Wall St sets bar higher for IBM in 2010 after rally

NEW YORK (Reuters) - IBM''s quarterly results should show a solid recovery in technology spending, but investors will likely want reassurance of stronger growth in 2010 before pushing its stock price much higher.

"We do not expect the kind of upside that we''ve had in the past," said Canaccord Adams analyst Peter Misek, who recommends holding the stock. "The sell-side in general, we over-estimated the impact of the recession and under-estimated IBM''s ability to cut costs."

Goldman Sachs analyst David Bailey held a similar view on IBM''s results, which are due on Tuesday.

"While we expect a solid December-quarter report from IBM, we do not think the results will serve as a major catalyst for the stock in either direction, given heightened expectations," he said in a report.

Analysts on average expect IBM to report fourth-quarter revenue of around $27 billion, roughly flat from a year earlier, according to Thomson Reuters I/B/E/S.

Profit per share is seen rising to $3.47 from $3.27 a year earlier, with full-year earnings of $9.88. The company has forecast earnings of at least $9.85 a share.

But the main focus will be on IBM''s 2010 outlook. Its last forecast was for earnings per share of around $10 to $11.

Bernstein Research analyst Toni Sacconaghi said he expects IBM to forecast "at least $11.00" for the full year.

"We note that IBM''s playbook over the last two years has been to set achievable guidance and raise it," he said, citing IBM''s record of beating consensus EPS in each of the last eight quarters and repeatedly raising guidance.

SMARTER PLANET

While the global economic downturn certainly dented profit in 2009, IBM managed to weather the worst of the recession by reducing costs and shifting focus from hardware to IT software and services, which has helped bolster margins.