ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Thursday, November 21, 1996 TAG: 9611210049
SECTION: BUSINESS PAGE: B-6 EDITION: METRO
DATELINE: NEW YORK
SOURCE: Associated Press
SOME MONEY MANAGERS expect shares to hit between $175 and $195. - IBM Corp. didn't announce any major new products this week, or disclose fresh clues about its financial condition.
But the stock of the world's biggest computer company is on a roll. It soared more than $17 to nine-year highs from last Friday to Tuesday. Wednesday, it shot up an additional $5 in early trading before retreating on profit-taking, closing down $1.50 a share to $152.62 1/2.
Why the run-up? Better late than never, it seems, investors are waking up to IBM's resounding recovery from its dark days of the early 1990s.
``It's really not a recovery - it's a discovery of IBM,'' said Bob Djurdjevic, an analyst at Annex Research in Phoenix and a veteran IBM watcher.
``Wall Street seems to be finally discovering what they've been saying all along - that there's a lot of hidden value in IBM.''
Many money managers once more consider IBM stock an essential part of their investment portfolio. Indeed, several analysts have raised their price targets for IBM shares. Daniel Mandresh, an investment analyst at Merrill Lynch & Co., said Friday he expects IBM stock to hit $195 per share.
Wendy Abramowitz of Argus Research has a target of $175 per share for IBM stock.
Behind the newly optimistic market views is a growing sense that IBM may have finally put its difficult past behind it.
The Armonk, N.Y.-based company has been rebounding for several years, lifted by stronger sales across its broad range of computer products and services, tens of thousands of layoffs and a strategic shift toward new technologies.
But until recently, the stock price's rise has lagged that recovery amid skepticism among investors that IBM was completely out of the woods.
Things at IBM began looking up shortly after the company hired Louis Gerstner as chairman in March 1993. It was IBM's most difficult time in its 80 years. Profit margins had tumbled. Gerstner's mission was to turn around a computer namesake whose technology reign was usurped in the 1980s by the remarkable rise of nimbler competitors such as Microsoft, Compaq and Sun Microsystems.
He accelerated employee layoffs, adding 35,000 job cuts to 50,000 that had been announced. He restructured IBM to make it more customer-oriented, custom-tailoring products and services to the industry segments that buy them.
One big beneficiary of the new customer focus was IBM's fast-growing services division, which includes consulting, running data centers and developing new systems for large customers. Its revenue jumped 26 percent last quarter.
Gerstner also formed a division to focus on the Internet. That has helped polish the company's image to technological innovator from a dull supplier of clunky traditional computer equipment.
``To have a well-formulated Internet strategy could help valuation even though it's not contributing immediately to the bottom line,'' said Donald Ryan, an Internet analyst at Meta Group, based in Stamford, Conn.
``They are proposing innovative solutions, and maybe that is fueling expectations.''
LENGTH: Medium: 67 lines ILLUSTRATION: GRAPHIC: Chart by AP. color.by CNB