Longbow: IBM Pre-Announce Confirms Contract Mfg Weakness

Longbow Research analyst Shawn M. Harrison offers this morning a “read-through,” as he calls it, on IBM’s ( IBM ) Q3 pre-announcement from last night , and finds evidence in IBM’s lower-than-expected revenue to support a dim view of contract manufacturers. Writes Harrison: We estimate IBM is a high-single-digit percentage of revenue for Celestica ( CLS ) (storage, i and p series servers, and some x and z-series servers) and BHE (POS terminals), while IBM is a low-single-digit percentage of revenue for Flextronics ( FLEX ) (storage and high-end servers through Solectron), Jabil Circuit ( JBL ) (mid-range i and p series servers and POS terminals), and Sanmina ( SANM ) (mid to high-end servers and some storage). Accordingly, he’s modeling year-over-year declines in the relevant storage and computing businesses for Celestica and Jabil, but some increase for Flextronics and Sanmina. This morning, the stocks, however, are marching sharply upward along with the ... (link)