Will IBM Earnings Indicate Bottom -- Or Free-Fall? - InformationWeek
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7/16/2009
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Bob Evans
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Will IBM Earnings Indicate Bottom -- Or Free-Fall?

The not-so-good news is that IBM is expected to reporth declining revenue for the fourth straight quarter this afternoon. The good news is that the percentage decline expected for this quarter versus last quarter is almost flat, leading some analysts to speculate that the struggling economy might be bottoming out. The bad news? If they're wrong, it means we're in a free-fall.

The not-so-good news is that IBM is expected to reporth declining revenue for the fourth straight quarter this afternoon. The good news is that the percentage decline expected for this quarter versus last quarter is almost flat, leading some analysts to speculate that the struggling economy might be bottoming out. The bad news? If they're wrong, it means we're in a free-fall.As Forbes.com reports:

But as a bellwether for the tech sector, IBM's revenues paint a cautiously optimistic picture: The company's sales for the second quarter are expected to have dropped 12% year-over-year. That's still a slightly greater year-over-year revenue drop than the first quarter, when the company's sales fell 11.4% year-over-year. But last quarter's 11.4% drop was much bigger than the 6.4% drop in the fourth quarter of last year and a 4.9% gain in the quarter before that, all of which pointed to a far more troubling trend. IBM's expected 12% drop in the second quarter, by contrast, shows that the company's sales shrinkage has nearly stabilized.

Together, those numbers hint at smaller revenue declines over the next quarter and positive revenue growth by early 2010, says Andrew Bartels, an analyst with tech-focused Forrester Research. "We're at the part of the 'U' where the bend is flattening out," he says. "We'll see the bottom arrive in Q3, and then real revenue growth will actually come back."

Following comments yesterday from Intel's Paul Otellini about PC sales having bottomed out last quarter, the IBM earnings report will be scrutinized vigorously for indications of what might be construed for the overall economy. IBM will no doubt play its cards very cautiously, as it should, but in these troubled times, even an indication that the rate of revenue decline is slowing will be gobbled up as wonderful news.

Stay tuned - and don't toss out that life-preserver just yet.

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