International Business Machines Corp.

BECKMAN COULTER INC., $47.26, New York symbol BEC, makes lab equipment that doctors and medical researchers use to detect substances in blood and other bodily fluids. The stock fell 21% on Friday after the company warned that problems with a test kit are hurting its sales and earnings. This test kit determines whether a patient has suffered a heart attack. Earlier this year, Beckman recalled the test kit, which accounted for 1% of its 2009 sales. The company is now working with the U.S. Food and Drug Administration to fix the problem. Beckman plans to begin clinical trials of the upgraded test kit next year....

MOTOROLA INC., $6.76, New York symbol MOT, has announced some of the details of its planned breakup into two companies. The company aims to complete the split in the first quarter of 2011. Motorola Mobility Inc. will make mobile phones and home-entertainment equipment, such as set-top boxes for receiving cable and satellite TV signals. The other company, Motorola Solutions Inc., will make communication equipment for large corporate clients, including telephone companies. Each of these businesses accounted for roughly half of Motorola’s 2009 revenue. The breakup makes sense for Motorola. That’s because its two main businesses have little overlap: The mobility business focuses on individual consumers, and the solutions business sells its products to large corporations. It also provides companies with financing for their purchases....

Computer Sciences Corp., $49.19, symbol CSC on New York (Shares outstanding: 154.2 million; Market cap: $7.6 billion), sells software and computer-outsourcing services to businesses and government agencies. The company’s products and services help its customers automate routine functions, such as accounting and purchasing. That lets Computer Sciences’ clients focus on their main businesses, and improve their efficiency. The company typically enters into long-term contracts with its clients. That gives it steady, predictable revenue streams. Long-term contracts also let Computer Sciences build customer loyalty, and sell more services to its existing clients....

INTERNATIONAL BUSINESS MACHINES CORP., $125.26, New York symbol IBM, continues to expand its business-software operations. That’s because it earns higher profits from selling software and computer-management services than selling mainframe computers. This week, the company agreed to buy Sterling Commerce from AT&T (see below). Ohio-based Sterling makes software that helps automate and streamline transactions between businesses, such as buying raw materials and replenishing inventory. Sterling has over 18,000 clients. The sale will close later this year. IBM is paying $1.4 billion for Sterling. To put this figure in context, IBM earned $2.6 billion, or $1.97 a share, in the three months ended March 31, 2010....

INTERNATIONAL BUSINESS MACHINES CORP., $131.19, New York symbol IBM, aims to double its earnings to $20 a share by 2015. To achieve this goal, IBM will expand in developing markets like Russia, India, Brazil and China. These countries are attracting more business activity as their economies grow. That’s increasing the need for IBM’s mainframe computers and technical expertise. By 2015, IBM aims to get 25% of its revenue from these markets, up from 19% last year. The company will also continue to spur its growth by purchasing related companies and assets. It will probably spend $20 billion on these purchases through 2015. That’s equal to 12% of its $170.4-billion market cap....

HEWLETT-PACKARD CO., $51.97, New York symbol HPQ, is buying smartphone-maker Palm Inc. (Nasdaq symbol PALM) for $1.2 billion. About $1 billion of the purchase price will be in cash; the remaining $200 million consists of Palm’s debt. Hewlett holds cash of $13.6 billion, or $5.79 a share, so it can easily afford this purchase. The deal should close by July 31, 2010. Palm sells mobile-computing and communication devices to consumers and businesses worldwide. The company has one main product line: smartphones, which it sells under the Treo, Centro, Pre and Pixi brands. The Pre and Pixi smartphones use the webOS operating system. Palm will strengthen Hewlett’s own line of wireless devices. It should also help Hewlett compete as more people access the Internet through mobile devices instead of desktop and laptop computers. As well, Palm’s software expertise will help Hewlett develop new products. For example, Hewlett is working on a touch-screen tablet computer that would compete with Apple’s iPad....

INTERNATIONAL BUSINESS MACHINES CORP., $129.99, New York symbol IBM, fell slightly this week, even though it reported higher-than-expected earnings and revenue. In the three months ended March 31, 2010, IBM’s earnings rose 13.3%, to $2.6 billion from $2.3 billion a year earlier. Earnings per share rose 15.9%, to $1.97 from $1.70, on fewer shares outstanding. Revenue rose 5.3%, to $22.9 billion from $21.7 billion. These figures beat the consensus estimates of $1.93 a share in earnings on revenue of $22.8 billion. The gains were mainly driven by higher revenue at IBM’s mainframe computer and software divisions. As well, the company gets two-thirds of its revenue from foreign markets, and the lower U.S. dollar enhanced the results of its overseas operations....

When we’re picking stocks to recommend in our newsletters, including Wall Street Stock Forecaster, our publication that covers the U.S. markets, we like to see companies that benefit from steady revenue streams from high-quality assets, long-term contracts or other reliable sources. That’s because this type of revenue helps cut a stock’s risk. It also cuts its exposure to the ups and downs of the economic cycle.

This Wall Street stock’s shift has helped steady its revenue

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APPLE INC., $235.97, Nasdaq symbol AAPL, rose 2% this week on media reports that the company will soon launch a new version of its hugely popular iPhone. Aside from being thinner than the current iPhone, the new model will likely have more memory and a number of new features. Apple may also be developing an iPhone that runs on code division multiple access (CDMA) cellphone networks. Right now, the iPhone uses global system for mobile communications (GSM) technology. More cellphone providers use GSM than CDMA. However, some large U.S. carriers, including Verizon (see below) and T-Mobile, use CDMA networks. A CDMA iPhone would let Apple expand its market share by making the iPhone available to these carriers....

We’ve chosen IBM as our Stock of the Year for 2010. That’s no guarantee of gains, of course. But it does tell you we feel IBM seems to offer above-average if not great returns this year, but with below-average risk. In the past decade, IBM has transformed itself from a computer maker to a computer-services provider. That’s because selling its expertise generates higher profits than selling computer hardware. Its services help clients cut costs and improve productivity, so demand should rise now that the global economy is growing again. IBM’s strong brand and reputation are also helping it expand in fast-growing countries like China, India and Brazil. As well, the continuing growth of Internet banking and the online selling of goods should fuel its earnings for years to come....