Answer is that you have absolutely no information about the default rate or the structure of any of the deals. It's all just speculation.
Do you have information about the difference between IBM's cost of money and their lending rates to customers? How many deals? How large? What terms?
It could be a great business or a complete bust - high risk or no risk. You really don't know. It's all just opinions with no facts.
And when others question the details you sprout more opinions. So in your next note why not supply some actual facts or nothing at all.
Financing is not a good business for them - selling computers, software, and integration services is. The street places a lower multiple on banking than on selling computers, and that's one reason IBM's PE has fallen from 30+ to 12.
Worse still, since IBM is not a bank, there is no discount window or TARP bailout for bad investments. So they have all the disadvantages of being a bank and none of the advantages.
Borrowing money at high rates and lending that money to customers to buy products is not a good business and it's not profitable banking.
From 2nd quarter PR. How good are IBM chances to earn more than $10 a share this year?
IBM REPORTS 2009 SECOND-QUARTER RESULTSDiluted earnings of $2.32 per share, up 18 percent; Raises full-year 2009 EPS expectations to at least $9.70 from $9.20; Free cash flow of $3.4 billion; cash balance of $12.5 billion;
Net income of $3.1 billion, up 12 percent; net margin of 13.3 percent, up 3.0 points; Pre-tax income margin of 18.3 percent, up 4.1 points; largest increase in more than 3 years; Gross profit margin of 45.5 percent, up 2.3 points; up 19 of last 20 quarters; Revenue of $23.3 billion, down 13 percent, or 7 percent adjusting for currency; Software pre-tax margin up 8.3 points; income up 24 percent; Full-year 2009 Software pre-tax income expected to grow at double-digit rate and reach $8 billion; Services pre-tax margin up 4.1 points; income up 23 percent; Services signings up 3 percent; strategic outsourcing signings up 38 percent, both adjusting for currency; 17 services deals greater than $100 million; Public sector revenue up 7 percent, adjusting for currency. ARMONK, N.Y., July 16, 2009 . . . IBM (NYSE: IBM) today announced second-quarter 2009 diluted earnings of $2.32 per share compared with diluted earnings of $1.97 per share in the second quarter of 2008, an increase of 18 percent.
The earnings per share results were the highest for any first, second or third quarter in the company's history, adjusted for stock splits.
Second-quarter net income was $3.1 billion compared with $2.8 billion in the second quarter of 2008, an increase of 12 percent. Total revenues for the second quarter of 2009 of $23.3 billion decreased 13 percent (7 percent, adjusting for currency) from the second quarter of 2008.
So if you're so bullish on the stock why not sell at-the-money covered calls each month. On Monday you could buy 5,000 shares and sell 50 Oct $120 calls for $2.60. If you do that each month you'll generate a 2% monthly dividend. That's a lot better than those silly bonds.
If you do that all year you'll be hedged against a $31 stock price decline. So if you were even slightly bullish that would be a much better trade. Simple too. if you did it for 4 years you'd own the stock for free.
But - if the stock collapses, you'll get your head handed to you and it will take months to recover.
So - are you really bullish on the stock?
it's not, it's a positive ... learn why the debt is there ...
it's not other companies that ballooned debt just to run ...
for IBM is pretty much like accounts receivable, as the part
of debt for the financing facility and the rest is for
investments , I'm sure that a small part is there because
of general operating expenses, but check the cash flow,
there's more than enough money to go all around and still
hand out some to shareholders ....
we normally don't consider a house mortgage , car loan,
boat to be a pox , there is some corporate debt that is
the same .. no big deal, some should be there , or the
company is probably running idle ... later ... garce