Tech bellwether IBM ( IBM) could pull off yet another upside surprise when it reports earnings after the bell Thursday. At least that's the line taken by some of the more bullish houses on Wall Street, following Big Blue's January comments that 2004 will mark the beginning of an upturn in tech spending.

The current consensus estimate assumes earnings of 93 cents on sales of $21.914 billion, according to Thomson First Call.

Prudential Equity Group predicts IBM's first-quarter sales could show upside of as much as $300 million or $400 million, and earnings could exceed consensus by 2 cents to 3 cents. Merrill Lynch and Goldman Sachs are less ebullient, but agree slight upside is possible.

As is often the case, most buy-side participants aren't as bullish as their sell-side counterparts. Many investors reserve their bullishness for a few quarters down the road, downplaying the weight of the upcoming report by noting IBM isn't likely to see real leverage until enterprise spending rises in earnest. And there's little evidence that has happened yet.

"I don't have really high expectations in terms of what we're seeing Thursday," said Duane Roberts, a portfolio manager for Dana Investment Advisors, which holds IBM. "The impression I'm getting is that spending isn't picking up quickly. I think it will probably be the second half of the year, if not, 2005."

At that point, IBM should be in a sweet spot. "I think the completeness of their package makes them a little unique," said Roberts. "I like their valuation level and the general direction with the services business and with Linux. As information technology spending picks up, with their services and with their hardware as strong as it's been, I think IBM will benefit."

Fans of the stock point out that not only is IBM's business expected to gain momentum over the course of this year, but also its massive hardware arm is currently gaining at the expense of its competitors.

Still, the shares have lagged the market year to date as investors demand more evidence of the long-awaited (and still mostly elusive) upturn in enterprise spending.

Though the stock saw a short-lived spike in January after a stellar earnings report, it had gained a mere 1% this year as of Wednesday's close of $93.70.

"People want to be followers, not leaders, with IBM," said Scott Rothbort, president of LakeView Asset Management and a contributor to Street Insight, TheStreet.com's companion Web site. Though some of his clients have legacy positions in the stock, he hasn't recently bought any IBM shares for his firm's accounts.

Big Blue shares have "almost treaded water since the beginning of the year," Rothbort shrugged. "From a technician's point of view, the $100 level is very hard for it to pierce. It just isn't a really sexy stock."

Besides the broader macro issue of tech spending, other factors weighing on the stock include the outlook for its flagship services business and ongoing losses in its semiconductor line.

Though IBM reported a stellar quarter's worth of new services bookings in January, the broader services industry has been relatively sluggish as corporate customers appear somewhat reluctant to sign pricey megadeals. IBM has suffered from ongoing pricing pressure in the division, which accounts for more than half of sales.

"When we see more discretionary tech money begin to pour out of companies, that's when someone like IBM will really be the beneficiary," said Rothbort. "Right now productivity is very high. And a lot of companies put their first dollar into upgrading some of their hardware and telecom rather than services. Consultants come last."

Most analysts expect services bookings of around $11 billion in the March quarter, down from nearly $19 billion in the prior quarter.

Meanwhile, IBM's chip foundry business remains a sore spot. The March quarter "will likely mark the ninth unprofitable quarter for IBM's microelectronics business out of the last 10, particularly disappointing given the success of other semiconductor companies," Goldman Sachs analyst Laura Conigliaro grumbled in a recent note. The microelectronics arm has suffered from relatively weak utilization rates and yields, she noted.

IBM plans to stop breaking out the financial results of the semiconductor division, instead lumping them into the same category as its servers and storage. IBM says that reflects its aim for a closer strategic tie-in with its computer hardware, but some analysts have griped that it will make it harder to judge whether the business is getting back on track.

In any case, most on Wall Street expect the chip business line to post a loss in the neighborhood of $50 million in the March quarter but return to the black later this year.

Despite a couple of weak points across the company's vast business lines, IBM shares look attractive in the low $90s, said Bill Gorman, vice president in the equity research division of PNC Advisors in Philadelphia. "We think they're well positioned for what appears to be an upturn in corporate spending," he said, citing share gains in IBM's server business and an improving outlook for software.

IBM was the only server maker to gain year-on-year share in the fourth quarter, strengthening its No. 1 position with 37.9% in share, while Hewlett-Packard ( HPQ) and Sun Microsystems ( SUNW) both saw their share diminish, according to IDC. While first-quarter numbers haven't yet been released, analysts expect those trends to continue.

By midyear, "we think two things are likely to happen: One, focus will begin to increase on IBM's 2005 earnings estimates, and two, continuing consistency of execution will contribute to multiple expansion," predicted Prudential's Steven Fortuna.

Either should help give the stock a lift, he said.

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