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

To: Knighty Tin who wrote (4064)	10/23/1998 12:47:00 PM
From: J R KARY	Read Replies (2) \| Respond to of 8218

Come on Mike - can't overlook IBM's increasing sales and assets No comparison , IBM is not a bank . If IBM eventually uses its shares for acquisitions then we as shareholders win again. Remember LVG stated no hardware acquisitions THIS year (1998) . Skeets has a problem if his puts are below $130 . Jim K.

To: Knighty Tin who wrote (4064)	10/23/1998 3:45:00 PM
From: Jim Koch	Read Replies (4) \| Respond to of 8218

OK, children, listen carefully now. IBM is not just a manufacturing company. They are a services company, a software company, AND A FINANCING company. To ignore the fact that most of IBM's debt is used to fund their ICC financing subsidiary is flawed analysis. For those of you who choose to evaluate other companies the same way, it is a wonder that you make any money in the market. Perhaps you don't, that may be the crux of the matter. IBM is an extremely well managed company that has a reputation for being astute borrowers in global financial markets. It is not about how much debt they have, but how they use it, the return on it, and their ability to pay it back. Contrary to the emotional rantings and ravings on this thread,a few amateurs in this field (Standard & Poors, Moody's Investors Services, Fitch Investors Service, and Duff & Phelps)seem to think IBM is doing OK, giving them their highest ratings. The facts are: Of IBM's 1997 debt of $26.9 Billion, $23.8 billion is carried on ICC's balance sheet and used to fund a profitable subsidiary returning 20.3% on invested capital in addition to the intangible benefits that it brings to IBM's HW, SW, and services business. That leaves a "core" debt of $3.1 billion, an increase of $.9 billion over 1996. In 1997, the company repurchased $7.1 billion of its stock. Hardly seems as if they are mortgaging the farm to buy back their stock, now, does it? Still not convinced that this is smart use of capital? OK, since I see several of you doubters come from some very prestigious business schools, lets use the traditional case study to illustrate my point: IBM Company "A" (1977 numbers in $billions) Long Term Debt $13.7 $46.6 Interest Coverage Ratio 13.4 2.3 Debt/Equity Ratio .7 1.35 P/E Ratio(current) 22.9 31.8 Now, using the logic presented by some, I would sure be shorting that dog of a Company "A"! Well, GE, fueled by its high octane growth engine, GE Capital, is doing quite well thank you. Why? Because they aren't a toaster and washing machine company any longer, they are a well managed, financial powerhouse. Sound familiar? For those of you predicting IBM's stock to dip to $90, or even lower, you must know something the rest of us don't. The forecast for the 4th quarter and first half of 1999 is solid. The only way that this stock will go that low is if we have a global meltdown. Not that it isn't possible, but even then, IBM stock will offer a safer haven than most. That's why astute fund managers and investors who bet millions of dollars, not just a lot of hot air, are accumulating the stock. It will offer a safe and solid, if unspectacular, return on your investment. If you don't believe that, get out of the market and buy gold. Now! Now having said all that, is the stock currently overvalued? Good question, it may be. That should be the theme on this thread, not mindless IBM bashing. I hold a substantial amount of IBM stock long, have for years. IMHO I think the current runup in price is unwarranted and unsustainable over the short term. I have sold covered November 145 calls and bought December 140 puts. Of course, every time I do this I seem to get burned! Good investing out there!