Quoted: on IBM’s surge

“I do think things like Watson and Smarter Planet are kind of aspirational things that investors kind of like. But the real resonating factors among investors are the discipline of the financial model and the ability to deliver against it.”

Toni Sacconaghi, an analyst at Sanford C. Bernstein, on IBM’s stock surge. The company’s shares closed about $200 for the first time this week,  and are up about 9 percent since the beginning of the year. Ashlee Vance of Bloomberg Businessweek writes about how IBM has remade itself  “as a kind of technology visionary,” as seen in its Smarter Planet commercials. The message seems to have resonated with Wall Street. But Sacconaghi points to good old numbers: 40 percent of the New York company’s profit come from “traditional” hardware and software, the industry in which it competes with Silicon Valley giants such as Hewlett-Packard and Oracle. IBM’s high-profile research isn’t pie in the sky, though. Watson, the analytical computer with the ability to understand national language that beat humans on Jeopardy last year, reportedly is taking a job on Wall Street. Citigroup will be the first financial institution to use Watson to process information that could, among other things, help it assess financial risk. And Bloomberg says Watson is already working in health care, a possibility GMSV reported last year. (See After man vs. machine on ‘Jeopardy,’ what’s next for IBM’s Watson.) IBM shares fell yesterday during Wall Street’s big sell-off, but are trading higher at about $198 as of this post.


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