IBM takes a trip down tremoury lane

Anniversaries are usually less than memorable events, but the anniversary of the 1987 Stock Exchange crash was a firecracker experience with belated Hong Kong 21-gun salute thrown in for good measure. While the last stock market crash was born in the US, this one, at first look, appears to be from similar market imbalances in the Far East and, in particular, Thailand.

Some financial commentators are saying the real imbalance is still to be found in the US, and last week's jitters were caused by the over-priced Far East markets which, once they started to slide, had nowhere else to go.

Maybe these new alignments are the first shifts of the ground before the real earthquake. And it was in that weary earthquake zone called Silicon Valley that the high-tech companies had to put their money where their mouths were and buy back their own stock to stop a further slide. That process is far from finished. Although the markets may have temporarily stabilised, some stock prices are still over-valued.

IBM led the charge when it bought back #5.5 billion of its common shares.

And Wall Street has been busy all week advising hundreds of IT companies how to buy back their futures. Luckily most in the them are cash-rich and can afford it without affecting growth. But some, particularly UK companies, will take a short-term hit.

There were realists as well, and it is they who give clout to the view that this was not a foundation-shaking major realignment but a well overdue re-adjustment. And being overdue it just hit that bit harder.

Market movements are taking place at both ends of the business spectrum.

The IBM situation is interesting. It illustrates the reason why so many IT companies have traditionally been happy to remain private concerns.

Olivetti, for example, must now be counting its blessings.

Across the US, corporate firms forced into share buy-backs must be cursing their luck - barking 'buy' into one phone and then slashing research and development budgets as soon as they can pick up the receiver.

IBM's repurchase represents 3.7 per cent of their outstanding stock of 978 million shares - about $16 billion since January 1995. This is not big bucks for IBM. It will get worried when the real realignment takes place.