SeeTheLight

Big Blue's Stock May Be Affected by IBM's 'Bank'

@ Is this right:

I think you might be a little confused. The 46% margin means simply that for each dollar earned in interest it only costs 56 cents to earn it. This doesn't imply that IBM is charging loans at Loan shark rates.

For example. Let's say some one buys (not leases) a mainframe for $100,000. Then they finance it at 8% per annum. IBM's server group records the $100K revenue and the financing group earns 8K revenue in the first year. Then of that 8K revenue, it costs the finance group around 4.5K to earn it (paying salaries, borrowing costs, etc.). Obviously this example is a little simplified but it should illustrate it.

Pretty sure there are no loan sharking practices here, simply making it easier to buy the mainframe. If someone wants to lease a computer and re-sell it back later... why not? And It's not like IBM is forcing them to use their financing arm, they can go to bank if they want.

Hope that helps.