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INDUSTRY TRENDS

  IBM and Dell Announce a $16 Billion "Megadeal"

King, Prince of "Fluff" Spin More "Fluff" into Market

Lou's (Big) Blue Kowtows to Bill's (U.N.) Blue for a Red Cause

PHOENIX, Mar 5 - Dell and IBM, the king and the prince of "fluff" (the market capitalization-over-equity ratio), have just spun more "fluff" into the market. Taken at its face value, the two companies announced yesterday a $16 billion, seven-year deal. And the gullible "investors," read gamblers at the Wall Street Casino, lapped it up as if the "fluff" were real gold. Which is why we invented the "fluff" ratio last year, ranking the computer companies we follow by their market cap-over-equity, not price-earnings, ratios.

Wall Street gamblers unaware of such caveats, sent both IBM and Dell shares soaring yesterday, helping push the Dow Jones Industrials by 192 points, or by 2% of its value. IBM was up by over 10 points at its high, boosting its market cap by over $10 billion, before dropping back later in the day. Dell was up by about six points at its daily high, for about an $8 billion swing on the IBM news. Dell shares also fell back later in the day.

One could hardly have imagined a better example of both, today's market volatility, and its perversion. Within a matter of hours, about $18 billion of new "wealth" was created out of thin air, riding on the companies' hot air news balloon. And then much of it evaporated, again within a matter of hours, as the hot air turned to cold reality. Meanwhile, it was mostly the traders (i.e., the "house"), not the long-term investors, who made out in the process.

A scam a day keeps the doctor away?

Of course, such cons would never be possible without the media playing its part in spinning the tale the "fluff" champions way. All headlines we checked out in this morning's papers heralded the IBM-Dell's $16 billion figure, implying that that's how much new business this deal would be worth to the two companies. And it might be - when Northern Siberia hosts the world's first championship of golf; when the month of February has two blue moons; when there is a snow storm in Singapore; or when Bill Clinton tells the truth about his sexual escapades.

For, if you examine the finer print of this "$16 billion" deal, you quickly begin to realize that the number is a wildly optimistic figure, especially in terms of its net plus to IBM, which the Wall Street analysts and the media have said would benefit more from the deal than Dell.

Asked by how much this "megadeal" would boost its business this year or next, IBM told the analysts that it "would not significantly increase its sales in the early years of the contract," according to today's New York Times' report. As a result, most analysts didn't change their forecasts for IBM revenues. Yet they had no problems lauding the Dell deal as being great for IBM's business.

No surprise there. When Hewlett-Packard (HP) announced its intention to split off its instrumentation business earlier this week, the same analysts who applauded IBM's Lou Gerstner for deciding NOT to split up IBM, were now cheering HP's decision to do so.

In fact, contrary to the popular perception, Dell may reap more immediate benefits from the "megadeal." In return for Dell's promise to buy more parts from IBM in the future, IBM agreed to lower the royalties which Dell pays to IBM for use of Big Blue's patents and other intellectual property. The savings to Dell could be "as much as 1% of the price of each computer it sells," according to an analyst quoted in today's Wall Street Journal report.

Add to it the fact that the entire deal is non-exclusive (meaning that Dell can continue to procure its technology from other suppliers if it finds them more competitive than IBM), and then you can begin to appreciate that what has just happened is that the king of "fluff" (Dell) and the prince of "fluff" (IBM) have just spun more "fluff" to the gullible market. And that the business substance doesn't matter much in a game where "fluff" and greed reign supreme, such as on today's Wall Street.

Two top headlines from last Friday's (Feb. 26) Journal reinforce this observation:

"GDP SURGED at a rate of 6.1% in the last quarter of 1998, an upward revision from the 5.6% pace estimated a month earlier."

"Stocks closed lower Friday, as worries about a slowdown in the PC industry sent technology shares (and the Dow Jones Industrials) skidding."

So when the economy grows faster than assumed, stocks drop?

Nor did this Friday's (Mar. 5) top two Journal headlines sound any more logical:

"THE DOW INDUSTRIALS soared 268.68, or 2.8%, to a new high 9736.08 on Friday, its biggest gain this year and fifth largest on record..."

"Unemployment rose to 4.4% in February..."

So when the unemployment grows, the stockmarket cheers?

Or is a new Logic 101 needed here? Or none at all, just like in Las Vegas?

