Hello Art,
I don't know who laughed at you, perhaps you can tell us.
However, I do remember stating on this thread 2 years ago, that IBM would be reduced to a distributor of Hardware and that their Gross Profit Margins (GPM) would suffer. In early 1997, IBM had GPMs of 72% on their Mainframe Hardware sales. Today, GPMs for Services Div. (which is replacing the declining Hardware sales) is only about 28%. It was therefore very predictable, 2 years ago, that if IBM adopted this strategy, (becoming a distributor of OEM products, rather than remaining a Hardware Vendor of only their own manufactured products) it would result in decreased margins. While I recognize that IBM may not have had any other choice, else they might loose the business entirely over time, I don't think they should have been rewarded by having their P/E multiple double while they made this transition. I still maintain that the true impact of this transition strategy has been disguised by IBM's stock buy-back and their significant reduction in tax rates. While the rest of the Street may give IBM high marks for this, I don't. I still believe that a good company to invest in is one where Shareholders Equity is increasing, not one who shows declines quarter after quarter.
I have been posting on this thread for 2 years now, and on only a few occasions have most of the IBM longs who post here, directly addressed the issues I raise. The reason I respond to Arrow and Scott is that their comments are most often direct responses to my comments. It is not done with name calling. If we are to have a dialogue here, let's stay with the facts and issues raised.
Jules |
