Reports of the death of corporate spending are apparently greatly exaggerated, at least when it comes to computer services. IBM's
Last month, the company's biggest competitor, Electronic Data Systems
Translation: "Things may be bad, but they're not that bad. Something smells at EDS." Indeed, the SEC is now investigating EDS about events leading up to that warning, as well as a stock-hedging strategy that backfired.
Today, after IBM beat previously lowered forecasts and reaffirmed fourth-quarter targets, investors and analysts began jumping back on the Big Blue bandwagon. Since EDS warned, its stock has sunk more than 60%, but IBM is actually up a couple of percentage points.
But before we all get too giddy over the better-than-expected news from the tech bellwether, it's worth considering the words of Chief Financial Officer John Joyce, who called this "one of the toughest spending environments" he's ever seen. "Customers are still spending," he said, but more on services that enhance their overall return in the short term.