IBM Donates Two AS/400 Systems to U.N. War Crimes Tribunal

Lou's (Big) Blue Kowtows to Bill's (U.N.) Blue for a Red Cause

PHOENIX, Mar 5 - Bill and Lou sat together on the Council on Foreign Relations. They chewed the fat at the Bilderbergers' meetings. They patted each other on the back at the Trilateral Commission. They wielded forks and chop sticks at the White House dinner party thrown in honor of the visiting Red Chinese president, Jiang Zemin.

Apart from David and Henry (Rockefeller and Kissinger), the Piranha-in-Chief and the Big Cheese of the New World Order, the Billy-Lou twosome were the only members of all three globalist Non-Governmental Organizations present at the White House gala.

In other words, looks like Billy-Lou are two like-minded chums. Their triple NWO play is like being a member of the Soviet Politbureau, the Central Committee, and of the Communist Internationale - all at once.

No wonder China's Jiang "honored" IBM's Gerstner by paying him also a private visit in New York, following the Oct. 29, 1997 White House dinner. Stalin would have probably done the same for a "comrade."

Blue Partners for a Red Cause

un-red.jpg (5428 bytes) No surprise, therefore, either that Lou's (Big) Blue has just kowtowed to Bill's (U.N.) Blue by donating two AS/400 computers and peripherals, worth about $650,000, to the U.N. War Crimes Tribunal for the Balkans and Rwanda at The Hague. In gratitude, Bill Clinton sent a "Dear Lou" thank you letter to Lou Gerstner, the IBM chairman, according to a Mar. 4 report in the Wall Street Journal.

The Journal's article said that IBM would reap "some political dividends" from this move. The paper didn't specify what they would be.

Maybe a "privilege" also to offer the One World globalists, like Klinton, a free computer service to help dismantle and rewrite the U.S. Constitution? Or provide special encryption tools to help Lou's chum, Billy-boy, better cover-up his government's breaches of national security, such as the theft of our nuclear secrets from the Los Alamos lab by their joint pal, Jiang, and his spooks? (see the New York Times, Mar. 6, front page report). Or send some mainframe freebees to the Kosovo Albanian terrorists?

Whatever these "dividends" end up being, IBM customers and shareholders who may still be thinking that the Big Blue is a U.S. company; or is in the business of technology, not politics; should reconsider that notion. Especially after they reread the first two paragraphs of this story. And perhaps switch their allegiances to another "blue chip" company which is not so glaringly RED - under its blue veneer.

Internet Star Wars:

Users' "Patriots" vs. Hucksters' "Scuds"

PHOENIX, Mar 5 - Wouldn't it be great if your TV remote came with a button with which you could zap out all commercials? Not the way the MUTE button works, which only eliminates the sound, but the whole shebang? So that you would only watch your favorite TV program, without any interruptions or delays?

Well, Germany's largest computer company, Siemens, has just come up with such a device. And it's FREE! (see http://www.siemens.de/servers/wwash). Except that this is not a TV remote; it's a piece of software dubbed the WebWasher. The WebWasher zaps out all banner ads, or pop-up windows - the Internet "Scuds" - with which the Web hucksters bombard the visitors to some popular sites (the media Web pages, for example). Such intrusive electronic missiles waste the users' valuable time and bandwidth. In shooting them down, Siemens' WebWasher essentially performs the role of the "Patriot," an anti-missile defense system which gained fame during the Gulf War.

And so, as in the Star Wars, for every Internet missile, sooner or later, there seems to be a counter-measure. If the WebWasher became pervasive, this Siemens' "Patriot" could be quite devastating. Not only because it could zap out up to $1 billion of ad money from the still fledgling Internet e-commerce. But because it might force the entire Internet business formula to be revised - from an ad revenue-supported medium (like TV or cable TV), to a subscription based business metric. Interestingly, if that were to come to pass, the Internet would be merely returning to its roots.

By the way, the WebWasher is relatively easy to install. And it works! We've been using it ourselves. But note the adjective "relatively" above. It's much easier than programming your VCR. But you will have to follow Siemens' instructions to a tee, when reconfiguring your Web browser's "proxy servers."

If you're thinking right now that we're talking here about some substitute waiters, you'd better get some Internet "pro" to help you install this "Patriot." Lest you want to continue to be bombarded by the "Scuds." J

Happy bargain hunting!

Bob Djurdjevic








Volume XV, No. 99-08
March 5, 1999

Editor: Bob Djurdjevic
Published by Annex Research
e-mail: annex@djurdjevic.com

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