This is a Healthy Business?

IBM is out touting their profit growth prospects (perhaps in response to having been eclipsed by HP in both performance and absolute size?). 

They are outlining their potential earnings growth by 2010 on moderate expected revenue growth.  Today’s WSJ reports:

“Of the roughly $5 increase in earnings per share that IBM says is possible by 2010, 75 cents comes from the assumption that IBM’s recent growth rates will continue. IBM sees another $1 coming from wide-ranging efforts already underway to cut costs and boost profit margins; $1.10 from more than $40 billion worth of stock buybacks; $1.20 from acquisitions and other future growth initiatives; and 90 cents from retirement-related savings. IBM is freezing accruals in its pension plan after this year.”

So organic growth is predicted to be about 12.5% in total over three years and is exceeded by the savings from cutting employee pensions, which in turn is smaller than the contribution of “wide-ranging” cost cutting.  Organic profit growth is roughly 15% of the overall forecasted growth.  What does that say about IBM’s business?  Their engineering capabilities have evidently migrated to the financial realm.

There may be something to Cringely’s reporting (and here) on how they plan to achieve the cost cutting.

UPDATE: I missed the fact they are taking on debt to do this.  IBM is doing the private equity thing without getting the private equity firms involved…