ARMONK, N.Y. ( TheStreet) -- Although one of the better performers in large-cap tech these days, IBM (IBM), which reports second-quarter results after market close Monday, is likely to reveal clouds hanging over its federal business, which has broader implications for tech overall.
"Weak public sector demand could continue to impact
Services account for around 60% of the 100 year-old tech bellwether's overall revenue.
Speaking during IBM's first-quarter call, CFO Mark Loughridge cited "difficulty" in the public sector. Weakness in this area impacts the company's global business services, he explained, but then added that this is not a "difference maker" in IBM's overall business. Investors should expect Loughridge to face questions on whether this is still the case following the company's results.Implications for the Rest of Tech Tech investors monitor Loughridge's public sector comments to weigh the impact on other big-name tech stocks. Beleaguered networking giant Cisco (CSCO), for example, gets about 20% of its revenue from the public sector, and has already noted a significant decline in government spending, both in the U.S. and overseas. PC maker Dell (DELL) also felt the impact of public sector budget cuts in the U.S. and Western Europe during its recent second-quarter results. Dell gets around a quarter of its total revenue from the public sector, but saw this part of its business decline 2% year-over-year. As for IBM, there is still plenty of positive sentiment surrounding the company's stock. Less flashy for investors than, say, Apple (AAPL), IBM has earned a reputation for solid growth thanks to its shift away from commodity hardware towards high-margin areas such as software and services. IBM surpassed Microsoft's market cap for the first time in 15 years earlier this year. IBM's stock has risen more than 19% this year, which contrasts with HP (HPQ) and Microsoft (MSFT), whose shares have fallen 17% and 3.82%, respectively. Even Apple's meteoric rise has slowed amid ongoing investor unease about the broader economy, gaining just over 14% this year, while shares of IBM's fierce database rival Oracle (ORCL) have added just over 1% to their value. "We believe that the
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