Hi Earlie,
Don Hays mentions your NYT IBM comments his market commentary, although he does not mention you by name.
wheatfirst.com
<<IBM's earnings was clearly the catalyst to excite the markets, as their first quarter report showed revenue increases of 15 percent, and 42% in earnings--blowing away everyone's estimate. Of course, you know I couldn't let that good news go by without throwing a little cloud over them, so I am amazed that the market chose to add $30 billion of market cap to Big Blue as a result. Especially when I notice that the robust revenue gains were mostly in PC sales, where they have consistently lost money. We also note that the year over year comparison was against a horrible first quarter last year.
One analyst cited in the New York Times, points out that IBM's average annual revenue growth in 1997 and 1998 was 3.7%, and that the annual growth in the operating profit declined from 5.8% to 0.7%. It was in this environment that the price of this big-cap stock has moved from 70 to yesterday's close of 209. That seems to be a big gain for rather mundane operating performance. It makes you wonder why, until you see that the company has been buying back stock at a frenetic pace. Their number of shares has decreased by 22% since 1995, using internally produced cash flow. But their cash flow was not sufficient to fund these massive stock buybacks, as they added over $7 billion of corporate debt. It looks to me as if the price increase is not so much a function of their performance, as their own buybacks--another sign of the times.>> |
