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

To: J R KARY who wrote (3351)	6/23/1998 12:25:00 PM
From: yard_man	Respond to of 8218

Sure thought a break of 107 would carry it down. You guys enjoy the summer rally. I'll be back after it starts to stall a little. Take care.

To: J R KARY who wrote (3351)	6/23/1998 12:35:00 PM
From: art slott	Read Replies (1) \| Respond to of 8218

Jim, the $ managers will be "window Dressing" all week for the end of the 2nd qtr. Just as soon as the bears get bold enough(or wishful) to mention IBM going down to the 90's the selling "shenanigans" come to an end. Its tough to short a stock with the best R and D in the world. Great call on the low price of 106 1/8. Regards Art,

To: J R KARY who wrote (3351)	6/23/1998 12:43:00 PM
From: Arrow Hd.	Respond to of 8218

Could be treasury operations is buying what they need to make the quarter though my thinking is that some of the business areas came through ok. Whether it offsets Asia and currency is the question. I get a sense that there is cautious optimism regarding the second half. I dont think any business area is out of the hunt with regards to making their full year numbers so the push will be on big time to come through (and protect their careers and jobs). As an aside, some of the old time IBM watchers commented on Ned Lautenbach's retirement and his moving on to new challenges outside of IBM. It is possible that the 2% revenue growth in the first quarter helped that decision since he was the senior VP in charge of world-wide marketing and sales. Dont know for a fact. Just an observation. So performance is rewarded and the lack of it still is painfully visible. Some other tidbits to ponder. The Y2K issue is now moving into major testing phases at most of the world's big companies. This will drive demand for net-add processors to do the testing since the efficiency of IT operations and the reliability of processors allows for 24/7 real-time productive use of the installed processor complexes which leaves little capacity for unique, one-time events like Y2K. So they have to add capacity on an interim basis. Consulting firms are estimating that the average firm world-wide will add 15 to 20 percent added capacity in the second half of 1998 and 20 to 25 percent added capacity for 1999. They are not going to buy new to do this. What they will do is either purchase the oldest Y2K compliant hardware available (which will prop up RVs) or more likely, do a short term lease on the best used equipment they can find. Who has more of this type of equipment than anyone? IBM and its financing arms such as ICC and FSI (Europe) among other subsidiaries. When non PC hardware is purchased it is a split between buying a complete new system (new serial number), upgrading an existing system (keep the old serial number) or doing an asset swap (trade-in transaction). The terms of these deals has IBM owning the removed parts or traded-in machine. A lot of this hardware is Y2K compliant and can be used to provide an economical solution for a company's Y2K testing yet it is enormously profitable to IBM or its leasing subsidiary since the original transaction washed the RV of the removed equipment (except in minor cases where the RV is high) and therefore, it is legitimate to record this equipment at zero book value. As an example, pieces of machines that become IBM property due to net-priced upgrades of existing machines move between countries at scrap value for tax purposes. So when this equipment is reconditioned or used to build used machines all of which get remarketed at the current used market value it is not only very profitable due to the base book value of zero, it also optimizes utilization of all available inventory no matter where it exists in the world. It is these nuances and periodic opportunity that analysts are clueless to and yet can contribute nicely to that corresponding period. Trust me, when you add short term 25% growth bonus of very profitable leased mainframe MIPs that dont dilute the price of the baseline 30 to 40 percent growth of permanent new from the factory mainframe MIPs you have a surge that is unexpected but flows right to the bottom line. That is not to say we wont be seeing these stock price swings anymore. There is plenty of opportunity for shorts to make money at the top of a price swing but, IMHO the long term trend is up.