Shares of International Business Machines Corp. (IBM) reached a new 52-week high of $96.06 on Monday, December 18th. This follows news reporting the computer giant won a large contract with the German government. Trading volume for IBM was also higher on Monday. The contract, initiated by the German parliament for networking, hardware and services, is valued at about $9 billion.
IBM will capture a portion of the contract worth about $4 billion. IBM also announced on Wednesday that it is teaming up with Yahoo (YHOO) to roll out a new data search tool for businesses. Yahoo will offer the service on its site for free.
In addition, investors were excited at the comments made by Bill Zeitler, senior vice president and group executive of IBM, at a recent analysts’ conference. He stated, in reference to IBM’s system and server market share, “We expect we will continue to gain [Market] Share in the range of a point a year going forward.
We are and have been the leader in servers… And we’re also number one in game processors.” The complete audio cast, and accompanying slide show, of Mr. Zeitler’s presentation can be found at ibm.com under executive presentations.
IBM Opens Second Life Store:
IBM Corp. in collaboration with electronics retailer Circuit City (CC) stated it would be opening a big-box outlet in the virtual video game, Second Life. IBM said this first ‘prototype’ store is part of a bigger complex the computer manufacturer plans to open next week in the virtual world. The store is made with the look, feel and products found in a real Circuit City store. Users can command their characters to shop for items to be used online or for ‘real’ items for home delivery.
The partnership is also working on a way to create 3D models of spaces so that users can see how different products will look in different settings. For example, a user might create a living room similar to their own to see if it would look best with a 42-inch or 50-inch plasma television. A statement issued by Circuit City said of the venture, “Our ultimate goal is to understand the implications of virtual 3-D worlds on multichannel retailing and to extend the connection we have with our customers to new spaces.”
Competitors:
Competitors for IBM include: Electronic Data Systems Corp. (EDS), Hewlett-Packard Co. (HPQ), Microsoft Corp. (MSFT), Applied Biosystems Group (ABI), Accenture Ltd. Class A (ACN), BearingPoint Inc. (BE), BEA Systems Inc. (BEAS), BMC Software Inc. (BMC), Computer Associates Intl. Inc. (CA), Compuware Corp. (CPWR), Cray Inc. (CRAY), Dell Computer Corp. (DELL), Datalink Corp. (DTLK), Diamondcluster Intl. Inc. (DTPI), NIC Inc. (EGOV), EMC Corp. (EMC), Dot Hill Systems Corp. (HILL), Infocrossing Inc. (IFOX), Informatica Corp. (INFA), NCR Corp. (NCR), Novell Inc. (NOVL), Network Appliance Corp. (NTAP), Nuance Comms. (NUAN), Oracle Corp. (ORCL), Pacificnet Inc. (PACT), Quest Software Inc. (QSFT), Rackable Systems Inc. (RACK), SAP AG (SAP), Sapient Corp. (SAPE), Sun Microsystems Inc. (SUNW), Sybase Inc. (SY), TIBCO Software Inc. (TIBX), Unisys Corp. (UIS), Vignette Corp. (VIGN), WebMethods Inc. (WEBM), and WebEx Communications Inc. (WEBX).
Company Profile:
International Business Machines Corporation is a worldwide information technology company. Its three segments are: Systems, Software, and Services. The Systems segment offers systems including servers, data storage products, semiconductor products, and printing systems. The Software segment’s main products are Lotus, Tivoli software for infrastructure management, and Websphere Software.
The Services segment focuses on business performance services, engineering and technology services, application management services, and e-Business hosting. IBM was founded in 1910 and is based in Armonk, New York.
Potential Trades:
With IBM’s new German contract, we’re bullish on IBM. The following neutral-to-bullish trade scenarios were discovered using PowerOptions’ powerful web based search tools. PowerOptions quickly provides the data needed to make clear and informed decisions.
| Intl. Business Machines (IBM) Covered Call $ 95.44 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| OPTION | Expiration /Strike |
Opt. Bid |
%Dnsd. Prot |
%If Unch. |
%If Asgnd |
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| IBMAS | 07 JAN 95.00 | $2.40 | 2.50% | 2.10% | 2.10% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Bull Call Debit Spread INTL BUSINESS MACHINE (IBM) $95.44 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SELL | Expiration /Strike |
Opt. Bid |
BUY | Expiration/Strike | Opt. Ask |
%Return | Break Even |
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| IBMAS | 07 JAN 95.0 | $2.40 | IBMAQ | 07 JAN 85.00 | $11.00 | 16.30% | $93.60 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The covered calls stock options position offers 2.5% downside protection with a potential profit of 2.10%, and the expiration date is January 20, 2007 – only 33 calendar days away. The bull call debit spreads position offers a potential profit of 16.30% and a breakeven price of $93.60. However, an investor should know that with a bull call debit spreads position, the entire investment will be lost if the price of the stock is below the lower option strike price – $85.00 in this case.
An audio podcast of this article is available at: http://www.poweropt.com/podcasts/2006_12_19_IBM.mp3.
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[tags]Germany, Bill Zeitler, Second Life, Lotus, Tivoli, Websphere, Armonk, New York, ABI, Applied Biosystems Group, ACN, Accenture Ltd. Class A, BE, BearingPoint Inc., BEAS, BEA Systems Inc., BMC, BMC Software Inc., CA, Computer Associates Intl. Inc., CC, Circuit City Stores Inc., CPWR, Compuware Corp., CRAY, Cray Inc., DELL, Dell Computer Corp., DTLK, Datalink Corp., DTPI, Diamondcluster Intl. Inc., EDS, Electronic Data Sys. Corp., EGOV, NIC Inc., EMC, EMC Corp., HILL, Dot Hill Systems Corp., HPQ, Hewlett Packard, IBM, Intl. Business Machines, IFOX, Infocrossing Inc., INFA, Informatica Corp., MSFT, Microsoft Corp., NCR, NCR Corp., NOVL, Novell Inc., NTAP, Network Appliance Corp., NUAN, Nuance Comms., ORCL, Oracle Corp., PACT, Pacificnet Inc., QSFT, Quest Software Inc., RACK, Rackable Systems Inc., SAP, SAP AG, SAPE, Sapient Corp., SUNW, Sun Microsystems Inc., SY, Sybase Inc., TIBX, TIBCO Software Inc., UIS, Unisys Corp., VIGN, Vignette Corp., WEBM, WebMethods Inc., WEBX, WebEx Communications Inc., YHOO, Yahoo Inc., bull call debit spreads, covered call investment strategy, investment strategy, iron condor, option income, poweroptions, selling naked puts, stock option trading, stock options[/tags]