Could this possible trend in corporate flight from cash be a direct result of ZIRP and/or high inflation expectations (as opposed to moronic CEOs/CFOs who don't have a clue)? i.e. Better to increase company owned equity (or basically any asset at all) than be hoarding increasingly worthless cash.

This is just more confirmation that the Wall Street game is business as usual. Set expectations low, beat low expectations and profit handsomely by extracting millions of equity and bonuses for Executives. Wash, rinse, repeat....You would never know that risk even matters- give the appearance of growing earnings at any cost has been and is still the game.

Karl, this is not all one sided re: Dumb.

While I agree with your "macro" call that this action says the company is unable to expand or produce product to heighten profitablility;

This is a company whose profits have generally come from currency translation for probably 5 out of the last 8 quarters.

Still, 2 points:

1: Buying back the stock obviates the requirement to pay a 2.9% dividend on bought back shares.

2: They will repurchase shares by selling puts. Today now they can sell November 140 puts for about $2.50, get filled or not, and not care. Now obviously, they can not sell 7% of their float in any kind of perceivable manner, but they *can* do so over many many months, as is uusally the duration of these BB programs. Should they be assigned on 140's, it's a fairly profitable game.

In general, I agree with your strategic take; but it's not all the way stupid. Only partially!

Hmmm. I've always suspected that when IBM hired me, they made a questionable move. Maybe this is dumber.


Degaston wrote:

Quote:

IBM has a serious brand problem. On every front they compete with Microsoft they're blown away by the Redmondians.

Please. Email, yes. I'll give you that. Notes vs. Exchange/Outlook is not a contest. Even Quicker vs. SharePoint.

But DB2 vs. SQL?
AIX/zO/S/iSeries vs Windows 2008? (security?)

I haven't drunk the Blue Kool-Aid and of course it wasn't OS/2 that brought on the Internet/Information Age, but I'll agree with 86-the-bs and hope you were joking.....

IBM needs to hit at least $11.40 in earnings per share for the company's top brass to get their 2010 bonuses, so on Tuesday its board of directors gave Sam Palmisano, Big Blue's president, CEO, and chairman, the means to engineer that number with a $10bn bag of cash.

The board declared a dividend of 65 cents per share on IBM's stock while also authorizing the company to spend an additional $10bn to take them off the market and "return value to shareholders" — the IBM euphemism for not giving employees a pay raise.
...
http://www.theregister.co.uk/2010/10/26/....

Quote:

Karl, this is not all one sided re: Dumb.

While I agree with your "macro" call that this action says the company is unable to expand or produce product to heighten profitablility;

This is a company whose profits have generally come from currency translation for probably 5 out of the last 8 quarters.

Still, 2 points:

1: Buying back the stock obviates the requirement to pay a 2.9% dividend on bought back shares.

2: They will repurchase shares by selling puts. Today now they can sell November 140 puts for about $2.50, get filled or not, and not care. Now obviously, they can not sell 7% of their float in any kind of perceivable manner, but they *can* do so over many many months, as is uusally the duration of these BB programs. Should they be assigned on 140's, it's a fairly profitable game.

In general, I agree with your strategic take; but it's not all the way stupid. Only partially!

Gamma, they are in the business of technology not crafty accounting. LOL.


It stinks to me too... you put out shares to raise revenue for business ventures, contracting them gives me the impression you are out of ideas. A company like IBM should not have a shortage of ideas.


These companies should have a goal to get as much revenue for investment as possible, in fact their visions should be grander than their means. You would think that a company like IBM would be more effective using that dollar to grow technology, not accounting.


(...but I am not surprised, have you met any of the dinosours employed by IBM? Most of them just want the money and are rather conservative. Time is kind of passing them by and they don't mind making money off their past reputation. )

The only company that is a bigger pain in the ass to work with is Xerox.

I worked for a company that outsourced their entire IT department to IBM. IBM turned around and hired 90% of the people that used to work at the company to manage their old legacy infrastructure.

They did the same thing with a Big 4 accounting firm and the IT auditor. The IT auditor who worked for the company suddenly worked for the Big 4 firm. When Sox was enacted and we had to hire another firm other than our Financial auditor, the individual suddenly became an employee of that other firm. She had one client, us.

I never really fully understood why this was happening. I have no clue if it was cheaper or not.

All I do know is that all the outsourced employees were ex-employees of the company.

If there was a function the management could outsource, they did.

Again, would have loved to see the analysis of whether it was cheaper or not.

The only thing I can think of is it is cheaper to say we don't want to work with X consultant, but in the case of the IBM folks and the IT auditor, they were the only people who knew how to keep the legacy systems running or how they worked after the years of things that were done to them.

They had a big stock buyback in 2008 (or late 2007 I forget) and go check the insider stock buy/sell info. Their big fat CEO, Sam, cashed out nicely in Aug. 2008 before the crash. Mind tell you, he is about to step down (that is the officail plan). IBM is an ill-managed company and sure you should short them when the time comes. However, there are many better targets out there.