Annex Bulletin 2006-17                               April 26, 2006

Excerpts from CONFIDENTIAL client edition

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Updated 4/26/06, 3:45PM PDT, adds Forecast Update

Annex Research' Five-Year Forecast for IBM

Steady As She Goes

Emphasis on Quality Continues: Revenue to Rise in Single-; Earnings in Double-Digits

SCOTTSDALE, Apr 26 - "Steer clear of incredible shrinking IBM," screamed a bombastic headline of today's Real Money ( (Jim Cramer) story.  Such stone age thinking - that bigger is better - is sadly still omnipresent on Wall Street.  Which is the reason the IBM stock is mired in the low 80s, as we pointed out in a quote in yesterday's Gannett Journal News story:

"If anyone wants to look at the quantum leap at IBM, they should look at profit margins," (Bob) Djurdjevic said. "Investors have to be savvy enough to accept the fact that sometimes smaller is better, but that's not the mentality on Wall Street. That may be why IBM is not getting the credit they deserve."

(from Gannett's Journal News, Apr 25, 2006)

Our just-updated five-year forecast for IBM reaffirmed our last year's conclusion - that "Quality over Quantity" (Mar 2005) is a new and welcome modus operandi at Big Blue.  


Forecast Update


Just to put things in perspective, IBM's 2006 net of $9.9 billion is 90% bigger than the earnings of Fujitsu, EDS, HP, Accenture, CSC and Capgemini - combined!  And even the IBM 2005 actual net was more than 50% larger.

We don't see anything "low" or shabby about the quality or size of such earnings, as the columnist suggested.  We see the new Big Blue as one giant cash generating machine.  Maybe Wall Street will also notice that if it keeps looking at IBM long and hard.


"That's all she wrote," we're afraid, for those of you who are NOT Annex Research clients, who are now reading the complete Annex Newsflash, along with all charts which back up our story.

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Happy bargain hunting!

Bob Djurdjevic

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Volume XXII, Annex Newsflash 2006-17
April 26, 2006

Bob Djurdjevic, Editor
(c) Copyright 2006 by Annex Research, Inc. All rights reserved.

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