Morgan Stanley initiated coverage on IBM Corp. (IBM) with neutral.
Analyst Rebecca Runkle says core competencies and positioning should allow IBM to maintain, if not grow, key market shares in the next five years. However, valuation suggests limited upside from current levels. With the broadest and deepest product portfolio, as well as enviable account penetration, she thinks IBM is well positioned to weather the economic storm. The question is, will growth strategy finally kick in? Technology segment weakness and the potential slowdown in Services momentum, as well as investor concern about the Gerstner succession may provide more attractive entry points. She would be more aggressive at $85-$90. Runkle sees $4.33 2001 EPS, and $4.70 EPS for 2002.