Expect IBM Q1 Gains in Software, Server Revenue: Analyst
For the first quarter of 2012, IBM is expected to show gains in software and high-end servers, according to a forecast by an industry analyst.
IBM will report its Q1 2012 financial results on April 17. In an April 16 note to investors, Shaw Wu, an analyst with the investment firm Sterne Agee, said he expects that IBM will show decent quarterly results driven by software and share gains.
Based on our supply chain checks, we anticipate in-line revenue and a beat on EPS [earnings per share], driven by software and share gains in high-end servers offset by mixed trends in services, Wu said. For its outlook, we anticipate the company to modestly raise its previous view of at least $14.85 in EPS for 2012. IBM remains one of our top picks.
Wu said for the first quarter of 2012, Sterne Agee is modeling $24.8 billion in revenue and $2.68 in earnings per share for IBM, versus the consensus at $24.8 billion and $2.65 in EPS.
What we are picking up in our channel feedback is in-line to above-performance in its software business [23% of revenue], driven by its business analytics, enterprise cloud and Smarter Planet initiatives, Wu said. We believe this richer mix of software should allow the company to post an EPS upside.
Moreover, Wu said Sterne Agee expects IBM to show share gains in high-end servers driven by its Power multicore processors that allow customers to consolidate lower-end and midrange servers and increase efficiencies.
However, Wu said in his report, In services, we believe revenue growth could be a little more challenged, offset by a focus on profitability, given mixed data points from INFY [Infosys] and ACN [Accenture]. As such, we anticipate overall revenue to be about in-line. Last but not least, from a geographic perspective, we are picking up relative strength in the Americas (42%) and Asia-Pacific (23%), offset by mixed trends in Europe (32%).
Meanwhile, Wu said Sterne Agee maintains its buy rating for IBM, as Big Blue is arguably the model company in the enterprise space others are trying to emulate. We believe the companys pioneering vision that the value-added in IT is software and services has given it strategic and structural advantages.