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Tickers in this Article: IBM, INTC, AMD, HPQ, DELL
IBM's (NYSE:IBM) latest quarterly earnings results didn't quite come up to par with the exacting standards of some analysts following the company, and as a result the shares dipped about 2% following the announcement. But for those who are prepared to dig a little deeper into the numbers, there is solid evidence to indicate that the company's fortunes are likely to pick-up during the second half of the year.

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Evidence For Optimism
While the company's first-quarter earnings per share number of $1.97 barely made it past analyst's expectations of $1.93, and the uptick in EPS guidance for this year was similarly thin, increasing to $11.20 from $11, double-digit gains in revenues from contract services and software sales were seen as clear cause for optimism. (Learn about the controversies surrounding companies commenting on their forward-looking expectations in Can Earnings Guidance Accurately Predict The Future?)

Tech Spending on the Rebound
Spending on services like consulting is generally seen as good leading indicator that a shift in corporate attitudes may now be under way. It's a sign that many of IBM's big customers may now be willing to make longer-term investments in their businesses following the period of deep retrenchment in the wake of the recession.

It's just one more sign pointing to a recovery in the fortunes of the technology sector that had earlier been signaled by the unexpectedly strong results posted by chip making rivals Intel (Nasdaq:INTC) and Advanced Micro Devices (NYSE:AMD).

A recent survey on the subject by Swiss investment banker UBS has indicated that European and U.S. IT budgets are now expected to rise over the next twelve months following a 5.1% dip over the past year. The study also revealed that Hewlett-Packard (NYSE:HPQ), IBM and Dell (Nasdaq:DELL) were the most likely beneficiaries of this uptick in spending due largely to the aggressive pricing policies each had put in place over the last six months.

Competitiveness Vastly Improved via Globalization
Part of the reason these companies can now afford to be so be so aggressive on price is that they managed to avoid a lot of the recession-induced pain experienced by so many other sectors. Greater penetration into international markets, where demand held up relatively better than in the U.S., and their ability to deploy their own technology to operate more effectively on a global scale, thus cutting costs, has put these tech giants on a better competitive footing than they've been on in years.

The Bottom Line
The post-announcement sell-off in IBM shares represents a buying opportunity. Given the company's improved fundamentals, the 11 times forward multiple that investor's are assigning to IBM based on this year's earnings looks cheap, especially when compared to the 15 times multiple that the Standard & Poor's 500 is commanding on the same basis. That probably explains why some analysts continue project a price target for the stock in the $155 to $160 range.

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