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

To: Jules B. Garfunkel who wrote (2925)	4/23/1998 12:23:00 PM
From: Arrow Hd.	Read Replies (1) \| Respond to of 8218

Jules, you are on a very good point. The fact is that IBM manages the research community very well and directs them to adjust their earnings estimates to be in line with what can be reasonably be made in that quarter. That is why the CFO announced in January the 10 - 15 cent shortfall. It was already known that it was going to be a tough quarter and there were some one-time charges to take. But the fine tuning is done with the tax rate, stock buybacks, write-offs and to some degree actual revenue recognition activities. If the adjustments are not exactly in line then periodically during the quarter I am sure there are "kiss and tell" sessions so that estimates get better in line. Not major surgery, just some tweaking here and there. So the assumption should be made that the earnings number will be made. If it is early in the quarter and it is way off like the first quarter then it will be via an announcement. If it is close it will be on a more discreet basis. But it will come in line prior to the actual earnings announcement and it should not be a surprise when then they "beat the estimate" by a penny. What is more important to focus on is the fundementals in the core businesses; their market share, price attrition, product competitiveness, shift in market strategies, etc. This is not easy to do because the company is so large. Also, knowing how a division is doing is also misleading since the corporate office will over-assign business objectives so the divisions can all be having a difficult time making their assigned objective but due to the cascading effect of overassingment the balance sheet reconciliation actually comes out ok. Plus, the previously mentioned variables allow for fine tuning. But perception is reality. So if the street thinks its a good quarter for whatever their reasoning then the hype will drive the stock. It is impossible to guage hype. I think with all the money that has come into the market in the past few months and with many technology stocks simply over-valued it was logical to put some of this into IBM. There is comfort when a company has the power to leverage their financial position to be able to make the quarter assuming they can continue to talk the street down or up as required with a modest risk to stock volatility. But at some point the fundementals have to take hold and a resumption of the high single digit growth must resume. If there is one variable that is poorly understood it is the pervasive and insidious price attrition that is going on in each technology sector today. This is a tremendous obstacle to overcome. To ship 45% more mainframe MIPs and have price attrition basically offset this spectacular achievement is truly disturbing. I do look for this to somewhat abate and for a better second half but remember that Ricciardi hedged on the second quarter with basically a "no comment". So it will continue to be an exciting period.

To: Jules B. Garfunkel who wrote (2925)	4/23/1998 5:46:00 PM
From: Don Hurst	Read Replies (2) \| Respond to of 8218

Jules, "Can't you see" that your statement applies to Intc, Msft, and any other company that is buying back shares and has reasonably intelligent beancounters? " Yes, but how did you know, (or any other analyst know), what tax rate to use, or how many shares IBM had bought back in the quarter, in order to calculate your Q1 $1.08 estimate. Can't you see it is somewhat of a farce for anyone to try to predict IBM's earnings?" BTW, I think the stock almost got back to 118 today. Did Cordes buy? Regards, Don