EARNINGS OUTLOOK
Earnings roll on with IBM, EMC
Seagate Technology also set to give quarterly results
By Rex Crum, MarketWatch
Last Update: 4:03 PM ET July 14, 2005
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SAN FRANCISCO (MarketWatch) -- International Business Machines Corp., EMC Corp. and Seagate Technology will keep the slate of computer-hardware earnings reports coming next week, as the companies deliver highly anticipated results.
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Investors will be looking for IBM (IBM: news, chart, profile) to bounce back from a disappointing first quarter, when the company surprised the market by releasing its results a few days ahead of schedule and by missing Wall Streets estimates.
When IBM posts results, currently set for July 18, analysts surveyed by Thomson First Call forecast the company to earn $1.03 a share on $21.9 billion in revenue. Those estimates are below what Big Blue earned a year ago, when it posted a profit of $1.16 a share on revenue of $23.2 billion.
Several Wall Street analysts have come out with upbeat views on IBM in recent days, with many pointing to evidence that Big Blue's services business should get back on track after a rough first quarter.
Toni Sacconaghi, of Sanford Bernstein, said that while IBM's second-quarter report will be "messy," he still expects the company to post new services signings of $12.5 billion for its second quarter, which would be a 25% increase over a year ago.
Sacconaghi added that with services contributing about 55% of IBM's total revenue, "the consulting market appears to be rebounding, and announced workforce reductions alone could boost [services] margins" over the next several quarters.
IBM has said it plans to cut between 10,000 and 13,000 jobs, mostly in Europe and the United States.
Storage technology giant EMC (EMC: news, chart, profile) will get into the earnings fray on July 21, when it delivers its second-quarter results before the market opens.
Analysts estimate EMC will earn 12 cents a share, on $2.34 billion in revenue, compared with 8 cents a share on sales of $1.97 billion a year ago.
Wall Street watchers have expressed some concerns over EMC's results. Shebly Seyrafi of Merrill Lynch said that channel checks show larger than expected weakness in Europe, and that he expects sales in Europe, the Middle East and Africa to fall by 7% over the prior quarter.
Shebly added that the weakness seems to stem from slower sales of EMC's Symmetrix storage product overseas, as well as flat growth in the United States. The analyst kept his profit estimate on EMC unchanged at 12 cents a share, but lowered his revenue forecast to $2.3 billion from $2.36 billion.
Seagate Technology (STX: news, chart, profile) , the top maker of hard-disk drives for computers and other devices, will report its fourth-quarter results on July 19. Analysts forecast Seagate to earn 51 cents a share on $2.1 billion in revenue. During the same period a year ago, Seagate earned a penny a share on $1.34 billion in sales.
Merrill's Seyrafi on Wednesday raised his rating on Seagate to buy from neutral, and that the company remains ahead of its major competitors, Maxtor Corp. (MXO: news, chart, profile) and Western Digital Corp. (WDC: news, chart, profile) , in terms of new perpendicular disk-recording technologies.
Seyrafi indicated that such a position should give Seagate a lead in drives for mobile devices and other smaller-disk uses.