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IBM Stock Tumbles as Results Disappoint Investors

Reuters
Friday, 19 Jan 2007 | 11:09 AM ET

IBM stock plunged after the company's quarterly earnings failed to beat some investors' forecasts and computer hardware sales lagged some targets.

The world's biggest computer-services company reported after the market close on Thursday a fourth-quarter profit before special items of $2.26 per share. ThinkEquity analyst Eric Ross said the results were only in line with estimates after adjusting for a tax rate that was below what analysts had expected.

"Investors were obviously dismayed by IBM's in-line EPS. We believe investors were expecting IBM to handily beat consensus estimates and, as a result, were disappointed," he said in a note to clients.

Before the results, the stock had gained 37% from a year low in July as investors raised their expectations for the company's earnings.

Several brokerages broke with the consensus of investors and increased their price targets for the company's shares.

Bear Stearns raised its target to $100 from $98. Citigroup increased its target to $115 from $105 in a report with the headline "Keep the faith."

Merrill Lynch analyst Richard Farmer said in a research report that IBM had posted "a solid December quarter." Still he maintained his "neutral" rating on the company's shares, advising clients to hold off on buying the stock.

"We prefer to wait for an entry point that reflects more investor scepticism," Farmer said.

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