IBM ($111) Shares Jump on Strong Earnings
By Timna Tanners
LOS ANGELES (Reuters) - Shares of International Business Machines Corp. (NYSE:IBM - news) rose sharply to boost the Dow, after the world's biggest computer maker posted earnings that beat analyst expectations.
IBM rose $11-5/8, or 12 percent, to end at $108-5/16 on the New York Stock Exchange (news - web sites), where it was the second-most active issue of the day. Big Blue's share price spike accounted for 81 percent of the Dow Jones Industrial Average rise of 93.94 points, a 0.89 percent rise to 10,678.28.
Shares benefited Thursday from the company's rosy outlook for its future, despite the economy's weakness and a slump in personal computer demand that has battered shares of its rivals.
Analysts noted IBM was in a good position due to its global reach, mainframe computers and an emphasis on corporate customers amid a slump in demand for consumer PCs.
``IBM clearly stands to benefit from a new mainframe product cycle, relatively small exposure to the consumer space, and a large globally dispersed services business that is less sensitive to a macro slowdown,'' Bear Stearns analyst Andy Neff said.
He kept his buy rating on the stock, and noted that IBM was particularly attractive at recent levels due to its low relative stock price-to-earnings ratio.
On Wednesday, Armonk, NY-based IBM posted fourth-quarter net income of $2.7 billion, or $1.48 a share, compared with $2.1 billion or $1.12 a share in the year-ago period, which was hurt by Y2K concerns. That compared with the analyst consensus estimate for earnings of $1.46 a share, as compiled by First Call/Thomson Financial.
IBM Chairman and Chief Executive Louis Gerstner said that the company was well positioned to weather an uncertain economic climate.
That sentiment and IBM's solid earnings report contrasted with the woes in recent months of other computer makers such as Apple Computer Inc. (NasdaqNM:AAPL - news), Compaq Computer Corp. (NYSE:CPQ - news), Dell Computer Corp. (NasdaqNM:DELL - news), Gateway Inc. (NYSE:GTW - news) and Hewlett-Packard Co. (NYSE:HWP - news).
``It's nice to see them beat expectations and we're going to keep an eye on it,'' said Michael Hays, vice-president of Maxus Asset Management, with about $2.5 billion under management.
He said Maxus has been buying shares of software companies geared around IBM's new mainframe, but would look to buy Big Blue in the $80s and sell in the $130 range.
``We are probably going to hold on to what we have and not buy more. I think we need to see more evidence that IBM will be able to grow mainframe sales,'' he added.
Other analysts were also cautiously optimistic.
``The quarter undoubtedly contained strong aspects, and we are warming up to the shares, but we await clearer visibility in the server businesses and overall IT (information technology) spending before reassessing our view,'' |
