So why did IBM Corp need to pay so much to buy Tivoli Systems Inc – and in hard cash too, not soggy paper? Even if we’re generous and say profits will double and more to $12m this year, IBM is still valuing it at about 62 years’ earnings, and the whole world was saying the that Japanese market was nuts when price-earnings ratios reached between 60 and 100 (it was – the Tokyo index was at around 38,900 then, and it didn’t stop falling until it got down to about 14,000) – so is it that IBM knew that some unwelcome competitor was about to buy Tivoli, or simply some new easy-come-easy-go attitude towards money imported from American Express Co? Either way, if we were IBM shareholders having to get by on a 25 cent quarterly dividend, we would very much want to know.
