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Greenberg: IBM Earnings, All About the Levers

When it comes to earnings quality, the best I can say for IBM: Eh!

And the good part about IBM , is that it comes right out and tells you, assuming you care about it.

Here’s what you need to know about its third quarter:

Revenue, up 3 percent.

EPS [earnings per share] growth, up 42 cents or 18 cents—beating by 7 cents. However, according to the company, only 7 cents of that came from “revenue growth at constant mix.” The other 35 cents came from cost cutting, a lower tax rate and share repurchases.

And while the company lifted guidance by 15 cents a share to $11.40, all of that is the result of a lower tax rate.

CFO Mark Loughridge told investors on the company’s earnings call that IBM views its tax rate “as an operational line item like any other.”

It’s up to investors to decide whether they want to, as well.

My take: A wise PR guy from 3M, back in the 1970s, once told me: “If we point it out, you won’t look for it and make a bigger deal about it once you find it.”

That’s IBM’s playbook to a T. And they do it so well!

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