09 October, 2008

IBM doesn't hear of 'Global Economic Slowdown'

The Technology Services and Computing Blue-Chip pre-announced its quarterly earnings Wednesday in an effort to boost confidence in not only its 52-week low stock price but also to provide a window into the upcoming economic effects facing 'Big Technology'. IBM (IBM), or Big Blue as it responds to in business circles offered a reassuring look into its future profitability despite the economic fears that have plagued all industry.

IBM told investors to expect at least $8.75/share in profits for the year, which is in-line with previous forecasts from the company, and a quarterly profit of $2.05/share beat analysts estimates of $2.01. The news had IBM stock up about 5% in the after-hours market, and the company continues to hover with a 3% gain this morning at the open.

While IBM is well represented on the technology side within the Financial Industry, the company hopes its long-term contracts hold up well against the failures in banking. Clearly as banks go belly up so do their IT departments and eventually so would all of their IBM server hardware. IBM is not immune to a global business slowdown but the company appears to be weathering the latest storm rather well. Although Revenue came in below average expectations, those numbers were in the midst of being adjusted downwards for the current economic situation. Nonetheless Revenue climbed 5% year over year to $25.3Billion.

The IBM news will spread some good faith across the technology sector and you can expect the usual suspects to be in line for positive openings, Intel (INTC), Microsoft (MSFT), Oracle (ORCL) etc.

As the S&P struggles to finish in the green just one of these October days so far, it could just be Big Blue that will push markets with a new found confidence into earnings season and allow a sliver of buying to turn into bargain hunting Investing on a large scale. With yesterday's positive afternoon turned into a sea of selling late in the day, Investors will want to wait and see if this holds.

One thing is holding and that's IBM's profitability!

Disclosure: Author holds no position in any mentioned companies

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