network to AT&T, and AT&T is having much of its computer system run by IBM. It's amazing what a new management can do, once it exercises some common sense. (Boeing, are you listening?)
Interestingly, IBM gets paid both ways. However, as a customer itself of the network it is selling to AT&T, IBM will be paying some of it back to AT&T, over time. One estimate from the Street is that $9 billion will be passing back and forth between the two companies. And, several thousand employees of the one will now become employees of the other, and vice versa. One analyst has even declared it a "partnership". Of course, the most awesome merger in the world would be Big Blue combining with Ma Bell. But, perhaps formal merger is unnecessary, in light of this informal partnering.
My case for both of these companies is a macro one. There are a billion adults out there who have never made a phone call or owned their own PC. Most of them would like to. Over the next generation, globalization of free markets will make it possible for a great many of them to do so. The computer industry and the telco industries are both expected to grow at double digit annual rates for at least another generation to come.
And, don't forget that famous equation: Telephones + Computers = The Internet. Why pay astronomical multiples for untested new ventures in order to invest in the growth of e-commerce, when you can do so by buying shares of these rock solid blue chips at reasonable multiples of sales and earning? |
