A day after reporting first-quarter earnings,

IBM

(IBM) - Get Report

shares saw a lift, though its results drew criticism from some quarters.

Novellus

(NVLS)

traded down, as Wall Street questioned its attempt to blame weakening business on SARS, hurt further by a downgrade from Goldman Sachs.

In early afternoon trading, IBM was up $2.36, or 2.9%, to $82.43, while Novellus was off 66 cents, or 2.4%, to $26.69.

Though there was some noteworthy dissent, sell-side analysts generally gave IBM credit for solid results, despite the confusion yesterday over the company's vague endorsement of second-quarter consensus estimates and its 1-cent miss on earnings.

Steve Milunovich of Merrill Lynch says earnings quality has been improving at Big Blue. "IBM has been exceeding revenue estimates the past few quarters, a nice change. Share repurchase is on temporary hold, the tax rose from a year ago and 'other' items, including reduced pension fund income, netted out to a 3-cent hit year over year," he said in a note. "CEO Sam Palmisano's back-to-basics philosophy is evident."

He expects revenues to rise almost 10% to $21.5 billion, which reflects four to five points of currency benefit. This morning Milunovich raised his second-quarter earnings estimate by two pennies to 97 cents, though his outlook remains slightly below the current 99-cent consensus estimate. Merrill has done banking for IBM.

Still, IBM came in for criticism from other quarters. Summit Analytic Partners, a Summit, N.J.-based independent research outfit, cast its results in an unambiguously negative light, proclaiming, "We would be sellers of IBM at current levels and look to re-enter the name at better valuations and prices." Summit doesn't do banking.

After stripping out the currency benefits of a weak dollar, the firm concluded, IBM would have "missed by a mile," posting sales that were down 21% from the fourth quarter vs. Street expectations of down 10%.

Said Summit analyst Richard Williams, "I just don't understand why the Street is willing to consider foreign currency gains to be part of the operating number. IBM is a software company -- what business do they have trading currencies? It doesn't make sense to me at all."

"It's amazing to me because this entire rally today was that they had better revenues than expected and almost made the EPS number," said Williams. "But from our perspective, they had a dreadful quarter and the stock should be getting crushed."

While acknowledging the firm's outlook is "definitely in the minority," Summit concluded in its note that IBM's shares are "over-valued based on rosy outlooks by analysts that are willing to stretch the definition of operating results to remarkable limits."

Meanwhile, Novellus suffered a downgrade from Goldman Sachs, which said it had been "left with too many unanswered questions to maintain our positive view on Novellus, despite the fact that the stock is at the lower end of the recent trading range." It lowered its rating to in-line from outperform.

Among the concerns: Novellus guided for second quarter orders to slide 23% sequentially, well below Goldman's expectations for bookings to stay flat. Novellus also drew skepticism from Goldman and others for its complaints that SARS (Severe Acute Respiratory Syndrome) is hurting business.

"To date, none of the other semi-equipment makers are fixated on this issue," pointed out Banc of America analyst Mark FitzGerald in a follow-up note characterizing the tone of the conference call in a blunt headline: "Bizarre!" "Either Novellus management is ahead of the curve or they are using SARS as a cover, in our opinion," said FitzGerald. His firm hasn't done recent banking for Novellus.

If SARS indeed poses a major problem, it would most likely affect the end markets more rapidly than companies that supply equipment to chip-making plants, he explained, noting that Intel's conference call later today should shed some light on whether that's the case.