- ThinkEquity's Eric Ross notes that increased performance and profitability in IBM's (NYSE:IBM) Global Service segment, together with strong software sales, causes them to reconsider their SELL rating and now recommend it as a BUY for this quarter. Firm now expects increased revenues together with higher margins in Q406 and stretching into 2007. They are upgrading IBM from Sell to Buy, and raising price target from $70 to $110.
Mr. Ross explains that the primary reason for his sell rating was the weak outlook for IBM's global service business, driven by weak IT services overall. He now believes this segment
(approximately 50% of total revenues) has turned the corner toward strong performance this quarter. The salespeople they have spoken with are extremely confident and say productivity is increasing, driving margins higher. While revenue concerns may linger, they expect IBM to boost the profitability of this segment into 2007.
Everyone the firm was able to get on the phone was highly confident that their area was performing very strongly (except in storage). This is a marked difference from the response they received from these same contacts in spring 2006.
Ests: Revs Q406 from $25.0b to $26.5b; CY06 from $90.166b to $91.666b; CY07 from $91.500b to $96.990b. EPS Q406 from $1.95 to $2.25; CY06 from $5.76 to $6.05; CY07 from $6.25 to $6.74.
Notablecalls: I like the conviction behind this call. I wish all upgrades were like this one. People would pay more attention to them. Note that THNK's ests are now close to Street high.
Mr. Ross explains that the primary reason for his sell rating was the weak outlook for IBM's global service business, driven by weak IT services overall. He now believes this segment
(approximately 50% of total revenues) has turned the corner toward strong performance this quarter. The salespeople they have spoken with are extremely confident and say productivity is increasing, driving margins higher. While revenue concerns may linger, they expect IBM to boost the profitability of this segment into 2007.
Everyone the firm was able to get on the phone was highly confident that their area was performing very strongly (except in storage). This is a marked difference from the response they received from these same contacts in spring 2006.
Ests: Revs Q406 from $25.0b to $26.5b; CY06 from $90.166b to $91.666b; CY07 from $91.500b to $96.990b. EPS Q406 from $1.95 to $2.25; CY06 from $5.76 to $6.05; CY07 from $6.25 to $6.74.
Notablecalls: I like the conviction behind this call. I wish all upgrades were like this one. People would pay more attention to them. Note that THNK's ests are now close to Street high.
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