IBM

(IBM) - Get Report

is on track to post double-digit sales growth in the first quarter, but that's less impressive than it sounds. In fact, very little of the growth reflects gains in Big Blue's organic business, analysts say.

Instead, the benefits will reflect currency gains and new acquisitions over the past year.

Wall Street analysts broadly expect the company to notch expectations for sales of $19.8 billion and earnings of 80 cents, as compiled by Thomson Financial/First Call. Those figures would reflect sales growth of 10% and profit growth of 18%.

Merrill, which is betting that IBM's sales can jump a slightly higher 11% from last year, estimates that 3% to 4% of the increase will reflect additional revenue from the purchase of PricewaterhouseCoopers. The majority of the growth, around 7%, will come courtesy of a weak dollar.

IBM pulls in over half its revenue from abroad (32% from Europe and 22% from Asia in the latest quarter). Over the past year, the euro and yen have appreciated 22% and 11%, respectively.

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Echoing Merrill's comments on currency benefits to the company, A.G. Edwards reckons the company will gain an additional $500 million to $600 million in the quarter from the soft greenback.

As for specific business lines, first-quarter bookings in IBM's services arm, which accounts for nearly half of total revenues, are likely to show a steep sequential drop-off in line with seasonal trends. (Making for an even harder comparison, signings in the prior quarter got a boost from two unusually huge deals, totaling $7.5 billion.)

Lehman's Dan Niles says he's expecting "somewhat disappointing" services signings of around $12 billion, compared with last quarter's $18 billion. "In the short term, customers are looking for fast-payback projects," he says in a note.

Analysts say hardware sales should be helped by share gains in servers and storage. Unlike enterprise software, hardware hasn't seen end-of-quarter pushouts of large deals, Niles points out.

Finally, software should see a top-line boost of as much as $100 million from the Rational acquisition, which closed in February.

But looking forward, consensus expectations for the second quarter could prove a "stretch," Niles says. Currently, the Street is looking for 7.5% sequential growth in sales, with profits up 24%.

To be sure, IBM has seen similar quarter-on-quarter sales jumps before. In 2002, IBM's second-quarter revenue spiked 9%, with an accompanying 24% leap in profits.

But expectations might need to be curbed this year, says Niles, who's gearing for only 6% sales growth in the second quarter.