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Cramer: Time to Cut Intel and IBM Some Slack

Wednesday, 18 Apr 2012 | 7:06 PM ET
No Huddle Offense: IBM & INTC
Mad Money host Jim Cramer says IBM and Intel have seen brighter days, but these companies remain major players in tech.

Despite reporting lackluster revenue, Intel and IBM should still be given the benefit of the doubt, Jim Cramer said Wednesday on CNBC's "Mad Money."

Cramer urged investors not to give up hope on the two tech giants just yet, simply because "they have done a terrific job over the last few years, making good targets and defying the skeptics."

Even though IBM reported revenue on Tuesday that fell short of analyst expectations, the company topped quarterly earnings estimates and raised its full year outlook. The firm has also been shifting its focus from hardware to higher-margin software and services over the past decade, Cramer said. And that's bound to produce some hiccups along the way.

Priced at just 13 times earnings, Cramer thinks the stock is cheap.

"To me, it's run, it's resting and it will start climbing again, soon," Cramer said, adding the company's strong business in both the U.K. and Spain has him convinced that IBM's product is needed no matter what.

Intel, on the other hand, isn't so clear-cut.

The stock was shaken up by a recent slowdown in disk drive production, but there is still demand coming out of China and other emerging markets.

Meanwhile, Cramer said the firm continues to hype up a huge Windows product cycle, "and that's always been terrific for Intel." At the same time, he said, several plants are also opening up for its PC chip business, which will no doubt take a toll on gross margins — at least for the time being.

The bottom line: Intel and IBM are still "innocent until proven guilty," Cramer said. Both firms are in the midst of major transitions and even though their revenue came in a little on the light side, their long-term performance still gives them an edge over other key players in the industry.

When this story was published, Cramer's charitable trust owned IBM.

Call Cramer: 1-800-743-CNBC

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