IBM Has Room to Run

I have made no secret of my admiration for IBM (NYSE: IBM  ) . Late last year, I dubbed it the best blue chip for 2007, and earlier this year I also made it my selection as the best overall tech stock for the year.

So far, I haven't been too disappointed, but even though we at the Fool downplay the importance of short-term results, I still thought IBM would have done better than the modest 5% increase that it has posted since January. Apparently, IBM feels the same way, and that's why CEO Sam Palmisano announced last week that the company intends to buy back $4 billion worth of its stock.

This decision tells me is that the company and its board of directors think the stock is underpriced. I agree. A cursory look at just a few of the developments coming out of Big Blue this past week offers a good deal of supporting evidence.

For instance, on Tuesday, IBM reported that it's working with the Nature Conservancy to study the health of large ecosystems. On its face, this might not sound so significant, but it is a perfect example of how Big Blue's supercomputers can model complex systems and use technology to help people and businesses make more informed decisions. If a farm begins production near a river, for example, IBM's supercomputers will be able to model the impact on everything from water quality to erosion.

Then on Thursday, the company announced that it will team up with Hoplon Infotainment to develop a new mainframe system, dubbed "Gameframe," that will host massively multiplayer online games using its Cell processor.

It would be easy to overlook the significance of this technology and think of it as simply applying to the realms of virtual reality and gaming. But gaming already is -- and will continue to be -- big business. Moreover, in the fine print of the news release, IBM also indicated that it will be using the system to run other commercial supercomputing workloads.

Finally, over the weekend, management indicated that it will release details later this week about its progress in the field of nanotechnology that will let it quickly, cheaply, and effectively self-assemble various components of next-generation computer chips.

From my perspective, all of these developments hint at a number of exciting growth opportunities in the company's future -- opportunities the market may not be factoring into the stock price.

Interested in reading more about IBM? Check out these articles:

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Fool contributor Jack Uldrich owns stock in IBM. The Fool has a strict disclosure policy.


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