IBM on Deck: Steady as She Goes

NEW YORK ( TheStreet) -- The tech spotlight sat firmly on Apple ( AAPL) CEO Steve Jobs and his medical problems Tuesday, but fourth-quarter earnings from IBM ( IBM) will also be closely watched after the bell.

"IBM" has become something of a byword for solid, steady growth in recent years; analysts expect the tech bellwether's latest numbers to continue the trend.

Analysts surveyed by Thomson Reuters are looking for IBM to post overall revenue of $28.26 billion and earnings of $4.08 a share, up from $27.2 billion and $3.59 a share in the same period last year.

"We believe the company's solid secular prospects and leading software and services assets should enable it to trade at a premium to other technology conglomerates," said Bill Shope, an analyst at Goldman Sachs, who has a neutral rating on the stock. "But with less room for margin-driven earnings expansion in the near term and the uncertain demand outlook for IBM's software and services segment beyond this quarter, the shares may be range bound."

IBM shares have risen almost 14% over the last 12 months, eclipsing both Hewlett-Packard ( HPQ) and Microsoft ( MSFT), which fell 7.84% and 11.87%, respectively. Apple's stock, in contrast, has grown almost 63% over the last year.

Big Blue's software division should see good fourth-quarter performance.

"Software growth should improve from last quarter," said Shope, forecasting software sales growth of 2.5%, compared to the third quarter's 0.7%. "We expect the company to note a strong pipeline as well as continued strength in business analytics, storage management and business integration."

Software is crucial to IBM, which describes itself as the world's second-largest software vendor by revenue. Sales of software accounted for $5.4 billion of the firm's total third-quarter revenue.

IBM, which is using the Jeopardy! game show to showcase its new analytics ability via its Watson supercomputer, also continues to be a massive player in IT services. During the third quarter, revenue from IBM's Global Technology Services business grew 1% to $9.5 billion, while the company's Global Business Services grew 5% to $4.6 billion.

For the fourth quarter, Goldman predicts overall services revenue of $14.91 billion, a sequential hike of almost 6% and up almost 2% year-over-year.

Last week's results from Intel ( INTC) could also bode well for IBM. The chipmaker noted a robust IT spending environment, which helped boost in its data center revenue.

It has, however, been suggested previously that IBM's sheer size could be an impediment to long-term growth, although IBM software and systems chief Steve Mills says that the company's massive scale lets it solve problems that other companies cannot.

One of the few tech giants to successfully sidestep the worst of the recession, IBM has raised its guidance for almost every quarter over the last three years. For fiscal year 2010, the company raised its earnings forecast to at least $11.40 per share, up from the previously projected $11.25. IBM also expects to double its profit to at least $20 per share by 2015 and said it will spend around $20 billion in acquisitions over the same period.

At midday Tuesday, IBM shares were up 88 cents to $150.88.

--Written by James Rogers in New York.

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