IBM in Tech-Spend Spotlight

In the second quarter, earnings from tech companies in the S&P 500 grew 12% from the same period a year earlier, vs. about 8% for the entire index, according to Thomson Financial. Hardware makers led the pack with 38% growth, followed by software and services. The semiconductor subset was the only major tech category in which earnings fell.

Analysts expect tech earnings to grow 9% in the current quarter vs. flat growth for the total earnings of S&P 500 companies.

Sales have remained strong, and haven't yet foreshadowed a slowdown. If U.S. economic growth downshifts, many analysts say tech service providers may be spared because their support is necessary to run computer networks and applications.

But the outlook for hardware and software purchases is less certain since they can be delayed without shutting a company down.

IBM is the largest company to combine all three of these businesses under one roof, making it a proxy for the overall tech spending climate.

Analyze This

Analysts, on average, expect that IBM's third-quarter sales rose 6.4% to $24.1 billion, fueling a 15% jump in earnings per share to $1.67.

Goldman Sachs analyst Laura Conigliaro expects the company to reiterate its full-year earnings growth target of 14% to 15%, which implies earnings of $6.91 to $6.97 a share.