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Pastimes : Clown-Free Zone... sorry, no clowns allowed -- Ignore unavailable to you. Want to Upgrade?

To: zonder who wrote (199234)	10/22/2002 12:33:03 PM
From: Earlie	Read Replies (3) \| Respond to of 436258

Zonder: I guess we apply different criteria then. Go back over the last five or six years worth of IBM financials. You will find that the PEs were much lower, even though the company's business and balance sheet were much stronger at the commencement of that period. IBM used to make its dough selling hardware, software and maintenance. Unfortunately, other companies ate IBM's lunch in these endeavours which accounts for the LINEAR descent of the revenues for all three. Enter Gerstner, and we watched as he moved the company into the "service" game (a lousy margin game, but at least the bucks can appear big to the uninitiated). When you do reasonable analysis on what he then proceeded to do, it was a simple case of bidding the service contracts to win them at any cost,.... to TRY to keep the booked revenues looking decent. It is well understood in the industry that IBM has bid contracts at prices that made little sense to its competitors. There is also plenty of evidence that IBM has taken very aggressive revenues from those contracts in their early years. Sooner or later, this comes home to roost. And what do you say about IBM's practice of selling off divisions and booking the incoming cash by reducing SG and A? Sure it makes them look like they have been efficient, but of course it is nothing but an accounting lie. And your views on IBM's heavy use of pension fund assumptions to jazz up their reported profits? Good fundamentals or BS accounting? Have you looked at IBM's tax rate nonsense? Think it won't enter the picture at some point in time to bite? And your views on the $2.0 billion of primarily borrowed dough spent EVERY QUARTER (until recently,.... when their borrowing ability finally ran out of steam) to hold the stock price up? Go back and look at the price IBM obtained per share when it sold stock to the public. Does it make sense to buy it back at huge multiples? Most intelligent companies buy back their stock when it is depressed, not across the greatest mania peak in history. Try to guess what IBM's average price might be for all that paper it bought back over the last five years and compare it to where the stock is now. And while you are at it, compare the total amount spent on this mad stock buyback program with IBM's ACTUAL profits, You will find that the former exceeds the latter by a substantial amount. Is this good business? Have you even glanced at the trashed balance sheet? If you have, you know that Gerstner has simply gutted the company, even as he sold off more than $600 million in personal stock. He is nothing but a confidence crook in my book. In any event, I look forward to hearing the basis on which you see the company's fundamentals as supportive of the current share price. I am all ears. Best, Earlie