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A SPECIAL ANNEX NEWSFLASH

Analysis of IBM Insider Stock Trades

Exodus Begins...

Three Senior Gerstner Aides Sell Millions of Dollars'-Worth of IBM Shares

PHOENIX, Apr 28 - Three senior IBM executives with roots in the Gerstner administration sold $5 million of dollars'-worth IBM shares in the last several days, suggesting an exodus (or a purge, take your pick) of the old guard at Armonk may be under way on the eve of the IBM Annual Meeting (Apr 29, Kansas City).

Nick Donofrio, a senior vice president in charge of IBM technology, exercised 34,020 options on Apr 21 at $13.36 per share ($454,507), selling the same number of shares the same day at $84.09 per share ($2,860,714), for a tidy pretax profit of about $2.4 million.  

Two days later (Apr 23), Donofrio's colleague, Paul Horn, a senior vice president and head of research, sold 5,000 shares at $85.73 each, according to Securities and Exchange Commission.

Bruce Harreld, a senior vice president for strategy whom Gerstner had handpicked for that job in 1996 (see "Louis XIX of Armonk," Aug 1996), sold 20,000 IBM shares at $85.44 apiece, also on April 23, for a pretax profit of about $988,000.

Donofrio also sold 51,028 shares on Feb 26 at $78.40 each for total proceeds of $4,000,493, and a pretax profit of over $3.3 million.  Harreld also sold a large number (120,000) of his IBM shares last year (July 29, 2002) for total proceeds of about $8.3 million.

The IBM threesome followed in the footsteps of their former boss who gained about $4.7 million in 2002 from exercising options.  In addition, Gerstner received last year a base salary of $2 million plus a bonus of $1.5 million, even though he was the IBM CEO for only about a month (see “Gerstner’s Legacy: Good Manager, Poor Entrepreneur”, Jan 2002).

Of course, even such an extravagant pay package pales in comparison to Gerstner's earnings and stock option exercises from prior years, when he and his cohorts on the IBM Board raided the IBM treasury to the tune of nearly half a billion dollars (see the chart and "Sir Lou OutLayed Lay!" Apr 1, 2002).

IBM shares were up 1.6% to $85.20 in today's late afternoon trading.

Happy bargain hunting!

Bob Djurdjevic

For additional Annex Research reports, check out... 

2003: “Turnaround Continues...” (Apr 15), “Start of a Real Turnaround?” (Jan 17).

2002: “Gerstner: The Untold Story”  (Dec 27), "Gerstner Spills the Beans" (Dec 13), "On a Wing and a Prayer" (Oct 21), "IBM-PwC Tie the Knot" (Oct 2), "Half or Double Trouble?" (Aug 12), Wall Street/Main Street Chasm (June 25), “Wall Street Casino,” (June 21), Big Blue Salami (June 19), "Looming IBM Layoffs" (May 14), "IBM 5-Yr Forecast: From Here to Eternity?" (Apr 2002),  “Tough Times, Soft Deals,” (Apr 25, 2002), “Gerstner’s Legacy: Good Manager, Poor Entrepreneur” (Jan 2002), IBM Pension Plan Vapors: Where Did $17 Billion Go? (Mar 2002), "Sir Lou OutLayed Lay!" (Apr 1, 2002).

A selection from prior years: Is IBM Cheating on Taxes, Annex Bulletin 99-17 (May 1999),  IBM 5-year Forecast 2001: An Unenviable Legacy (June 2001) "Break Up IBM!" (Mar. 1996), Fortune on IBM (June 15, 2000), “Smoke and Mirrors Galore,” July 2000), "Slam Dunk of Bunk" (Jan 2000), Annex Bulletin 98-14 ("Wag the Big Blue Dog"), Armonk's Fudge Factory (Apr. 9, 1999)Where Armonk Meets Wall Street, Greed Breeds Incest (November 1998)Stock Buybacks Questioned: Is IBM Mortgaging Its Future Again?, 97-18 (4/29/97),  "Some Insiders Cashed In On IBM Stock's Rise, Buybacks" 97-22, 7/27/97,  Djurdjevic’s Forbes column, "Is Big Blue Back?," 6/10/97;  “Executive Suite: How Sweet!,” (July 1997), "Gerstner: Best Years Are Behind", Aug. 10, 1999), "IBM's Best Years Are 3-4 Decades Behind Us" (July 1999), "Lou's Lair vs. Bill's Loft" (June 1999),  "Corporate Cabbage Patch Dolls," 98-39, 10/31/98; Djurdjevic’s Chronicles magazine October 1998 column, "Wall Street Boom; Main Street Doom", “Louis XIX of Armonk,” (Aug. 1996), "Mountain Shook, Mouse Was Born" (Mar. 25, 1994), “A Nice Guy Who Lost His Compass” (Jan 26, 1993), “Akers: The Last Emperor?” June 1991), Industry Stratification Trend (Mar. 30, 1990) etc.]

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Volume XIX, Annex Newsflash No. 2003-05
April 28, 2003

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

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

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