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Tickers in this Article: IBM, BKS, MU, GE, WMT
Judging by its Q1 headline numbers, it is hard to not like International Business Machines (NYSE:IBM). The computer services giant reported $2.3 billion in first quarter earnings, which is up 26% from last year and topped expectations by 20 cents per share. This is impressive-looking performance, but investors ought to start wondering how much longer Big Blue can keep it up.

The shares are now at an eight-year high, having gained 27% since January. But even as the company seeks growth in emerging markets, IBM is going to be hard pressed to post numbers that justify anything higher than its $124 share price.

Sizable Concerns
My concerns stem from the law of large numbers. Like its mega-cap brethren, General Electric (NYSE:GE) and Wal-Mart (NYSE:WMT), the bigger IBM gets, the tougher it gets to grow. Even a few billion dollars in extra sales do little for a company expected to generate more than $106 billion in sales in 2008.

Sustaining annual top line growth of just 5% means the equivalent of creating one Fortune 500 company each year; $5.3 billion in new sales would rank 429th on the Fortune list, ahead of Micron Technology (Nasdaq:MU) and Barnes & Noble (NYSE:BKS). The scale of growth that's required to meet investor expectations is staggering. (To learn more, check out Is Growth Always A Good Thing?)

IBM's International Exposure
IBM's first quarter statement boasted of 11% revenue growth, to $24.5 billion, largely on the back of a strong performance in Europe, Asia and other emerging markets. Yet those sales numbers were flattered by a sinking dollar, since deals done in other currencies now translate into more greenbacks. IBM acknowledged that absent currency effects, its top line revenue would have grown by just four percentage points.

In other words, this is low quality revenue growth. If the U.S. dollar were to enjoy a rally, especially against the highly valued euro, the currency effects could turn against IBM. Should the global economy slow alongside that of the U.S. greenback, IBM could face a double whammy. Of course, troubles of this kind would have a nasty effect on IBM bottom line profits.

Repurchase Authorized
Reducing the number of shares outstanding through share buybacks is a way to prop up earnings per share. IBM management has authorized $15.4 billion for buybacks to be drawn from cash flow and its $12 billion cash pile. IBM has the balance-sheet firepower to sustain bottom line earnings growth, but that's not a sure sign that the company can keep up profitability from its operations. (To learn what buybacks mean to shareholders, read A Breakdown Of Stock Buybacks.)

What's Ahead
IBM's current earnings, brand value and growth rate can support its current PE of 14. However, in the face of an economic slowdown, it's hard to figure how Big Blue stock, already pushing its limits, can get any bigger.

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