Market Overview

IBM Hot After 4Q Results


The 4Q earnings released by International Business Machines Corp (NYSE: IBM) indicate how a well-implemented transition can pay impressive dividends. Announcing its results yesterday, IBM easily exceeded Wall Street expectations with a profit of $3.59 a share, compared to the consensus of $3.47. The company’s revenues of $27.2 billion were also higher than the consensus expectations of $27 billion.

A better-than-expected performance from the Technology and Business Services units and inline results from Software and Systems/Technology helped IBM deliver an impressive set of figures. After meeting the optimistic margin outlook for 4Q, IBM stated that it will continue to expand its margins. Surprises from IBM did not halt there! The company also upped its EPS projection for 2010 from $10-$11 to "at least $11." IBM finished the quarter with $14 billion in total cash.

So, how is IBM different from any other technology company, such as Intel (NASDAQ: INTC), Dell (NASDAQ: DELL) and Hewlett-Packard (NYSE: HPQ)? While all other companies restructured their businesses after the deep economic downturn, IBM has continued to post steady growth in its bottom-line since 2007, moving from a net income of $4 billion in 4Q07 to $4.4 billion in 4Q08 to $4.64 billion this quarter.

While big cap techs like Cisco (NASDAQ: CSCO), IBM and HPQ are trading at 11, 12 or even 14 times earnings and their growth potentials seem seriously undervalued, IBM is trading at only 12 times (forward earnings) estimates.

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