Despite IBM profits, a tech gloom still looms

By JORDAN ROBERTSON Oct 9, 2008

Even after IBM Corp. surprised Wall Street with a healthy profit in the third quarter and a reaffirmation of its earnings outlook for the rest of the year, the broader technology sector dived again Thursday. There's just not enough of what lifted IBM to go around. Tech stocks were pummeled Thursday, and IBM ended the day down as well. Analysts expressed fears that Armonk, N.Y.-based IBM could see trouble in the fourth quarter and into 2009 if the lending and spending climate worsens as expected. Signs of weakness in the just-concluded third quarter could also emerge when IBM releases its full results for the period on Oct. 16. The company announced more than a week early Wednesday that profit per share was 4 cents higher than Wall Street's forecast, helped by an internal clampdown on spending. What IBM didn't include in its short statement was any mention of the value of the new technology services contracts it signed, a key measurement that Wall Street uses to gauge the revenue IBM will be able to count on in coming years. With the deepening distress in the financial services market - which accounts for nearly 30 percent of IBM's sales - analysts fear that IBM has taken a big hit like other companies in the past few weeks, damage that wouldn't show up until the fourth quarter.

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