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July 17, 1991

ANALYSTS DISAGREE ABOUT IBM’s PROSPECTS

By CBR Staff Writer

Many views make a market as they say, and while analysts at Shearson Lehman Brothers have been talking IBM Corp’s shares up, Thomas Rooney at Donaldson Lufkin & Jenrette is just as energetically talking them down: Rooney has been telling clients to sell the shares ahead of announcement of the second quarter figures, due tomorrow, saying that he expects IBM to have an operating loss in the current quarter, and is concerned about the dividend cover – a healthy company should have its dividend covered around 2.5 times by profits, and if cover gets down below one, a company must either cut its dividend or dig into its cash reserves to maintain it; Rooney still expects the typically hectic fourth quarter to bring IBM back to $4.75 a share for the year – against $10.71 last year, but says he may have to lower his 1992 estimate of $8.50 to $8.75 a share; IBM shares shed $2.625 to $96.75.

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