IBM`s shares surged 8 percent on Wednesday after the world`s first big computing company beat expectations on third-quarter revenue and gave an outlook that hinted it was back on a growth track after six years in retreat.
There was no initial sign of changes to major brokerage trading recommendations for International Business Machines Inc and most shied away from calling a complete turnaround in the company`s fortunes.
But the results pushed Big Blue shares to a high of $158.52 in early trading in its biggest intraday percentage gain since 2009, in stark contrast with a nearly 12 percent fall so far this year.
"We were pleased to see the quality of IBM`s earnings improve, with IP income and taxes being less of a driver of upside than in prior quarters," Deutsche Bank analyst Sherri Scribner wrote in a note.
While IBM has struggled more than peers such as Oracle Corp and Microsoft Corp to adjust their approach to a changing market, the quarterly performance of its software business was noteworthy given its presence in key software markets, Jefferies analyst John DiFucci wrote in a note.
IBM`s revenue has fallen for 22 straight quarters as weak demand from customers left its legacy hardware and software businesses stagnating.
The results showed revenue from IBM`s cloud, cybersecurity and data analytics business rose 11 percent to $8.8 billion in the quarter, accounting for about 46 percent of total revenue.
The company`s software revenue also grew for the first time after 13 consecutive quarters of declines.
"We see the business as secularly challenged due to its high exposure to a legacy business model, and see continued margin pressure over the long-term as IBM`s business is pressured by competition from lower-cost offerings and the cloud," Deutsche Bank analyst Sherri Scribner wrote in a note.
But she added: "We are modestly adjusting our FY-17E EPS higher on a lower share count and some additional mainframe sales."
Out of 25 analysts covering the stock, only 6 have a "buy" or higher rating, 15 are on "hold", and 4 have a "sell" or lower. They have a median price target of $154.50.
"The bottom line, IBM remains in a "work-in-progress" mode, as its continues to convert its revenue base away from asset/labor intensive legacy into asset/labor light "digital" solutions," Wedbush analyst Moshe Katri said.
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