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LEASING






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Analysis of IBM Credit Corp.’s 1999 Business Results

Profits Up, New Leases Down

Customer Financing Units Follow General Big Blue Trends

PHOENIX, May 25 – IBM’s customer financing arm, IBM Credit Corp. (ICC), and Big Blue’s corresponding international subsidiaries, generally followed the parent company’s 1999 business trends (see “Slam Dunk of Bunk”).  Profits were up, revenues also increased moderately, but the new contract sales declined, according to the just-released ICC 10K statement for 1999. 

In part, profits were up due to ICC’s sale of leased assets to IBM (i.e., not to customers) related to AT&T’s acquisition of IBM Global Network from IBM.  That was a one-time gain; of course, a mini version of “The Great IBM Lease Base Sale” of the early 1980s.

In the fourth quarter, however, it took some accounting “magic” to come up with the 64% surge in net earnings, especially since ICC’s 4Q99 revenues declined 3%.  “No worries,” as they say Down Under.  ICC’s bean counters with green shades, black hats and long arms simply pulled a $33 million white rabbit out of the hat to offset some of their top-of-the-line decline.

The “Provision for Receivable Losses” category had $23 million in it in the third quarter of last year.  In the fourth quarter, however, not only did ICC appear to finance totally risk-free deals; it miraculously made money (about $18 million!) for the company. 

[...]

Our report then goes on to explain how ICC performed such a miraculous accounting feat.  And then gives a few more examples of its accounting "magic."

We also analyze ICC's and IBM worldwide customer financing business results by detailed Profit & Loss categories, including by vertical, horizontal and international segments.

"That's all she wrote," we're afraid, for those of you who are NOT Annex Research clients, and who are now reading the complete Annex Bulletin, along with 8 charts which back up our analysis in the 5-page print edition of this particular report.

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Happy bargain hunting!

Bob Djurdjevic


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

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Volume XVI, No. 2000-14
May 25, 2000

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

P.O. Box 97100,      Phoenix, Arizona 85060-7100
TEL: (602) 824-8111        FAX:

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