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IBM’s Shares Mark Their Longest Rising Streak Since May 2007 By Katie Hoffmann Bloomberg

Sept. 18 (Bloomberg) — International Business Machines Corp. shares rose for a seventh straight day in the longest streak in more than two years, spurred by analysts’ predictions of wider profit margins.

IBM, based in Armonk, New York, added 23 cents to $122.11 at 4 p.m. in New York Stock Exchange composite trading. The shares, up 45 percent this year, last had a seven-day rising streak in May 2007.

IBM, the world’s largest provider of computer services, increased its profit margins in July for the seventh straight quarter. The company has focused on more-profitable software and services, rather than hardware, and shifted jobs to lower-cost regions. Since July, more than half of the 26 IBM analysts surveyed by Bloomberg have raised their price targets — many saying that profit margins have room to grow.

Wall Street has underestimated IBM’s earnings this year because it hasn’t taken the company’s profit margins and dependable revenue sources into account, Rob Cihra, an analyst at Caris & Co. in New York, said in report today. He increased his price target $10 to $145, making him at least the fourth analyst to predict that IBM shares will reach $140 or more.

Earlier this month, the company reaffirmed its full-year profit forecast of at least $9.70 a share and said it’s “well ahead” of a 2010 goal of at least $10 a share. Software and services now make up more than 80 percent of the company’s profit. That’s helped buoy earnings even as the recession crimps sales.

Price Goals

Sanford C. Bernstein & Co.’s Toni Sacconaghi, the top- ranked analyst by Institutional Investor, boosted his target by 7.7 percent to $140 last month, citing the potential for wider margins. This month, Kathryn Huberty, an analyst at Morgan Stanley, increased her target price for IBM to $145 from $116.

Rising to at least $140 would set a record for the stock, which reached a high of $137.88 in July 1999.

IBM expanded profit margins in all units except for hardware and financing last quarter. The company’s gross margin, or the percentage of sales left after production costs, increased to 45.5 percent from 43.2 percent a year earlier.

IBM is the second-best-performing stock in the Dow Jones Industrial Average this year, trailing American Express Co.

To contact the reporter on this story: Katie Hoffmann in New York at khoffmann4@bloomberg.net

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September 19, 2009 Posted by | Uncategorized | | Leave a comment