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International Business Machines Corporation Message Board

  • rarealignment rarealignment Apr 21, 2014 7:03 PM Flag

    capital expenditures verus buybacks

     

    IBM has spent 4X as much on stock buybacks as on capital expenditures. Since Q1 2012 net debt has risen from $20 billion to $35 billion, a 75% increase in just about two years. We all know they are trying to mask income statement weakness with more and more debt. But the problem is that the debt/equity ratio has reached unsustainable levels.

    So will they continue buying back stock at record levels funded through new debt issuance and preserve the illusion that EPS is stable for another quarter; or will IBM finally throw in the towel and preserve its balance sheet while allowing EPS to finally track revenue growth?

    The wrong decision here is almost certainly going to result in a nasty downgrade by the credit rating agencies.

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