Oracle Corporation (ORCL), International Business Machines Corp. (IBM): Why I Bought More of This IT Company

Superficially it is worrying, but unless you believe that all these tech firms (TIBCO, IBM and Oracle Corporation (NASDAQ:ORCL)) have suddenly seen their sales managements lose the ability to sell, then the real cause of this slowdown in tech spending (and I think it’s time to call it that) is probably due to some caution around the sequester. International Business Machines Corp. (NYSE:IBM) reported in September that orders had fallen over a cliff only to see a nice rebound in the next quarter.

Furthermore, none of these companies are blaming the macro environment or seeing their pipelines diminish, so if you are bullish on the economy then there is every reason to expect that this order weakness will prove temporary.

The Bottom Line

I think my line of argument applies to all three companies, but they differ in their attractiveness. Frankly, TIBCO really needs to report a couple of good quarters and regain investor confidence. It appears to have more issues than just sales execution.Oracle Corporation (NASDAQ:ORCL) is attractive in this viewpoint, but longer term it faces risk as it refreshes its hardware. It also has to demonstrate that it can continue to be as dominant in the cloud based era as it is with on-premise

For IBM, the response to the weak quarter is to take some workforce rebalancing in Q2, and if recent reports are true it is prepared to sell some low margin hardware businesses. All of which is in line with its long term objectives to go for margin improvements by divesting and reducing lower margin sales. Even in this bad quarter International Business Machines Corp. (NYSE:IBM) managed to increase gross and operating profit margins.

Moreover, despite the weaker numbers this quarter it didn’t lower its full year earnings guidance. The company is still forecast to deliver double digit earnings growth in the next couple of years while generating huge amounts of cash flow. I think the sell-off is a decent buying opportunity so I bought some more.

The article Why I Bought More of This IT Company originally appeared on Fool.com and is written by Lee Samaha.

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