CM in MA

Google, IBM and the Wall Street Funhouse

shmo: IBM generates a ton of cash. With it, IBM pays a dividend, is an active acquirer, spends generously on R&D (see my earlier post), and buys back shares. Even when IBM borrows money for the buybacks, it makes sense so long as their earnings yield is above the borrowing rate. IBM is buying back shares because they are undervalued.

Disclosure: Commenter has (and has had for a long time) a long position in IBM.

Google, IBM and the Wall Street Funhouse

Thomas: no worries my friend.

Google, IBM and the Wall Street Funhouse

RE: IBM R&D and Acquisition Spending. Yes, IBM's business has been doing well for the past few years. Arguably, IBM's R&D spending and acquisitions are among the many reasons for this performance. Here's some information on this area of IBM's business activity:

- IBM spent the following on R&D over the last five years: 2003: $5.31b; 2004: $5.87b; 2005: $5.84b; 2006: $6.11b; 2007: $6.15b. This totals $29.28b, and represents roughly 38-40% of total cash flow from operations during this period. To put the annual amounts in perspective, IBM's 2007 R&D spending exceeds the individual market capitalizations of the bottom quartile companies in the S&P 500.

Through 2007, IBM has led in U.S. patents for 15 consecutive years.

IBM recently completed its largest acquisition, Cognos, for roughly $5b. For a list of IBM acquisition activity, check en.wikipedia.org/wiki/...

Disclosure: Commenter has (and has had for a long time) a long position in IBM.