This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

IBM Struggles as Tech Spending Fizzles

NEW YORK (TheStreet) -- IBM's (IBM) revenue is barely budging as customers dial back spending on technology and related services.

Armonk, N.Y.-based IBM is "running out of levers" to support its traditional earnings growth of around 10%, as margins are "maxed out" and share repurchases are already greater than free cash flow, ISI Group analyst Brian Marshall said in a note Tuesday. "Headwinds are getting stronger for the IT service industry."

The company reports fourth-quarter results after the market close on Tuesday. IBM edged past Wall Street's earnings forecast in its third-quarter results, released in October, but currency pressures weighed heavily on revenue.

A tech bellwether, IBM has traditionally been seen as a barometer for tech spending. Last week, chipmaker Intel (INTC), another key player, reported its own fourth-quarter results, exceeding analysts' estimates, but delivered weaker-than-expected guidance.

Analysts surveyed by Thomson Reuters expect IBM to report revenue of $29.07 billion and earnings of $5.25 a share, compared to $29.5 billion and $4.71 a share a year earlier.

The fourth quarter of 2011, however, included around $240 million of revenue from IBM's divested Retail Store Solutions business. For the current quarter, this will hurt revenue comparisons by about 1 percentage point for IBM overall and 5 points for its hardware business.

Topeka Capital Markets analyst Brian White expects IBM to meet or slightly miss his fourth-quarter revenue estimate of $28.9 billion, but meet his earnings forecast of $5.23 a share.

"For 2013, we expect muted IT spending, but we believe IBM's high recurring revenue stream and more defensive portfolio will prove attractive to investors," he wrote in a note released on Tuesday. Specifically, the analyst predicts strength in fourth-quarter hardware and software, helping offset the company's services business.

Services accounted for 58% of IBM's total third-quarter revenue. Global Technology Services came in at $9.9 billion, while Global Business Services segment revenue was $4.5 billion.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,943.81 +28.74 0.17%
S&P 500 1,967.57 +2.89 0.15%
NASDAQ 4,415.49 +19.2860 0.44%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs