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IBM 2012 1Q Financial Analysis

|Includes: International Business Machines Corporation (IBM)

IBM results are average. Quarter sales are down by -3% compared to 2011 2Q. On the other hand Net infome before depreciation has increased by +3% but in general there is no visible growth and results looks a bit flat.

Decrease is in all segments. Most in System and Technology -9% least in most profitable segment of Software, which stayed unchanged. In general companies results are average.

Balance structure continues to be unacceptable due to very low equity, which remain 18%, due to very aggressive dividend (0,9 bn.$) and share repurchase (2 bn.$) which is ~60% ouf of Net income before depreciation (5 bn.$) and this level can be considered as quite high. Due to low equity high return on equity is generated, which is around 60-70%.

Even if we take into consideration part of companies activity as financial equity remains to low. Liquidity is just above acceptable 1 level and is around 1,2. In general companies balance structure is aggressive.

Share value:

Equity / share 20,5 bn.$ 1,143 bn. 17,9 $/sh.
Market value 204,5 $ +186,6$ 10,1 years
Year Net income before Depreciation 21,0 bn.$ +18,4$/sh. 9,0%

Companies share basic value is ~18$ (unchanged compared with Q1). Current market price is~205$ (Δ+5%/197$) which shows that market is paying ~187$ more or 10,1 years (10,0 years) of Net income before Depreciation earnings which is 21 bn.$ (Δ+0,5%/20,9$), which is a lot taking into consideration that companies balance structure is very aggressive. Share profitability (Share market price/Net income before Depreciation) is 9,0% (9,1%) which is a bit better then average.

Company at the moment pays 3$/share annual dividends (0,75$/quarter) before tax or 1,5% (1,7%) investment yield, which is low. Since no growth is predicted dividend level should stay the same. In general share evaluation is to high and has decreased further due to increased share price, also balance structure is very aggressive.