International Business Machines Corp.

INTERNATIONAL BUSINESS MACHINES CORP. $193 (New York symbol IBM, Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 1.2 billion; Market cap: $231.6 billion; Price-to-sales ratio: 2.1; Dividend yield: 1.8%; TSINetwork Rating: Above Average; www.ibm.com) started up in 1911, which makes it the world’s oldest computer company. IBM now operates in over 170 countries.

The company has long been known as a maker of mainframe computers. However, these products supplied just 18% of its revenue in 2011. That’s because IBM continues to expand into more profitable areas, like designing computer systems and managing them for clients (56% of revenue) and selling software (23%). Its financing division supplies the other 3%.

The company often uses acquisitions to enhance its expertise. In the three months ended March 31, 2012, it spent $1.4 billion buying smaller firms. It’s particularly interested in companies that specialize in analytics software, which helps businesses track consumer purchasing and other data.

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INTERNATIONAL BUSINESS MACHINES CORP. $204 (New York symbol IBM, Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 1.2 billion; Market cap: $244.8 billion; Price-to-sales ratio: 2.2; Dividend yield: 1.7%; TSINetwork Rating: Above Average; www.ibm.com) continues to expand its analytics operations, which make software that helps businesses and governments quickly gather and analyze a wide range of data. The company recently paid an undisclosed sum for Toronto-based Varicent Software Inc. Over 180 banks, insurance companies and retailers use Varicent’s products to manage employee salaries and bonuses paid to salespeople. IBM is our #1 buy for 2012.

INTERNATIONAL BUSINESS MACHINES CORP., $199.60, New York symbol IBM, reported higher-than-expected earnings for the latest quarter. However, revenue fell short of the consensus estimate. That caused the stock to fall 2% this week. In the three months ended March 31, 2012, the company earned $3.1 billion. That’s up 7.1% from $2.9 billion a year earlier. IBM spent $3.0 billion on share buybacks in the latest quarter. Due to fewer shares outstanding, earnings per share rose 13.0%, to $2.61 from $2.31. Without unusual items, mainly costs to integrate acquisitions, IBM’s earnings per share would have risen 15.4%, to $2.78 from $2.41. On this basis, the latest earnings beat the consensus estimate of $2.65 a share....

INTERNATIONAL BUSINESS MACHINES CORP. $204 (New York symbol IBM, Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 1.2 billion; Market cap: $244.8 billion; Price-to-sales ratio: 2.2; Dividend yield: 1.7%; TSINetwork Rating: Above Average; www.ibm.com) continues to expand its analytics operations, which make software that helps businesses and governments quickly gather and analyze a wide range of data.

The company recently paid an undisclosed sum for Toronto-based Varicent Software Inc. Over 180 banks, insurance companies and retailers use Varicent’s products to manage employee salaries and bonuses paid to salespeople.

IBM is our #1 buy for 2012.

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INTERNATIONAL BUSINESS MACHINES CORP., $197.76, New York symbol IBM, is now developing software that helps prevent online data theft. The company’s analytics software already helps businesses and governments quickly gather and analyze a wide range of data. This technology is used in many ways, from easing traffic congestion in cities to making power grids more efficient. This week, IBM demonstrated software that can detect and prevent unauthorized access to databases by analyzing certain patterns, such as failed login attempts. This product could be in huge demand, particularly in light of recent high-profile attacks on U.S. government websites....

INTERNATIONAL BUSINESS MACHINES CORP., $190.46, New York symbol IBM, is our “Stock of the Year” for 2012. The company continues to benefit from its decision in the 1990s to focus on selling its expertise instead of computer hardware. IBM now gets most of its revenue from steady and predictable long-term contracts. That cuts its risk. The company is now using its strong profits to expand into promising new areas, such as online data storage and software that helps businesses analyze customer spending patterns. As well, IBM’s strong reputation is helping in expand in Asia and Latin America. That cuts its reliance on slower-growing regions like North America and Europe....

We’ve chosen IBM as our “Stock of the Year”for 2012. After nearly going bankrupt in the 1990s, the company decided to shift toward selling its expertise and away from making computers. IBM now gets most of its revenue from steady, predictable long-term support and maintenance contracts. That cuts its risk. The company is now using its rising profits to expand into promising new areas, such as cloud computing and software that helps businesses quickly analyze large amounts of data. IBM’s strong reputation is also helping it expand in Asia and Latin America. That makes it less reliant on slower-growing regions like North America and Europe....

INTERNATIONAL BUSINESS MACHINES CORP. $192 (New York symbol IBM, Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 1.2 billion; Market cap: $230.4 billion; Price-to-sales ratio: 2.1; Dividend yield: 1.6%; TSINetwork Rating: Above Average; www.ibm.com) is the world’s oldest computer company (it began operating in 1911), with operations in over 170 countries.

The company continues to profit from its move away from mainframe computers and toward designing computer systems and managing them on behalf of its clients. The resulting long-term maintenance contracts give it more dependable revenue streams. IBM now gets 55% of its revenue from services.

The company continues to rapidly grow its software business. Right now, it is particularly focused on developing analytics software, which helps businesses and government agencies gather and analyze a wide variety of data. In addition, IBM makes software for applications ranging from traffic management to power grids and food production. Software now supplies 25% of IBM’s overall revenue.

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INTERNATIONAL BUSINESS MACHINES CORP., $194.56, New York symbol IBM, continues to expand its software business. This week, it agreed to buy DemandTec Inc. (Nasdaq symbol DMAN), which makes software that retailers and makers of consumer products use to analyze their customers’ spending habits. This information helps them predict consumer behaviour and quickly adjust their prices. Adding DemandTec will also enhance IBM’s expertise in fast-growing area of cloud computing. IBM will pay $440 million for DemandTec when the sale closes in the first quarter of 2012. The company earned $3.8 billion, or $3.19 a share, in the three months ended September 30, 2011, so it can easily afford this purchase....

INTERNATIONAL BUSINESS MACHINES CORP., $185.24, New York symbol IBM, rose initially in response to news that Warren Buffett’s Berkshire Hathaway Inc. (New York symbol BRK.A) now owns 5.4% of IBM. However, the stock fell 1% for the week. This is Mr. Buffett’s first major investment in a technology company. IBM’s revenue and earnings growth has slowed recently, due to the weaker global economy, but its long-term outlook remains strong. The company continues to benefit from strong growth in emerging markets, like Russia and Brazil. Strong business growth in these countries is spurring demand for reliable computer services. By 2015, IBM feels these markets will supply 30% of its revenue, up from 23% now....