Next Wednesday evening, we'll get second-quarter numbers and a business update from the company also known as International Business Machines, IBM
What analysts say:
- Buy, sell, or waffle? Big Blue has 20 analysts watching its every move. Fourteen of them say we should buy this stock, and the other six are holding for now. In our Motley Fool CAPS database, more than 1,200 users have collectively rated it a three-star stock.
- Revenues. Wall Street expects about $23.1 billion of sales, up 5.3% from last year's $21.9 billion.
- Earnings. $1.47 per share would satisfy your average analyst. That would be an 11% improvement over the year-ago quarter.
What management says:
In the last earnings call, CFO Mark Loughridge pointed out IBM's 11 straight quarters of widening operating margins. The star performer in the company's stable of hardware, software, and services was the software segment. Tivoli sales grew 18% year over year, and the WebSphere platform improved by 14%. The high-margin nature of software sales is the coup de grace here.
What management does:
That attractive shift in product mix, and an aggressive strategy of acquisition and divestitures in the General Electric
12/2005 |
3/2006 |
6/2006 |
9/2006 |
12/2006 |
3/2007 |
|
---|---|---|---|---|---|---|
Gross |
40.4% |
41.2% |
41.7% |
42.0% |
42.1% |
42.3% |
Operating |
14.4% |
14.8% |
15.1% |
15.1% |
15.3% |
15.3% |
Net |
8.7% |
9.3% |
9.5% |
10.2% |
10.4% |
10.4% |
FCF/Revenue |
12.1% |
13.5% |
12.9% |
12.2% |
11.6% |
11.2% |
Efficiency Ratios |
12/2005 |
3/2006 |
6/2006 |
9/2006 |
12/2006 |
3/2007 |
---|---|---|---|---|---|---|
Return on assets |
7.6% |
7.9% |
8.1% |
8.2% |
8.4% |
8.7% |
Return on equity |
24.7% |
26.5% |
26.6% |
28.4% |
30.6% |
31.6% |
One Fool says:
These improvements are happening while Oracle
All kidding aside, software products and services add some hot and spicy growth to an otherwise stolid but secure revenue base from hardware sales, financial services, and third-party support contracts. Better still, IBM is enjoying its worldwide reach these days, since a weakening dollar has boosted profits in every division by a couple of percentage points over last year.
All in all, IBM falls somewhere between the rocketing growth of smaller players like TIBCO
Berkshire Hathaway is a Motley Fool Inside Value pick and a Motley Fool Stock Advisor recommendation.
Fool contributor Anders Bylund holds no position in any of the companies discussed here. If he joined the Blue Man Group, he'd be Big Blue, too. You can check out Anders' holdings if you like, and Foolish disclosure looks good in any color.