IBM Message Board - Msg: 16173673

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Technology Stocks : IBM

IBM 298.92

+3.1%

2:24 PM EST

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To: kvkkc1 who wrote (7256)	8/6/2001 10:44:58 AM
From: Arrow Hd.	Read Replies (1) of 8220

Some good discussion going on. I read the Barron's article over the weekend. It is a rehash of what Barron's has printed before in Abelson's column. It is what any company would do if they had this kind of financial flexibility. But, as we discussed here as early as February, the third quarter will probably be a defining moment. I think the damaging aspect of this quarter is that there will be no earnings growth. If you go back to post 7226 where we discussed the 2Q CC I speculated that the 3Q earnings estimates (and maybe 4Q and full year) will quietly be brought down. This has happened, and to the point where there will be no YOY increase if the numbers come true. --2000 3Q = 1.08 --2001 original consensus estimate = 1.14 (Barron's quote) --2001 new consensus from Barron's = .96 --2001 new consensus from CSFB = .99 --2001 new consensus from SI = 1.00 So the consensus is coming down, and IBM manages the consensus to an eyelash, and what it tells is a very weak quarter YOY. An earnings shortfall for the first time in a long time. This has been factored into the price already. IBM is not at 119 anymore, it is floating around here in the low 100s and will probably remain in this range until early September when analysts will alternately bash or support the stock depending upon their opinion (and client positions). So on a very short term basis I am probably neutral. But the institutional money probably doesn't care and will wait out the year to see how, or if, the fourth quarter will improve. The last CC said that they were not changing the full year outlook for earnings on a constant currency basis. So you could use that as a crutch to weather the third quarter. It would be more of a crutch if this was an EBIDTA statement too but it isn't. So the wild card here regarding whether the hat has a rabbit or a turd is the writedown issue. There are more to come. IBM said so in the CC. Do they bite the bullet and clean things out or do they go for the full year earnings commitment? Gerstner wants no warts in his last few quarters but he doesn't want any stigmas attached to his leadership story either. He will want to leave Palmisano a clean slate. That is the big question. Some analysts are taking a conservative view since they are lowering both the fourth quarter and full year in addition to 3Q. The write-down issue got focus in the CC. The analysts did not miss it.

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