Will the tech sector lead an economic turnaround? Forbes.com thinks so.
This week, Peter C. Beller writes that Monday’s IBM revenues numbers and the fallout from the proposed Oracle and Sun Microsystems could lay the groundwork for an economic rebound.
I’ll get to the IBM numbers in a moment, but Beller thinks that, even though IBM’s numbers clocked in lower than analysts had expected, they show enough to indicate that technology spending may just soon be on the upswing. “Those sentiments support claims from other tech companies that a turnaround, for technology spending at least, could be on the way,” writes Beller. Other factors are in play, as well, he adds. “Chip maker Intel recently said it believed the home computer market had bottomed out. Tech customers and investors alike are also watching for fallout from Oracle’s $7.4 billion deal to acquire Sun Microsystems. Software mergers can leave target companies in shambles, customers irate and acquirers with a lot less value than they thought. IBM could benefit from a debacle or suffer if Oracle makes the merger work.”
IBM chief financial officer Mark Loughridge was queried about the Oracle/Sun deal in a teleconference call with analysts on Monday, but he was playing his cards close to his vest. “Oracle and Sun have been partnering for 2 decades,” he says. “We’ve picked up 14 points of market share to 32 points since 2000. As I look at this - what’s really changed? Nothing. We’ve been competing with Sun. We know Oracle inside and out.”
Whether or not IBM was close to striking its own deal with Sun, Loughridge wasn’t saying. But he did note that IBM has engaged in dozens of mergers since 2000, and isn’t averse to jumping in again.
Now, on to the IBM Q1 revenue numbers. Total revenues for the quarter totaled $21.7 billion, falling short of Street estimates of $22.5 billion; but EPS of $1.70 a share was ahead of the Street by 4 cents.
That said, IBM was holding fast to its 2009 forecast, and that’s what has tech analysts so excited about a consumer business and spending turnaround. Thus IBM reiterated its estimate for full-year 2009 EPS of at least $9.20 a share. IBM said it remained “ahead of pace for our 2010 roadmap of $10 to $11 per share.”
IBM lost $2 in Monday trading, falling to $97.50, but that should only lead to a rubber band effect once investors digest the notion that IBM, even though it lost significant money last year, is betting that 2009 should be better.
No question, IBM is one of those few “bellwether” companies that can lead us out o a recession. For now, IBM’s own leaders think that Big Blue is going to hold up its end if the bargain.