IBM is in the running for the best tech stock for 2007. Click here to see the other entries.
On the same day this month that IBM (NYSE: IBM ) released its solid quarterly earnings and reported an 11% increase in net income, management also announced that it had landed a deal to supply NASA with software to help the space agency build the James Webb Space Telescope -- the successor to the Hubble Space Telescope.
Although the terms of the deal weren't released, and I doubt very much that it will account for anything more than a blip on Big Blue's income statement, it is a perfect example of why I think that IBM is not only the best blue chip for 2007 but also the best tech stock of the year.
You see, if IBM can supply the software to operate a massive state-of-the-art telescope that can peer into the depths of the universe and then gather and transmit that data back to NASA, there is good reason to believe that it will also be able to supply software for a variety of complex modeling jobs here on earth.
For instance, automobile manufacturers such as Ford and General Motors can use IBM's software to make developments to their products more quickly, and pharmaceutical and biotechnology companies like Pfizer (NYSE: PFE ) and Genentech (NYSE: DNA ) could employ it to model the complex molecular interactions necessary to create new drugs or find previously unknown connections between a person's genetic makeup and certain diseases.
But software (and the resultant service contracts that such projects represent) is just one reason why I believe IBM is the best tech stock of 2007. In the past, I have written a lot about the company's deep reservoir of patents, which is more than double the combined total of Intel's (Nasdaq: INTC ) and General Electric's (NYSE: GE ) , and explained how they will lead to a variety of new technological innovations.
I have also written of Big Blue's prowess in the field of supercomputing; its willingness to create new products like the SoulPad (a personalized virtual computer that can be transferred anywhere); and its tendency to try new and innovative things such as creating a large presence in Second Life, all of which are indicative of its forward-thinking and risk-taking culture.
All of these trends suggest that IBM will continue to grow and become an even larger technological powerhouse than it is today. Add into this equation the fact that, while competing against Hewlett-Packard (NYSE: HPQ ) in computer hardware and Accenture (NYSE: ACN ) in consulting services, it trades at a discount to those companies multiple-wise. That tells me that in spite of a 20% increase in price in the last year, the stock still has plenty of room to run relative to competitors.
Now, here's where you come in. If you agree with my bullish prognosis, head over to Motley Fool CAPS, the Fool's stock-ranking and investing-intelligence database, and give IBM an "outperform" rating. If you disagree and feel that Big Blue will leave investors feeling blue, rate the stock "underperform."
Your ratings will help us determine the best tech stock of 2007, and we'll reveal the winner early next week.
Fool contributor Jack Uldrich is currently rated 8,674 out of more than 21,000 players in CAPS. He owns stock in IBM, Intel, and GE. Pfizer, Intel, and Accenture are Motley Fool Inside Value picks. The Fool has a strict disclosure policy.