International Business Machines Corp. (NYSE: IBM) has recovered handily from its lows since the last earnings report as it is now effectively all under control of new CEO Virginia Rometty now that Sam Palmisano has announced the coming exit of the chairman post. Shares are playing some give back after the report, and with IBM being the highest priced DJIA component this could skew the market to the downside on Wednesday.

IBM's earnings on a comparable basis were $3.62 in non-GAAP earnings per share and total revenues for the quarter were down by 5% (2% if adjusted for currency) to $24.7 billion. Estimates from Thomson Reuters were $3.61 EPS and $25.36 billion in sales. IBM said that its total gross profit margin was 47.4% in the 2012 third quarter compared with 46.5% in the 2011 third-quarter period.

The estimated services backlog was up 1% year over year to $138 billion at the end of the quarter. That backlog figure was $136 billion just one quarter ago. IBM reiterated its full-year 2012 operating earnings per share expectation of at least $15.10.

Shares closed up 1% at $211.00 against a 52-week high of $211.79, but shares are down over 3% at $203.55 or so after its earnings report. As a reminder, the DJIA is a price-weighted index and this is the heaviest weighting at almost 12% of the total 30-component stock index. In short, IBM could drag down the DJIA by as much as about 50 points if all of the other 29 components remain static on Wednesday.

JON C. OGG


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