IBM (NYSE: IBM) posted impressive earnings in the fourth quarter -- more than 11% growth -- and put up an even more impressive forecast. Its software and services businesses are doing unusually well, and the company expects that to continue.
On the company's conference call (see full transcript), management made an even stronger case for why the company should do well in 2008.
One of the powerful cases the company made is that its products provide "cost savings for our customers." By making IT more efficient, IBM is arguing that its value to companies in a weak economy actually increases.
Management also pointed to IBM's "cash generation capability." In a tough economic period, that helps the company in several ways. It does not have to go to the credit markets when they are rocky. It can produce cash for acquisition and it can fund a share buy-back to improve EPS. Most companies do not have a level of ongoing free cash flow to support that many initiatives.
Finally, the company made the point that in developing markets in Asia, revenue is growing 20%, but operating income is moving up over 40%. That kind of growth can offset almost any slowdown in the US and Europe.
Douglas A. McIntyre is an editor at 247wallst.com.
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Reader Comments (Page 1 of 1)
1-18-2008 @ 9:15AM
Harold said...
Be sure that you SUBSTRACT the 6% directly related to the falling dollar if you want real earnings.
1-18-2008 @ 3:15PM
Boards0000000 said...
Let's wait and see what happens to the global economies before we hope for great future earnings. If no one's buying there won't be continued growth in any of the economies. Here in the US people and businesses are cutting back on spending. Companies are having trouble getting financing. Banks and bond insurers, mortgage insurers, realtors, construction workers, etc. are all in trouble so who will buy all these products? How will growth continue even in the global markets as we pull back on spending? Then they pulll back on spending, etc.
1-18-2008 @ 10:15PM
Jerry Bluhm said...
The markets are impossible to figure out and so is Wall Street, but the real fact is our economy is strong, companies are producing profits, and people are still buying, even houses. The companies that purchased all this bad paper will just have to pay up, and learn. Those who purchased more than they could afford will learn as well. Many will have to get second jobs, if they really want to pay their morgage. A hand out by the government, or the tax payer, is not the answer. Cheap credit and people trying to keep up with the Jones may not work anymore. So, go to work.
1-19-2008 @ 3:37PM
dan heary said...
everyone has a sale now and then. so take advantage for the long term. it seems the daily volume has not been affected, therefore cost average. pretty basic, i like roller coasters. drh
1-19-2008 @ 3:38PM
dan heary said...
everyone likes a sale now and then. so for long term cost average and enjoy down the road. it seems that the sales volume is where it should be. and i like roller coasters, get used to it, this is new school. no formula curves....drh