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To: reaper who wrote (173837)	6/19/2002 11:38:21 PM
From: Alias Shrugged	Respond to of 436258

Reaper I agree with the thrust of your comments, that pension income brings no cash in the door; I simply wanted folks to not expect a significant drop in pension income for 2002 especially given recent asset performance. My thinking was focused on the mechanics of pension expense; your thinking was focused on whether IBM stock price will slip under the waves due to cashflow, debt, etc. If their 10% assumption is ridiculously high now, was it ridiculously low during 1995 through 1999 when returns were high teens lower 20s? KT has said 6%-7% for a long term return assumption. I am very interested on your view on that. I spoke with someone in the business today. Looking at large US companies (with defined benefit pension plans), most are assuming (for expense purposes) between 9% and 10% return assumptions, with the average for the whole survey group 9.3% or 9.4%. Not many companies are having discussions about lowering this assumption. I would be surprised that any CFO is going to voulunteer to significantly lower this figure and smack their eps. (They might move from, say, 9.5% to 9.25%, but I doubt any one goes from 10% to 8% or even 8.5%). If IBM changed from 10% tp 8%, income would drop by roughly $800 million. Eventually, regardless of what you assume, the crappy asset performance will catch up to you and boost the expense (and probably funding). At 10%, a whole lotta companies are in for a long period of disappointment (imho). A different set of rules govern the funding calculations, and I will try to get at some of IBM's numbers. The average asset return assumption when doing required contribution calculations is 8.3%. Not many are above 9%. I've been following the exchange you are having about Oracle. I wish I could read balance sheets and cash flow statements like you. Mike