To: pater tenebrarum who wrote (32188 ) 5/10/2000 12:47:00 PM From: Cynic 2005 Read Replies (1) | Respond to
International Business Machines Corp. (IBM) 109: While much attention was focused on Cisco Systems (CSCO 62 3/4) last night, and rightly so, many overlooked the analyst meeting hosted by Big Blue. From what Louis Gerstner said yesterday, it seems that all is not well with this major computer and services company. At least during the first half of the year, Big Blue could experience greater performance difficulty than anticipated as the slowdown from the Y2K phenomenon caused more ripples than anticipated. Accordingly, with falling hardware sales and slower growth in their services business during the first quarter, and with software sales flat, IBM could be experiencing a tougher period ahead, though Mr. Gerstner sees the problems the company faces, especially in the fast evolving e-business arena, easing later in the year. However, it seems that IBM has its hands full contending with Hewlett-Packard (132 13/16) and Sun Microsystems (82 1/8) in the mid-range server business, and with EMC Corp. (125 11/16) in the computer storage arena. The company was also not too positive on its high-end server business, though this segment should weather the competitive storm in better fashion. Having already experienced a $1 billion revenue shortfall from expectations in the first quarter of the year, management is no longer boasting of double-digit revenue growth rate this year as it did last year. Instead, revenue growth for 2000 is likely to be more in the high single-digits, though Mr. Gerstner did not provide any forecast other than to state that IBM does not need to increase revenue in the double-digits to be successful. It seems that Big Blue is being cautious, anticipating a tougher market through the remainder of the year than they had in mind just a few months ago. While revenue growth is likely to be on the lower side, earnings of $4.37 per share for 2000 is not likely to be in jeopardy. But it still throws into question why investors are still willing to pay 25 times future earnings when the company has so many threats from better positioned competitors that could create downward surprises to revenue and earnings. - Raul Nicho, Briefing.com
