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Analysis of IBM’s Fourth Quarter and Final 1999 Business Results

A Slam-Dunk of Bunk!

Biggest Surprise: A Sharp Drop in Services Revenue Growth - Up Only 2%!

PHOENIX, Jan. 19 – In our 30+ years of following IBM and the computer industry, we've certainly heard our share of BS from various IBM and other executives.  But rarely has so much bunk been plunk(ed) on so many deaf ears by so few IBM executives’ shifting of gears, as was the case during this afternoon's 4Q99 teleconference with analysts.  In terms of delivering pure bunk, John Joyce has just scored a slam-dunk!

A $557-million loss incurred by the Bug Blue’s PC operations in 1999 was a “profit decline,” according to IBM’s CFO John Joyce. 

A precipitous drop (down to only 2% in 4Q99) in the growth of IBM Global Services revenues, IBM’s “crown jewel” and the only working string in its violin, should give us cause for optimism.  Why? Because “we’re pleased the Y2K issue is behind us,” according to Joyce.


Our report then goes on to analyze the results of individual IBM business segments before concluding as follows:  

So how will the stockmarket react to such a heap of bad news from Armonk?  Look for the IBM stock to rise tomorrow (Jan. 20). 

Rise?  Yes.  Why?  Because any sane analyst would have left the crazed Wall Street casino long ago.  And because the remaining ones will probably rejoice tomorrow that IBM had not dumped any bigger surprises on them, as the now demoted former IBM CFO, Doug Maine, did last October (see Annex Bulletin 99-32, 10/21/99).  After all, they have to protect their bullish forecasts, don’t they?

The sin on Wall Street, the street of sinners these days, isn’t to sin.  Nor to report the spin as news, as IBM has just done. The sin at the Wall Street casino these days is to be found out.  And our bet is that Wall Street won’t want to find out just how badly IBM’s business has been hurt.  Not only by the Y2K problem; by its heavy dependence on the industrial era dinosaurs - still IBM’s biggest and best customers.  Against which we warned almost four years ago (see “Louis XIX of Armonk,” Annex Bulletin 96-42, Aug. 21, 1996).

In short, IBM is afflicted by an endemic problem which isn’t going to go away quietly as the Y2K issue has.  So investing in the Big Blue stock at this stage is like buying fools’ gold.  Fortunately for Armonk, there are plenty of fools hanging around the Wall Street casino these days.


"That's all she wrote," we're afraid, for those of you who are NOT Annex Research clients who are now receiving the complete Annex Bulletin, along with all the charts and tables which back up our analysis.  

To find our how you can become one of our clients, and read the rest of this Annex Bulletin, click on . Thank you.

Happy bargain hunting!

Bob Djurdjevic

NOTE: The print edition of this report, of course, contains additional charts and tables not included here.







































Volume XVI, No. 2000-04
January 20, 2000

Editor: Bob Djurdjevic
Published by Annex Research

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