IBM Posts Solid Quarter But Raises Questions for the Long-Term

Jul.19.06 | About: International Business (IBM)

Following is an excerpt from our One Page Annotated Wall Street Journal Summary (receive it by email every morning by signing up here):

IBM's Net Rises 11%, But Contract Signings Slip

  • Summary: International Business Machines Corp. (NYSE:IBM) reported net earnings of $2.2 billion, up 11% from the year earlier period. EPS came in at $1.30 -- 1 cent above estimates. Share prices responded positively to the news, increasing nearly three-quarters of a percent during trading before the announcement yesterday, then getting another 1.5% boost in after-hours trading. The increase in net earnings resulted mainly from an increase in software sales. IBM reported a revenue increase of 45% in their semiconductor division, largely on video game console chip sales. However, there was also cause for concern with contract signing falling significantly. Long-term deals faired the worst during this past quarter, coming in at just $4.6 billion -- only half of what they were a year ago. Since contract signings are one of the best predictors of future revenue, there is concern that IBM is gradually losing market share in this increasingly competitive market.
  • Comment on related stocks/ETFs: For more in-depth coverage of IBM's most recent quarter, see the company's conference call transcript now available at Seeking Alpha.