IBM for All

Compute it at 4 to 1

IBM, the Wall Street glamour stock whose price once soared to a lofty $733 per share, is finally coming down to earth. Last week the $18 billion-a-year computer giant announced a 4-for-1 stock split effective next May. That ought to bring the price of a single share down from about $284 last week to somewhere around $70--the lowest since 1932 and, for the first time in decades, within the reach of the average buyer. Says IBM Chairman and Chief Executive Frank T. Cary: "We want to make our stock more attractive to the small investor."

Why? IBM certainly does.not need to raise any new money from investors; it has $5 billion in cash and securities, or more than the monetary reserves of most nations. Instead, its motives appear to be pride and politics. A rising stock price confers more prestige on corporate managers than one that is just high. Despite IBM's dazzling record of sales and profit gains, its stock, adjusted for past splits, sells for a bit less than it did ten years ago. Reason: institutional and pension fund managers hold about as many IBM shares as they care to, since they want to maintain balanced portfolios, and the stock has been too expensive for all but the richest individual investors; so demand for the shares has declined. Politically, the more widely a company's stock is held, the more clout it has; AT&T's nearly 3 million shareholders, for example, constitute a powerful lobby. IBM could use support from more than the 579,384 shareholders it now has as it fights the Justice Department's attempt to split it up and moves into the heavily regulated field of satellite communications.

Still, the split represents a considerable shift in philosophy for a management that used to pride itself on having one of the highest-priced stocks around. Though IBM has declared six other splits in the past 20 years, they have been too modest (on the order of 5 for 4 or 3 for 2) to bring the price out of the stratosphere. But next year small investors are expected to seize the opportunity to buy in at Depression-era prices. As an extra inducement, IBM last week boosted dividends by $2.24 to an annual rate of $13.76 on the present stock or $3.44 on post-split shares. That means IBM shares will pay about the same yield--roughly 5%--as a bank savings account.

This file is automatically generated by a robot program, so viewer discretion is required.