Tags: IBM | provide | long-term | value

IBM Aims to Provide Long-Term Value

By    |   Thursday, 15 March 2012 11:40 AM

International Business Machines (IBM) wants shareholders to stick around for the long haul, betting that technology spending will outlast the current global economic uncertainty and put the company in a position to provide long-term value for those who invest in it.

Business has been strong recently, not stellar but solid. In the fourth quarter of 2011, net income hit $5.5 billion compared with $5.3 billion in the same period 2010, a 4 percent increase, which drew applause from the Street.

Revenue grew 2 percent to $29.49 billion from $29.02 billion, a little lower than expected. Demand for the company's software and services was strong, with software sales up 9 percent while technology services sales were up 3 percent.

"We had a strong fourth-quarter performance, capping a year of record earnings per share, revenue, profit and free cash flow," says IBM President and CEO Ginni Rometty.

"We delivered outstanding results in all four of our strategic initiatives for the quarter and the year, as we continued to realize the benefit of our long-term investments in growth markets, business analytics, Smarter Planet solutions and cloud. We are well on track toward our long-term roadmap for operating earnings per share of at least $20 in 2015."

Companies don't normally provide guidance that far out, and Wall Street banks are taking note. In February, Sterne Agee initiated coverage at buy. In January, Barclays Capital reiterated an equal weight rating.

Growth ahead

Big technology companies like IBM are set to grow in the future, according to ratings agencies.

"Investment-grade companies with strong liquidity and debt capacity at their ratings may again be more aggressive in their shareholder-return activities," Standard & Poor's credit analyst David Tsui says in a report on the technology sector.

Moody's analysts believe business will strengthen.

"Given IBM's improving revenue mix, we expect its credit metrics and operating performance will improve and remain robust through business cycles," says Moody's Senior Vice President Richard Lane.

The company will unveil first quarter earnings on April 30.

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Thursday, 15 March 2012 11:40 AM
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