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IBM gains on optimism about Web plans

International Business Machines Inc. (NYSE: IBM) gained 15 1/4 to 240 3/4 on Thursday after the company told analysts yesterday that its Internet businesses was generating $20 billion of its revenue -- about one-quarter of all sales.

Chief executive Lou Gerstner was upbeat about maitaining double-digit growth at a meeting held for analysts held in New York on Wednesday.

After the meeting, SoundView Technology raised its 12-month share price target to $260 from $225. Merrill Lynch boosted its price target to $270, up from $240 and Goldman Sachs increased its forecast to 250 from 225.

"With 25 percent from e-business, IBM is becoming a quasi-Internet company," said Merrill analyst Steve Minulovich in a report. "We agree that IBM benefits as corporations stampede on the Net."

Big Blue handles big name Web sites, such as Federated Department Stores (NYSE: FD), owner of Macys.com, Intimate Brand's (NYSE: IBI) Vicotoria's Secret's Web site, as well as startrek.com.

Minulovich, who reiterated his "buy" rating, expects Big Blue to outsource more of its PC production and to make up for an overall drop in profit margins through its services. IBM is seen as having, if any, only fleeting problems relating to year-2000 issues, according to the report.

In its first quarter, IBM surprised the Street with strong sales growth in all its businesses, including PCs.