IBM sees no mega-mergers
SAN FRANCISCO (Reuters) - International Business Machines Corp (IBM.N) Chief Executive Sam Palmisano said on Thursday the company is "on track" to meet its 2010 earnings target, and he ruled out mega-mergers on the scale of Microsoft Corp's (MSFT.O) $40 billion-plus bid for Yahoo Inc (YHOO.O).
The world's largest technology services company has made good progress toward its earnings-per-share goal of $10 to $11 in 2010, Palmisano and Chief Financial Officer Mark Loughridge said at an analyst briefing in New York.
While acquisitions should contribute to reaching the target, they would likely be small compared with the unsolicited offer by Microsoft, the world's largest software maker, to buy Yahoo, Palmisano said.
"We would not do a Yahoo," Palmisano said in response to a question at the meeting. "We would not do a big, multibillion-dollar acquisition."
He appeared to be reaffirming a policy in recent years to focus on small and medium-sized deals. IBM typically makes several dozen acquisitions of smaller companies annually that range from the tens of millions of dollars to several hundred million dollars each.
From 2002 to 2005, IBM bought 39 companies priced at less than $500 million each. Its largest acquisitions include Canadian software maker Cognos Inc, which it bought for about $5 billion in January; Rational, which it bought for $2.1 billion in 2003; and Lotus Development Corp.
IBM had $16.1 billion of cash on hand at the end of 2007.
Shares of IBM, up 6.7 percent this year through Wednesday, were down $2.07, or 1.8 percent, at $113.32 in afternoon trading on the New York Stock Exchange. The Dow Jones Industrial average was down 1 percent on renewed concerns over the mortgage and credit crisis.
IBM said that strong growth in emerging markets is helping the Armonk, New York-based company meet its earnings-per-share target set last year. The goal assumes a combination of factors including increased profitability, share repurchases, investments in the business, acquisitions and savings from changes in IBM's pension plan.
IBM bought back $18.8 billion of company stock last year and expects to repurchase as much as $12 billion this year. The company posted earnings of $7.18 per share for 2007, up 18 percent from 2006, and expects to earn at least $8.25 per share this year, representing 15 percent growth.
The 2010 target assumes average annual compound earnings-per-share growth of 14 percent to 16 percent.
(Additional reporting by Eric Auchard, editing by Gerald E. McCormick, Leslie Gevirtz.)
