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

To: Mark Brophy who wrote (3026)	5/3/1998 9:41:00 AM
From: Hsien W. Chang	Read Replies (2) \| Respond to of 8218

Can you explain to me the difference between stock repurchasing and paying out cash flow as dividend. IBM before 1993 was paying about $4.84/share in dividend. This was cut down to the present level after the change of management. Also about the same time IBM started the stock repurchase program. In either case the cash flow money was paid out. Do you mean that in the case of dividend pay out, the stockholders' equity is not reduced but it is reduced when a company repurchases its own stocks! Please help me to understand this. Thanks

To: Mark Brophy who wrote (3026)	5/9/1998 4:58:00 PM
From: Bill Martin	Respond to of 8218

Re: I should've been more clear. I meant that the shareholder's equity/share hasn't increased. Growth in BV/share is the main metric I use to judge a company, and it doesn't matter how many shares they repurchase. I understand Mark -- and my comment is still accurate. If a company buys back shares, then it's shareholder's equity/share drops, while it's Return on Equity rises. Do the math and you see this. IBM has been buying back shares (whether this is good or not you can certainly argue) and this makes shareholder's equity/sh drop. This is independent of the success or failure of the business -- it's a simple mathematical consequence of the share buy backs. FWIW .... Bill