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After Hours Action: IBM

In extended trade shares of IBM tumbled almost 4% after big blue disappointed the Street. Although IBM reported profits that exceeded Wall Street expectations, revenue was lighter than forecast.

Also, its new services contracts declined year-over-year in the quarter dropping 12 percent to $12.3 billion.

Investors found that aspect of earnings rather negative considering IBM has shifted away from being a hardware company and instead has focused on its software and services. It is now the world's biggest IT services provider.

Adding to the headwinds, IBM also said currency changes hurt revenue by $500 million in the quarter. (Many analysts didn't account for those changes in their forecasts.)

However, the news wasn’t all bad. IBM raised its 2010 net income guidance to at least $11.25 per share. The nickel per share increase reflects IBM's confidence in its ability to squeeze more profit out of its workhorse technology services and software divisions

By the numbers IBM reported earnings of $2.61 a share in the second quarter, up from $2.32 a share last year.

Sales for the most recent period grew 2 percent to $23.72 billion, up from $23.25 billion last year.

The technology services and hardware giant was seen earning $2.58 a share on sales of $24.174 billion, according to a consensus estimate compiled by Thomson Reuters.

What’s the trade?

Instant Insights with the Fast Money traders

IBM has been trading between $120 and $130 all year, says Jon Najarian. I’m a buyer at the lower end of the range and a seller toward the top.

I have no doubt the Street will take this stock out to the woodshed on Tuesday, adds Guy Adami, though I still think the stock is a screaming buy long-term.

It wasn’t a gigantic miss and the valuation is still attractive, muses Karen Finerman. I own IBM and I continue to own it.

Long term, I agree with Guy and Karen that IBM is a stock worth owning. And if tech trades lower on IBM earnings I’d pick up some Akamai or EMC, Terranova adds.

Looking at the market broadly, it feels like we’re poised to rally into the end of the year, says Anthony Scaramucci. If we get some strong earnings and some better news out of the government I think we go higher. I continue to think stocks look cheap.



Read More:

Click here for complete coverage of IBM earnings





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Trader disclosure: On July 19, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Terranova owns (C), (MRVL), (EMC), (ADI), (ADBE), (SWN), (ABT), (CVS); Adami owns (AGU), (BTU), (NUE), (C), (GS), (INTC), (MSFT); Adami’s wife works at Merck; Scaramucci owns (AAPL), (BAC), (DIS), (GS); Kelly owns (BP) puts; Kelly is short (GS); Pete Najarian owns (AAPL) call spreads; Finerman’s firm owns (BAC); Finerman owns (BAC) & (BAC) preferred; Finerman owns (BP) calls; Finerman’s firm owns (IBM); Finerman’s firm owns (JPM); Finerman owns (JPM); Finerman owns (RIG)

For Joe Terranova
Terranova works for (VRTS)
Terranova is chief market strategist of Virtus Investment Partners, LTD.
Virtus Investment Partners owns more than 1% of (CASS)
Virtus Investment Partners owns more than 1% of (LDR)
Virtus Investment Partners owns more than 1% of (LPHI)
Virtus Investment Partners owns more than 1% of (MGRC)
Virtus Investment Partners owns more than 1% of (XLB)
Virtus Investment Partners owns more than 1% of (XLP)
Virtus Investment Partners owns more than 1% of (XLY)
Virtus Investment Partners owns more than 1% of (XLI)
Virtus Investment Partners owns more than 1% of (XLK)
Virtus Investment Partners owns more than 1% of (XLU)
Virtus Investment Partners owns more than 1% of (SUBK)
Virtus Investment Partners owns more than 1% of (WDFC)
Virtus Investment Partners owns more than 1% of (YDNT)
Virtus Investment Partners owns more than 1% of (DRYS)

For Anthony Scaramucci
SkyBridge Capital owns (AAPL)
SkyBridge Capital owns (BAC)
SkyBridge Capital owns (DIS)
SkyBridge Capital owns (GS)

For Brian Kelly
Accounts managed by Kanundrum Capital own (TLT)
Accounts managed by Kanundrum Capital own (AUY)
Accounts managed by Kanundrum Capital own (GFI)
Accounts managed by Kanundrum Capital own (C)
Accounts managed by Kanundrum Capital own (GME)
Accounts managed by Kanundrum Capital own (BIG)
Accounts managed by Kanundrum Capital own (NWL)
Accounts managed by Kanundrum Capital own Japanese Yen
Accounts managed by Kanundrum Capital are short (BA)
Accounts managed by Kanundrum Capital are short (USO)
Accounts managed by Kanundrum Capital are short (GLD)
Accounts managed by Kanundrum Capital are short Aussie Dollar
Accounts managed by Kanundrum Capital are short (AMZN)
Accounts managed by Kanundrum Capital are short (KMX)
Accounts managed by Kanundrum Capital are short (FXI)
Accounts managed by Kanundrum Capital are short (EWO)
Accounts managed by Kanundrum Capital are short (EWI)
Accounts managed by Kanundrum Capital are short (JOE)
Accounts managed by Kanundrum Capital are short (RSX)
Accounts managed by Kanundrum Capital are short (SLX)
Accounts managed by Kanundrum Capital are short (CSX)
Accounts managed by Kanundrum Capital are short (FCX)

Dennis Gartman
Funds managed by Gartman are short the Euro
Funds managed by Gartman own the Canadian Dollar
Funds managed by Gartman own Gold
Funds managed by Gartman own (AAPL)

Mark Mahaney
Employees Of Citi Own (GOOG), (YHOO)
Citigroup Global Markets Or Affiliates Own 1% Or More Of (YHOO), (EBAY), (NFLX), (AKAM) Citigroup Global markets Or Affiliates Has Acted As Manager Or Co-Manager Of An Offering Of (PCLN) In Past 12 Months Citigroup Global Marekts Or Affiliates Has Received Investment Banking Compensation For Services Provided In Past 12 Months From (PCLN) Citigorup Global Markets Or Affiliate Received Non-Investment Banking Compensation From (YHOO), (GOOG), (AMZN), (EBAY), (EXPE), (WBMD) In Past 12 Months
(PCLN) Is Or In Past 12 Months Was An Investment Banking Client Of Citigroup Global Markets (YHOO), (GOOG), (AMZN), (EBAY), (EXPE), (WBMD) Are Or In Past 12 Months Were Clients Of Citigroup Global Markets (Non-Investment Banking Non-Securities Related Services) Citigroup Global Markets Is A Market Maker In (YHOO), (GOOG), (AMZN), (EBAY), (NFLX), (AKAM), (PCLN), (EXPE), OpenTable, VistaPrint, (NILE), (WBMD) Citigroup Global Markets And/Or Affiliates Has A Significant Financial Interest In Relation To (YHOO), (GOOG), (AMZN), (EBAY) Citigroup Global Markets Or Affiliates Owns 5% Or More Of (YHOO)

For Victor Sperandeo
Vic Sperandeo Owns Gold

For Mike Khouw
Cantor Fitzgerald makes a market in (DE)
Cantor Fitzgerald makes a market in (JOYG)

For Carter Worth
Oppenheimer & Co. Is A Market Maker In (AAPL)


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