IBM raises outlook but investors wary after rally
Thursday, 21 January 2010
NEW YORK, Jan 20 (Reuters): IBM raised its 2010 profit target and reported a stronger-than-expected, 9 per cent increase in fourth-quarter earnings, as cost cuts and a shift to more profitable contracts helped it weather a slump in corporate spending.
IBM's share price fell 2 per cent after the results, however, as the results failed to encourage more buying in the shares which already rallied nearly 60 per cent in the past year.
Some analysts said International Business Machines Corp had set a high bar for itself, noting that the world's leading technology services company has not missed earnings estimates since 2005.
"I think there were some pretty big expectations built in, and you really needed to wow it," Stephen Massocca, managing director at Wedbush Morgan, said after the results were issued Tuesday.
Ted Parrish, co-portfolio manager at Henssler Equity Fund, added: "While I think the long-term prospects for the company are good, I think the shares are a bit frothy, not overvalued but I would say the stock isn't going to do as well as it did in 2009."
While IBM's results failed to excite Wall Street, they added to evidence that corporate technology spending is recovering, coming just days after another technology powerhouse, Intel Corp, posted results that topped expectations.
The strong numbers also show IBM's efforts to cut costs and shift from commoditized hardware to services and software businesses are paying dividends, analysts said.
IBM's share price fell 2 per cent after the results, however, as the results failed to encourage more buying in the shares which already rallied nearly 60 per cent in the past year.
Some analysts said International Business Machines Corp had set a high bar for itself, noting that the world's leading technology services company has not missed earnings estimates since 2005.
"I think there were some pretty big expectations built in, and you really needed to wow it," Stephen Massocca, managing director at Wedbush Morgan, said after the results were issued Tuesday.
Ted Parrish, co-portfolio manager at Henssler Equity Fund, added: "While I think the long-term prospects for the company are good, I think the shares are a bit frothy, not overvalued but I would say the stock isn't going to do as well as it did in 2009."
While IBM's results failed to excite Wall Street, they added to evidence that corporate technology spending is recovering, coming just days after another technology powerhouse, Intel Corp, posted results that topped expectations.
The strong numbers also show IBM's efforts to cut costs and shift from commoditized hardware to services and software businesses are paying dividends, analysts said.