IBM's 5-Year Plan Means Tech Rally-Time

IBM Sign
Aaron Brown: Photography
IBM Sign

Yeah, you read that headline right: IBM is offering up a 5-year earnings plan, and for a company in tech — really any company — to offer such visibility is substantial, and intriguing. Oh, and the 5-year plan has IBM reporting $20 a share in operating earnings by 2015.

What's going on here?

This is the second Dow component in as many days to offer an unusually long-term outlook. Just yesterday, Intel's CEO Paul Otellini projected "double-digit"earnings and revenue growth over the next three years, and says a gross margin range of 55 percent to 65 percent over that time-frame is also reasonable.

IBM's Sam Palmisano says his company also expects to make $20 billion in acquisitions over the next five years.

And all of this news comes on a day when Microsoft formally unveils its highly anticipated Office 2010 suite of software.

Stephen Elop, the president of Microsoft's Business Division, which generates something like $4 billion a quarter in revenue, tells me an in an interview earlier this morning that he's hearing quite a bit of optimism from his enterprise customers, that Office 2010 has a noticeable return on investment that will help its quick adoption by something like 90 million businesses around the globe.

The Office 2010 release will create a new wave in an already robust upgrade cycle that started with Windows 7, and has become the best-selling piece of software in Microsoft's history. But that rally was largely consumer based as corporate customers waited to do a single, simultaneous upgrade of both Win7 and Office 2010. Indications are, Elop tells me, that the enterprise is significantly optimistic and he feels good about Microsoft's outlook (no pun intended.)

The trifecta of powerfully optimistic news from Intel, IBM and Microsoft bodes very well for companies like Hewlett-Packard , Dell , Lenovo , even Google and Apple for that matter. Earlier this week, I surmised that tech might be a new kind of "flight to quality."No question there will be bumps in the road over the next five years, but for key companies in such dynamic sectors to offer visibility over the next several years when they have recently been loathe to offer a glimpse into the next quarter is a very good sign indeed.

Remember that so many of tech's top companies, most notably Intel , have dispensed with mid-quarter updates of any kind, and many have stopped offering any meaningful guidance on earnings calls. All of this puts the spotlight on the next big bellwether to report earnings, and that will be Cisco Systems later today.

Analysts are looking for 39 cents a share on $10.23 billion and for the company to continue to sing the optimistic tune it sang at the conclusion of last quarter. Guidance should be somewhere around $10.68 billion for Cisco's fiscal fourth quarter, or $10.8 billion if you take into account any contributions from the Tandberg acquisition which closed during the quarter. CEO John Chambers has said this will be a critical year for the networking leviathan, when so many of the company's strategies that have been put in place over the last few years finally come together. Cisco is making a major push into consumer electronics with a healthy focus on web video, and its deploying new high-speed routers that AT&T has been particularly enamored with, both key bits of good news.

If Cisco can build on the momentum already established by its Dow brethren in tech, we could see the recent rally on the Nasdaq accelerate, with JDSUniphase and Juniper in line to reap some halo rewards. Again, as I posted earlier, this isn't a call to willy-nilly throw money at all things tech, but when you see signs like this, so good and so close together, it seems a broad swath of tech sector leaders stand to be big beneficiaries of the rebound upon us.