International Business Machines (IBM) Corp's software sales may be hurt because of the war in Iraq, according to Thomas Weisel Partners analyst David Grossman.
Grossman lowered his estimates for first-quarter revenue at IBM, the world's second-largest software company, to US$19.7 billion from US$20 billion, and cut his earnings forecast to US$0.76 a share from US$0.79.
He maintained a "buy" rating. Analysts have forecast sales of US$19.9 billion and earnings of US$0.79, the Thomson Financial average forecast.
Computer-related companies including Oracle Corp, Microchip Technology Inc and Gateway Inc have said concern about the war is preventing some clients from buying. The concern is most likely to affect sales of large contracts, Grossman wrote.
"We are concerned about the ongoing reluctance of companies to close big deals in the fiscal first quarter, and with war clouds looming during the final end-of-the-quarter push," Grossman wrote in a note to clients.
Not all investors agree that sales of computers, software and related services are being hurt by the war. They say the industry is still in the slump that followed the boom of the late 1990s.
IBM is the largest software company after Microsoft Corp.
IBM's software sales were US$13.1 billion last year, about 16 percent of overall revenue.
The company's other divisions are meeting his expectations, and there isn't a "fundamental shift" in IBM's overall business, Grossman said in an interview.
The company continues to make gains in databases against Oracle, the world's largest database company, he said. Orders for IBM's WebSphere program that's used to manage Web sites, such as EBay Inc's auction site, are getting larger, Grossman said.
He estimates WebSphere's sales at about US$200 million a quarter.
The number of deals in IBM's Tivoli business, which makes security software, continues to decline, Grossman wrote.
The company's Lotus unit continues to encounter tough competition from rival Microsoft. Lotus' products include programs for instant messaging.
"This is a division we think IBM is gearing for a makeover to address a new market," Grossman says.
IBM spokesman Joe Stunkard declined to comment on his report.
Armonk, New York-based IBM is the world's largest computer maker and top seller of computer services such as running help desks and Web sites.
The company's shares declined US$1.90 to US$81.55 at 4pm in New York Stock Exchange composite trading. They have declined 20 percent in the past year.
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