Bothered by Big Blue

Jackie Wilson would be smiling over this market: Investor love, it seems, keeps lifting it higher and higher. The Dow even set a couple of new all-time highs this past week.

But let's not forget another Jackie Wilson line -- namely, "Quench my desire."

What could bring on the quenching of said desire by investors? It's not that lower-valued stocks like Exxon Mobil and Altria are poised for growth. Or that pricier ones, like old-king-log Microsoft and problem-plagued drugmaker Merck (MRK Quote), are navigating through foggier waters.

No, the more worrisome news from the past week came from a company whose price-to-earnings ratio lies comfortably between both extremes: IBM (IBM Quote).

On the face of it, this is an absurd claim. IBM's historical P/E is 15, yet its earnings are forecast to grow 11% in 2007 and 10% in 2008. That's enough to lower its P/E to 14 based on this year's profits and 13 on next year's.

Considering that the Dow Jones Industrial Average's P/E is 17, that's pretty good any way you slice it.

On Tuesday, IBM said first-quarter revenue grew 7% to $22 billion and net profit grew 12% to $1.21 a share, as Priya Ganapati reported. That was in line with estimates. So investors, who tend not to get too overexcited about IBM, should have been happy.