IBM Joins Tech Doghouse

Shares of IBM (IBM) slumped on Friday after an earnings report that beat the Street wasn't enough to sustain investor enthusiasm in another tech stock that has enjoyed a big runup.

Big Blue shares shed $3.50, or 3.5%, to $95.95 in recent trading.

"We saw what happened with Apple (AAPL) earlier in the week," says Bill Gorman, an equity research analyst with PNC Wealth Management, which holds IBM shares. "The tech tape has turned negative for the time being. [The tech sector in general] is down almost every year from the February to May timeframe."

But Gorman says he thinks the reaction is misplaced. "Software and services are clearly the drivers in this company now -- there were some positives there."

It's perhaps not a huge surprise that investors are using the opportunity to take profits. Before IBM posted its results, its shares had charged up more than 16%, topping $100, since it last reported quarterly earnings.

The market reaction could be a chance to get in on shares, wrote Bernstein analyst Toni Sacconaghi: "We ...would encourage investors to add to positions, particularly on any notable pullbacks."

"The stock's selloff in the after-market [Thursday] likely appears attributable to worries about the sustainability of margins going forward, which we think are overblown, given that margin pressure appears attributable to investments, rather than destructive market or competitive dynamics," he wrote. He has a buy rating on the stock, and his firm exercises investment discretion on more than 1% of outstanding common stock of IBM.