All good things eventually come to an end. Nothing is permanent. For any great company, the question should be when, not if, major problems will occur. Bill Gates, Michael Dell, Larry Ellison, Scott McNealy and John Chambers each have watched their companies' stock values plummet 50% or more as the 1998-2000 speculation in technology continues to unravel.

Next up? Lou Gerstner, the highly capable CEO of IBM (IBM:NYSE - news - boards). The swoon in technology is too strong for IBM to avoid. IBM, currently off only 21% from its 52-week high, is next in line for a radical adjustment in stock valuation. By my estimation, which I explain in detail below, current fair value of IBM stock is $67, or about 46% below its current quotation. As is the norm for me, I am a lonely messenger, with 21 of 23 Wall Street analysts currently rating IBM buy or strong buy.

Big Bomb? Can Big Blue avoid the swoon flu?

The quantitative analysis I employ is somewhat complicated. Among other things, it involves calculating a fair market capitalization based on a normalized net profit margin, discounted for prevailing interest rates and adjusted for expected sales growth.

The fair market value for IBM is not difficult to calculate. Looking at IBM's history, it is readily apparent that a net profit margin of about 8% is normal. Sales growth is poor, earnings growth has been respectable and the balance sheet is satisfactory, not pristine. My parameters indicate that 1.4 times sales is a generous value to assign to the fundamentals at IBM, or roughly $67 a share.

How did I arrive at 1.4 times sales? For solid, slow-growth tech companies like IBM, based on current interest rates, I find that a net profit margin of 5.75% equates with a market capitalization equal to one times annual sales. Because IBM's net profit margin of 8% (normalized) is 40% higher than a 5.75% net profit margin, I adjust the multiple of sales accordingly, and value IBM at 1.4 times sales.

Obviously, if IBM is going to trade at levels approaching $67, it is going to be a problem for the market. For fans of IBM, before you whip a nasty email to me, consider this sobering fact: In each and every year until 1998, IBM traded at less than one times sales, even during its strongest years (1995-1997). It was not until the inception of the 1998-2000 technology bubble that IBM began to receive the market value of two times sales that it enjoys today. If IBM were to return to its historical norm, and trade at less than one times sales during the year, it would mean a dip below $50 a share.

Potential Problems for Big Blue

IBM has suffered from anemic revenue growth for six consecutive quarters. Any company with the girth of IBM -- about $90 billion in revenue derived from numerous lines of business -- is going to have a hard time generating significant sales growth. IBM has had to use stock buybacks and cost-cutting to make its quarterly numbers. But absent organic growth, buybacks and expense-management cannot support earnings forever.

Against a tough macro environment for technology, can IBM sidestep the slowdown and continue to meet Wall Street expectations? Of all the possible scenarios, that would have to rank as the least likely. Look for sluggish server sales and declining IT spending to get the blame when IBM lowers expectations in this quarter or next. Immediately thereafter will follow a flurry of Wall Street downgrades and a downward adjustment in stock price.