Dow Earnings Season Rolls On: Will IBM Top Intel's Success?

Big Blue continues the second-quarter earnings season for the Dow Jones Industrials.

Jul 17, 2014 at 12:00PM
Longview

The Dow Jones Industrials (DJINDICES:^DJI) has gotten a lot of support from earnings season so far, setting new all-time record highs on Wednesday on the strength of tech giant Intel's (NASDAQ:INTC) second-quarter report. This afternoon, IBM (NYSE:IBM) will add its name to the list of Dow-component tech stocks reporting earnings, and investors are anxious to find out whether one of the most influential stocks in the Dow will be able to follow in Intel's footsteps and finally play a leadership role in the Dow's bull-market run.

Ibm

Source: IBM.

IBM expects to release its earnings report after the market closes Thursday afternoon, with last quarter's report becoming available to the public at around 4:05 p.m. EDT. The Dow component will then hold a conference call at 4:30 p.m. EDT in order to discuss the results.

Investors expect IBM's financial results to continue a trend that the tech giant has seen lately, with revenue expected to decline despite a solid increase in earnings per share. Unlike Intel, which has continued to remain reliant on traditional PC-related products for a substantial portion of its overall success, IBM has largely moved on from the hardware segment. Instead, IBM has focused on providing higher-margin services, software, and other offerings to enterprise customers, taking advantage of the rise of data analytics to help clients build full-service platforms to evaluate their own business prospects.

IBM's strategy makes sense and is similar to what a number of its peers have done, leaving lower-margin businesses by the wayside as they try to take advantage of better opportunities elsewhere. But at least this quarter, the strategy means that IBM won't necessarily see any benefit from the explosion in PC demand that helped drive Intel's success during the quarter. With enterprise customers in the midst of a hardware replacement cycle, Intel now thinks businesses will replace PCs with newer models at least for the rest of 2014 if not into 2015 as well. IBM won't benefit directly from that trend and can only hope that it can get some secondary positive effects from greater enterprise spending.

Ibm Logo

Source: Alfred Lui via Flickr.

The other reason IBM will have difficulty topping Intel's results is that IBM faces a lot more competition in its selected core businesses. Due in large part to the decline in PC sales over the past several years, competitors haven't bothered to challenge Intel's dominance of the failing segment, and that put Intel in the best position to capitalize when that trend turned around. By contrast, IBM faces a price war in certain cloud-computing services, and several other large tech companies both within the Dow Jones Industrials and without are all vying for the same business from enterprise clients.

If IBM can deliver even a modest positive surprise, the resulting upward movement could have a larger impact on the Dow Jones Industrials than Intel's boost yesterday. The most important factor in whether Intel will move markets tomorrow is whether it can implement some of its bigger-picture ideas and start executing more effectively for the long run.

Warren Buffett: This new technology is a "real threat"
At his recent annual meeting, Warren Buffett admitted this emerging technology is threatening his biggest cash cow. While Buffett shakes in his billionaire boots, only a few investors are embracing this new market which experts say will be worth over $2 trillion. Find out how you can cash in on this technology before the crowd catches on, by jumping onto one company that could get you the biggest piece of the action. Click here to access a FREE investor alert on the company we're calling the "brains behind" the technology.

Dan Caplinger has no position in any stocks mentioned. The Motley Fool recommends Intel. The Motley Fool owns shares of Intel and International Business Machines. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers