INTERNATIONAL BUSINESS MACHINES CORP. $162 - New York symbol IBM

INTERNATIONAL BUSINESS MACHINES CORP. $162 (New York symbol IBM, Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 997.6 million; Market cap: $161.6 billion; Priceto- sales ratio: 1.8; Dividend yield: 2.7%; TSINetwork Rating: Above Average; www.ibm.com) is selling its computer chip manufacturing operations to Globalfoundries Inc.

However, IBM will not get any payment for these assets. Instead, it will pay $1.5 billion to Globalfoundries to take over this money-losing business. IBM has also agreed to buy chips from Globalfoundries for the next 10 years.

This move is part of IBM’s plan to focus on its more-profitable computer services and software divisions.

Even so, many of its corporate clients are spending less on new computers as the global economy slows. That’s mainly why IBM’s revenue in the third quarter of 2014 fell 4.0%, to $22.4 billion from $23.3 billion a year earlier. Earnings fell 18.1%, to $3.7 billion from $4.5 billion, while earnings per share declined 9.8%, to $3.68 from $4.08, on fewer shares outstanding.

IBM now expects that it will earn $16.15 a share in 2014, down from its earlier forecast of $18.00. The stock trades at just 10.0 times the new estimate. However, IBM’s strategy should spur its earnings as the economy rebounds. As well, the $4.40-a-share dividend seems safe and yields 2.7%.

IBM is still a buy for long-term gains.

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