Wall Street Watch: IBM's Earnings Are Still Playing Catch Up


Jaded investors are starting to realize why IBM (IBM) is often referred to as Big Blue.

The tech giant posted mixed financial results after Tuesday's market close.

Revenue fell 5% to $24.7 billion during the quarter, well short of the $25.3 billion that analysts were expecting. This is certainly problematic. IBM has typically been seen as a thriving tech company. The company successfully transitioned out of its low-margin hardware business and into higher margin services years before it was the popular thing to do.

In the past, IBM has found a way to continue to grow even when Corporate America wasn't at its best, but now it's proving mortal. Investors should be used to this by now. IBM has now missed Wall Street's revenue target for five consecutive quarters.

IBM's holding up better on the bottom line. The tech bellwether's adjusted profit of $3.61 a share represents a reasonable 10% uptick in net income. However, analysts were pretty much on the money with their earnings estimates. There was a time when IBM would consistently blow through these targets.

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Investors have forgiven IBM's shortcomings in the past. The stock hit a fresh all-time high earlier this month and it was within pocket change of nailing a new high watermark during Tuesday's trading day.

However, as one of the first tech companies to report this season, IBM's unimpressive showing will be troublesome for its peers that will be reporting in the days and weeks to come.

If this keeps up Big Blue may soon become Big Black and Blue.

Other Things Worth Watching

• Slow time at the Apollo? Things aren't looking to good for the parent company of online educator University of Phoenix. Apollo Group (APOL) saw revenue and earnings fall in its latest quarter. The bad news doesn't end there. Apollo also warned on Tuesday night that it will eliminate roughly 800 jobs at the company in fiscal 2013 as it copes with sluggish enrollment levels. The Web-based education giant also lowered its outlook for the entire fiscal year.

• There is still growth to be found out there. Intuitive Surgical (ISRG) came through with a 20% surge in revenue. Profitability grew even faster. Brisk sales of the company's da Vinci surgical robotic systems helped. However, it wasn't all happy snipping at Intuitive Surgical. The 22% uptick in the number of procedures performed lagged Intuitive Surgical's own projections, weighed down by weakness in Europe and a decelerating number of prostate surgeries. Then again, maybe it's not such a bad thing if a surgical robotic arm isn't so busy.

Motley Fool contributor Rick Munarriz does not own shares in any of the stocks in this article. The Motley Fool owns shares of International Business Machines and Intuitive Surgical. Motley Fool newsletter services have recommended buying shares of Intuitive Surgical. Motley Fool newsletter services have recommended creating a synthetic long position in International Business Machines

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