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Technology Stocks : IBM -- Ignore unavailable to you. Want to Upgrade?

To: Seeker2007 who wrote (7503)	3/9/2002 1:19:49 PM
From: j g cordes	Read Replies (2) \| Respond to of 8218

"Hocus-Pocus: How IBM Grew 27% a Year LEAD STORY-DATELINE: Fortune.com, Monday, June 26, 2000. Under Lou Gerstner, IBM increased its earnings per share (EPS) at an average rate of 27% a year since 1994 and has seen its market value rise from just under $30 billion to about $200 billion. IBM's 1999 financial statements show that IBM's EPS was $4.12 - a 25% increase from 1998. So much emphasis is placed on earnings that all companies, including IBM, "have every incentive to do whatever it takes to make its earnings estimates." There is a difference, however, between IBM and other companies when it comes to EPS. Much of the 25% growth in IBM's EPS last year came from share buybacks, a large increase in its pension fund and the sale of assets rather than from an increase in its revenues. Revenues has only risen by 5% annually since 1995 and declined 5% in the first quarter of 2000. One way that IBM has sustained this EPS growth has been by buying back shares of its own stock. Since 1995, IBM has spent $34.1 billion in buybacks. This was more than IBM's reported net income over the same period. The billions spent buying back its shares have increased its debt from 49% to 59% of capitalization. An additional boost to EPS came from the $2 billion decrease in operating costs in 1995. This decrease was not from cost cutting, but from a once-in-a-lifetime sale of assets. Another boost came from its pension plan. Because of the soaring stock market, the actual returns on the pension plan exceeded the expected return. The accounting rules allow companies to recognize this difference as income. While this additional income increased EPS, it is only available for use as pension benefits. No matter what the numbers show, IBM is following generally accepted accounting principles in preparing their financial statements. Whether these statements fairly present IBM's operating results is another story."