from briefing.com
INTERNATIONAL BUSINESS MACHINES CORP. (IBM) 117 5/8 -1 11/16. Not everything is well
with Big Blue today as a report indicates that mainframe buying intentions waned in the month of April,
pressuring the stock lower. IBM has been counting on its big iron to carry load as the PC side of its
business felt the ill effects of the inventory glut that has prevailed in the PC area for the past couple of
quarters. While the decline in mainframe buying intentions may only be a one time event, it could be enough
of a problem that may prompt Wall Street to lower ratings and earnings estimates. So far, Wall Street is
giving Big Blue the benefit of the doubt, cautioning investors of the potential problem, but still keeping to
their original estimates. According to First Call, IBM is projected to earn $1.51 in Q2 and $6.51 for the
full-year of 1998. This compares with profits of $1.41 in Q2 on revenues of $18.87 billion and $6.05 for
1997 on sales of $78.5 billion. Should the lower trend in mainframe sales continue in May and June, expect
earnings to get clipped, even though the PC sector is beginning to see better times. Lower earnings are also
likely to result even as IBM begins shipping its new S/390 Generation 5 Server (G5) in the second half of
1998. While this new G5 series is expected to do well, it will probably not be enough to offset any major
dip in mainframe sales. Hence, the upside for the stock seem very limited at the moment, until a better
measure of buying intentions emerge. Without a clearer view of corporate buying patterns, expects future
earnings cuts to put a lid on the stock.
|
