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IBM surges on rosy outlook
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May 13, 1999: 11:39 a.m. ET
Investors are heady after CEO touts Big Blue's e-commerce revenue
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NEW YORK (CNNfn) - Investors in International Business Machines Corp. were feeling heady Thursday as the stock hit a 52-week high in morning trading on optimism about the technology giant's anticipated revenue growth and its commitment to Internet commerce.
Giving the Dow industrials an early boost, IBM (IBM) was up 15-1/2, or 7 percent, at 241. The Dow was up about 65 points. The company's previous 52-week high was 228-7/16.
Merrill Lynch reiterated its "buy" rating on Big Blue and raised its 6- to 12-month price target on the computer maker's stock to $270 per share. Credit Suisse First Boston also reiterated its "buy" rating on the stock.
Internet growth spurt
The surge follows comments Wednesday by IBM chairman and CEO Louis Gerstner that the computer maker is on track for double-digit revenue growth.
Most notably, Gerstner said the Internet will play an increasingly large role in the company's future.
Gerstner told a group of financial analysts that IBM generates about a quarter of its revenue -- approximately $20 billion -- from Internet-related sales. That surpasses the sales of the top 25 pure Internet companies combined, including Amazon.com Inc. (AMZN) and Yahoo! Inc. (YHOO).
Gerstner also took on the high-flying Internet companies, saying that traditional corporations were better poised to integrate the Web into modern business than Internet companies without an existing record and infrastructure.
IBM shares have been on a steady climb
Gerstner said such traditional firms as Wal-Mart Stores (WMT) and Ford Motor Co. (F) were set to reap the real rewards as businesses move to run their businesses and communicate with customers over the Internet.
"Clearly they were bullish and they were really pointed to (the fact) that IBM is getting a benefit from the Internet," Merrill Lynch computer analyst Steven Milunovich said of the comments by IBM's top executive.
Investors tend to listen carefully when Gerstner speaks, Milunovich said, who added that IBM's soaring stock also may spill over into shares of other computer companies, including Sun Microsystems Inc. (SUNW) and Hewlett-Packard Co. (HWP), which also are investing heavily in electronic-commerce ventures.
Sun shares were up 3/8 at 65-1/2; HP shares climbed 3-1/4 to 86-1/2.
"I think this Internet gold dust can be sprinkled around a bit," Milunovich said. 
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