IBM: A 'focus list' favorite

In its mid-year forecast, Dow Theory Forecasts -- which has been published for 5 decades -- features its top current picks, including IBM (NYSE: IBM), which earns its top designation as a "Focus List Buy."

Editor Richard Moroney explains, "IBM has repeatedly forecast its goal of per-share earnings of $10 to $11 in 2010. The company is well on its way to achieving that goal. Software, in particular, is key to IBM's earnings target.

"The company completed its acquisition of Telelogic in April, three months after purchasing Cognos. IBM expects acquisitions to contribute 3% of its goal of 7% to 10% growth in software sales.

"From 2002 to 2007, mainframe sales averaged 6% growth, but sales fell in three of those years, including 2007. The March quarter showed no improvement, as sales in the division fell 7%. But, with energy prices up, IBM sees an opportunity with its new, energy-efficient Z-series mainframe.

"Server sales have been spotty, but IBM's sales force translates server revenue into two to three times as much in software and systems revenue. IBM, with the potential to reach $155 to $165 over the next 12 months, is a Focus List Buy and a Long-Term Buy."

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