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Technology Stocks : IBM -- Ignore unavailable to you. Want to Upgrade?

To: Arrow Hd. who wrote (6864)	10/10/2000 9:43:25 AM
From: art slott	Read Replies (1) \| Respond to of 8218

ET After Others Warn, Market Awaits IBM Earns By Nicole Volpe NEW YORK (Reuters) - Sales and profit warnings by computer makers have shaken tech investors and caused more than the usual nail biting ahead of International Business Machines Corp.'s (NYSE:IBM - news) third-quarter results. IBM, the world's largest computer maker, has said nothing in recent weeks about the health of its business, leaving many investors waiting for the Big Blue shoe to drop. The Armonk, N.Y., company is expected to report earnings on Oct. 17. ``Investors could make a case based on any one of IBM's businesses that there's trouble,'' said Sanford C. Bernstein analyst Toni Sacconaghi, ``But the market appears to be giving it the benefit of the doubt. If they come in with revenue growth in the 5 to 6 percent range, and reaffirm on the fourth quarter with confidence, people will be relieved.'' Revenue growth is a hot-button issue among investors, who want proof that IBM can reignite sales after a year of setbacks and get back on track for reaching long-run annual growth of more than 10 percent. Analysts were expecting sales of around $22.66 billion, and earnings per share of $1.08, according to First Call/Thomson Financial. That compares with revenues of $21.14 billion and earnings of $0.90 per share in the third quarter of 1999. IBM derives some 30 percent of its revenue from Europe, whose weak currencies were cited in recent warnings by chip giant Intel Corp. (NasdaqNM:INTC - news), as well as personal computer makers Dell Computer Corp. (NasdaqNM:DELL - news) and Apple Computer Inc. (NasdaqNM:AAPL - news). A rumor last week that IBM would preannounce drove shares to a two-month low of $110-9/16. ``I think if they had a major shortfall, they would have warned already,'' said Frances Tuite, who as an analyst with Chicago, Ill.-based Talon Asset Management's Hedge division, has advised investors to ``sell short'' or bet against the stock. Talon owned some 48,000 IBM shares as of July. ``But I think revenue growth will come in under (5-6 percent over the year ago period).'' she added. ``I think IBM has a really high valuation for such slow growth. There is this combination of economic slowness and the euro,'' she said. Tech Growth Hit By Falling Euro High gasoline prices and the euro, which on Friday fell to the lowest point since the world's largest central banks intervened to prop up the currency Sept. 22, are just two of the larger problems said to be slowing technology growth. ``Last month you couldn't afford to buy fuel to go out and get a PC,'' said Wit SoundView analyst Gary Helmig. ``With all of these preannouncements, you have to wonder if there isn't a pattern in the worldwide economy that is going to bring slower technology growth.'' ``If IBM makes its numbers, it certainly will restore some faith,'' he said. Some analysts also had hoped that IBM might bring its PC business back to profitability this quarter, which seems somewhat more unlikely given the trouble other PC makers are having, analysts said. Bear Stearns analyst Andrew Neff said he has seen ``a dramatic change at the margin'' in the PC sector, and recently downgraded PC stocks. ``It appears to us that the shortfalls were a genuine surprise to most companies, which -- as of mid-September -- expected to meet investor expectations,'' he wrote in a note to clients. ``But something changed in late September resulting in significant shortfalls.'' He said the Apple warning ``was truly a shock,'' and that it forced him to back away from his usual response that each warning resulted from isolated corporate problems. ``By way of analogy, we had been running across a field getting shot at and we kept saying, 'That one missed me, I'm still okay.' We had to stop and ask, 'Should we be going across this field to begin with?''' Yet, IBM derives about 25 percent of its sales from sales of powerful business computers known as servers and its hard disk and chip technology business. And it derives about 35 percent of its sales from services. These business-related segments have seen a recovery from a slowdown felt last year, when companies did not want to buy new systems ahead of the Year 2000 date change ``I always say that what IBM loses in the apples it can make up in the pears,'' said Helmig. Currency One Of The Wild Cards Merrill Lynch analyst Tom Kraemer wrote in a note to clients he was concerned about IBM's quarter. ``IBM should enjoy quarter-to-quarter and year-over-year improvement in constant currency in all of its businesses,'' he said. ``Personal systems, storage and currency will be the wild cards.'' He said he's looking for 38 percent MIPS (millions of instructions per second) growth, which is a key measure of mainframe demand, and 10 percent global services sales growth. In addition, the two biggest makers of software that manage large IBM business computers -- BMC Software Inc. (NasdaqNM:BMCS - news) and Computer Associates International Inc. (NYSE:CA - news) -- last week both issued warnings on their fiscal second-quarter results.