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

To: Skeeter Bug who wrote (4117)	10/25/1998 11:02:00 AM
From: Jim Koch	Read Replies (1) \| Respond to of 8218

Skeeter, I agree that IBM is currently overvalued near term. That is why I am in a short position near term (see my post #4076). However, as many on this thread have pointed out, that has been a very risky strategy with this puppy! As far as my position on debt to buy stock, I have stated my position on that repeatedly. Don't want to talk about it anymore. Now, is it a wise use of funds to repurchase stock? Don't know for sure. It has been in the short run. EPS has risen along with the share price. Obviously, repurchase can't be used indefinitely to increase EPS. IBM has to also increase revenues along with EPS. That is what I will be watching very closely. The first part of the journey for IBM is over, they have restored the financial health of the company. Now comes the second, and more difficult part, return to a growth company. We will have to wait and see if they succeed. I am glad you did so well on your CMB puts. I had a similar experience with CCI, but unfortunately, the other way. I held blocks of both CMB and CCI stock, and had for quite a while. Last April, after the stocks had reached what I considered full value, I closed my positions and took my profits. As is my style, I had sold out of the money calls on CCI. With only a few days left till expiration, I left the calls naked. Big mistake! The next day they announced the merger and the stock jumped over 43 points in one day! I am still recovering from that!! :>(

To: Skeeter Bug who wrote (4117)	10/25/1998 5:45:00 PM
From: Bill Martin	Read Replies (2) \| Respond to of 8218

Re: Let me ask you this. if ibm didn't buy back their stock, could they have used the stock buyback money to lend out and received much more profit from the loans since they didn't have to pay interest to a third party? At least try a little rudimentary analysis Skeeter. Read Jim's post again. For the sake of argument let's assume your position is correct that IBM is borrowing money to buy stock (it's wrong, but let's assume it's right). Even in this case, as Jim pointed out IBM spent $17.8M to buy stock now worth $25.8M. To do this they passed up the opportunity (as you see it) to make an "investment" at a 6% return by not borrowing money. Ignoring everything else, it's still an excellent deal for the shareholders and a wise investment by the board. I understand that there's lots of room to argue about wheter IBM stock will go up down or sideways. Is there any way we can get off the kick though that IBM is borrowing money to buy stock, and the implied criticism that this must be wrong if they're doing it? There are certainly larger issues that can be belabored -- is the current P/E rational for example? What are their sales prospects? Etc. Bill