Wall Street shrugs off IBM federal bid suspension
Wall Street shrugged off news International Business Machines Corp was suspended from seeking new federal contracts, noting that the government accounted for just a percent or two of its revenue.
By PTI |
BOSTON: Wall Street on Tuesday shrugged off news International Business Machines Corp was suspended from seeking new federal contracts, noting that the government accounted for just a percent or two of its revenue.
IBM late on Monday said the federal govebnment has suspended it from seeking new contracts with US agencies pending outcome of an investigation of a 2006 bid by the world's largest provider of computer services.
The company's shares were up $1.51, or 1.3 per cent, to $116.65 in New York Stock Exchange morning trade. The Dow Jones Industrial Average was up 2.1 per cent.
"The US federal government contributes just 2 per cent of IBM's total revenue, approximately half of which comes from existing multi-year contracts, which should not be affected by the suspension," brokerage Citi said in a note to clients.
"Given our view that 2008 consensus revenue and EPS estimates were conservative before this announcement, we do not feel a need to reduce 2008 estimates at all," the note said. IBM has 30 days to contest the scope and duration of the suspension, Citi noted.
The worst-case scenario is that the suspension could last for a year, the brokerage said. Goldman Sachs, which estimates that the federal business contributes about 1 per cent to IBM's revenue, also kept its estimates intact.
"Most importantly for the near term the ban does not seem to have impacted IBM's March quarter close," the brokerage said in a note to clients.
IBM late on Monday said the federal govebnment has suspended it from seeking new contracts with US agencies pending outcome of an investigation of a 2006 bid by the world's largest provider of computer services.
The company's shares were up $1.51, or 1.3 per cent, to $116.65 in New York Stock Exchange morning trade. The Dow Jones Industrial Average was up 2.1 per cent.
"The US federal government contributes just 2 per cent of IBM's total revenue, approximately half of which comes from existing multi-year contracts, which should not be affected by the suspension," brokerage Citi said in a note to clients.
"Given our view that 2008 consensus revenue and EPS estimates were conservative before this announcement, we do not feel a need to reduce 2008 estimates at all," the note said. IBM has 30 days to contest the scope and duration of the suspension, Citi noted.
The worst-case scenario is that the suspension could last for a year, the brokerage said. Goldman Sachs, which estimates that the federal business contributes about 1 per cent to IBM's revenue, also kept its estimates intact.
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"Most importantly for the near term the ban does not seem to have impacted IBM's March quarter close," the brokerage said in a note to clients.
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