OFF TOPIC--IBM earnings.
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IBM results in spotlight as tech stocks slump
IBM results in spotlight as tech stocks slump By Richard Melville
NEW YORK, Oct 17 (Reuters) - With U.S. stocks reeling from a series of weaker-than-expected financial results in the technology sector, investors are approaching International Business Machines Corp's IBM.N report with heightened anxiety.
Already, tech stocks have skidded after semiconductor bellwether Intel Corp INTC.O fell short of Wall Street estimates with its third-quarter earnings. Seagate Technology Inc SEG.N, Sun Microsystems Inc SUNW.O and others also produced disappointments.
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On Monday, investors will learn the answer to questions that have dogged IBM shares in recent weeks, particularly the degree to which the persistently strong U.S. dollar damaged earnings during the quarter.
In September, Goldman Sachs analyst Laura Conigliaro cut her third-quarter earnings estimate on IBM by $0.10 per share to $1.25, based mostly on the view that exchange rates would cut into the value of non-U.S. sales, which comprise over half of IBM's revenues.
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Analysts have since debated the expected impact of the currency issue. Salomon Brothers analyst John Jones said third-quarter revenue growth "could be as low as one to two percent due to the unusually strong dollar." However, he also said he still believed IBM would report earnings of between $1.30 and $1.38 per share because of "enhanced hedging practices."
SoundView Financial analyst Gary Helmig said that beyond the currency worries, which he called "overblown," IBM's business in the quarter appeared strong.
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"I'm having a hard time coming up with a bear story on this quarter," Helmig said. "The services business is doing well and software should show signs of accelerating as discounting practices bottom out as a drag on results." Results will likely be mixed at IBM's hardware business, with production of the AS/400e, IBM's new-generation minicomputer, ramping up.
Troubles apparently persist in other some areas, however, evidenced by the leaked news of a planned reorganization at IBM's money-losing consumer personal computer business.
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With stocks under considerable pressure in recent sessions as questions arise about sustainability of gorwth prospects in technology, IBM's results -- and particularly comments about its outlook -- will draw broad attention.
"This is going to be a pretty important event," said Richard Cripps, chief market strategist at Legg Mason Wood Walker, "perhaps more for whether they confirm in their comments the slowdown seen by others than for the actual number they come out with."
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