IBM beat consensus estimates and raised guidance, but still failed to meet investors’ lofty expectations.
The top and bottom line results revealed IBM’s shifting focus towards software and services from hardware is paying off. Management made specific mention of competitor Oracle (ORCL) when discussing market gains in software. The company also called attention to their reach in the healthcare space, particularly with regard to electronic medical records.
Investors’ main source of concern was the 7% decline in new services business signings – an indicator of future business. The dip in signed service contracts is a clear sign that businesses are delaying spending and purchases. Management said that almost $1 billion worth of contracts were signed during the first two days of October and reminded investors that the company has a $134 billion backlog of already-signed agreements.
Today’s pullback is partially due to the disappointment from those expecting a stronger rebound in demand for IBM’s products, and it is probably warranted considering the run-up following Intel’s earnings. Still, IBM remains a force in the technology space and is well-positioned for long-term growth.
--
Peter J. Lazaroff, Investment Analyst
No comments:
Post a Comment