Summary
IBM on Monday reports its second quarter results and the company is likely to chug along on multiple fronts as it rides a mainframe and server refresh cycle.
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Larry Dignan
Andrew Nusca
Rachel King
IBM on Monday reports its second quarter results and the company is likely to chug along on multiple fronts as it rides a mainframe and server refresh cycle.
Analysts note that strong results from Accenture as well as Oracle bode well for IBM. Wall Street is also upbeat on IBM because it’s an odd technology duck that can perform well in and up or down economy.
Collins Stewart Louis Miscioscia said IBM is likely to deliver another strong quarter. Wall Street is expecting earnings of $3.03 a share on revenue $25.34 billion.
Miscioscia acknowledged that technology spending has hit a lull, but summer is usually a time for a pause. One key topic for IBM this quarter will revolve around hardware. Big Blue is riding a server and mainframe product refresh cycle, but some analysts are wondering how long the good times will last.
In a research note, Miscioscia said:
Our checks continue to indicate that Storage remains the strongest area of IT hardware spend. However, we also believe that servers are staying reasonably strong. Even though year over year compares are getting tougher in the server area, virtualization is driving x86 server demand. In the UNIX server market, we believe that Sun’s weakness is IBM’s (IBM-Buy) benefit. Our view for years has been that Sun, is in a competitively weaker position as the company does not have the scale to compete head-to-head with IBM in a SPARC vs. POWER CPU battle. In addition, IBM is still in the midst of an upgrade cycle on its RISC POWER servers (IBM Power Systems) driving momentum and share gain.
That Power Systems upgrade cycle began Sept. 2010 and those sales gains will make future quarterly comparisons more difficult. Stifel Nicolaus analyst David Grossman said there are some worries about the mainframe upgrade cycle and health of services unit, but concerns are generally overblown.
Grossman said that IBM’s hardware unit will continue to surge. The analyst is projecting hardware revenue to be up 10 percent with software up 12 percent compared to a year ago. Services will be up 7.3 percent, but much of that is sales gains due to a weak dollar.
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http://www.zdnet.com/blog/btl/ibms-second-quarter-riding-mainframe-server-refresh-cycles/52542
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