IBM in Tech-Spend Spotlight

SAN FRANCISCO -- Investors will get a better idea of evolving tech spending patterns when IBM (IBM Quote) releases its third-quarter earnings after markets close on Tuesday.

Big Blue is a bellwether for the tech industry, given its wide range of servers and data storage hardware, business software and consulting and support services. Updates to the company's future financial targets and comments made by management will shed light on whether IT managers are likely to tighten budgets, as some investors fear.

Investors have become skittish about a possible U.S. economic slowdown that could threaten tech's continued growth. Any hint that sales are at risk can whipsaw tech stocks.

Doubts about future IT spending were in part responsible for last Thursday's nose dive in Infosys' (INFY Quote) stock, which by most accounts should have soared on a strong second-quarter showing. Analysts and investors said the company couched its conservative full-year guidance in lukewarm tones by saying that it could not foresee how clients' IT budgets would take shape in January 2008.

Stocks of several large tech companies also careened last Thursday after a JPMorgan analyst said that Chinese Internet commerce site Baidu.com (BIDU Quote) would meet -- but not exceed -- analysts' third-quarter expectations. The selloff hit high-fliers like Apple (AAPL Quote) and BlackBerry maker Research In Motion (RIMM Quote).

Tech companies have outperformed most other industry sectors so far this year, especially as rapid global growth and a weak dollar fuel sales of computers and other hardware needed to wire emerging economies. IBM's sales from outside the U.S. have steadily grown in recent years and now account for over 54% of total revenue. The company's sales in Russia, China and other emerging markets outpaced all other geographic regions in the previous quarter.