IBM Earnings Lack Significant Upside (IBM)

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IBM (NYSE:IBM) has posted earnings at $1.68 EPS on $24.1 Billion in revenues, versus First Call estimates of $1.67 EPS & $24.07 Billion in revenues; Big Blue usually holds off on formal guidance and gives some data in its conference calls, but estimates next quarter are $2.60 EPS & $27.7 Billion in revenues. 

Shares closed up 1.3% today, less than 2% under multi-year highs, but shares are down about 1% after the report.

The one number we hone in on for the future is Big Blue’s backlog, and that came in flat to last quarter at $116 Billion and up $7 Billion year over year.  If that sounds familiar the backlog last quarter was up $7 Billion from Q2 2006 at $116 Billion.  It is not expected that IBM will have made major share buybacks in the compared to Q2.  The company’s total gross profit margin was 41.3 percent in the 2007 third quarter compared with 42.0 percent in the 2006 period and its tax rate fell to 28.0% from 30.0% last year. The cash balance was $13.8 billion at the end of the third quarter.

"Our outstanding services results this quarter enabled us to stay on track toward our objective of accelerated earnings per share growth through 2010, while we work through a transition in our hardware business," said Samuel J. Palmisano, IBM chairman, president and chief executive officer. "Our year-to-date performance underscores the strength of major elements of our long-term roadmap, including revenue growth, margin expansion, and continued success in emerging market countries and in the integration of our acquisitions."

Jon C. Ogg
October 16, 2007