IBM (NYSE:IBM) is set to announce its Q1 earnings on April 17, 2012. While we expect the company to show solid revenue growth, the first quarter is generally the cyclical low for financial results. We expect that big data solutions, analytics and cloud computing services are going to drive revenue growth this quarter. The shift to services such as the Smarter Planet initiative is expected to have an upward effect on gross margins. Revenue growth has been higher than expected in the last few quarters due to the base effect of 2010, and this is likely to be lower in 2012. It currently competes with Accenture (NYSE: ACN) and Hewlett-Packard (NYSE:HPQ) in the enterprise software market.
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Focus On Cloud and Analytics To Help Margins
As corporations deal with complex data, there has been an increased focus on business analytics and cloud computing. This is likely to help lift margins as it has pricing power in such services and will continue to do so until more players get into this space. Comprehensive data analytics and business decision services are currently being deployed for retail chains, power grids, transportation services and supply chains as a part of the Smarter Planet initiative. This coupled with cloud services for efficient data storage and processing provides an opportunity for IBM to support margins going forward. 
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Shifting Focus To Emerging Markets
In its annual filing for 2011, it has outlined a strategy to focus on emerging economies in providing IT infrastructure and solutions for primary industries and this focus will likely drive revenues for 2012.  Though a major change is not expected for Q1 due to the annual cycle, we expect this to show up in the later quarters of 2012. China, India and Brazil will contribute to this growth though we would keep an eye on lower growth in Europe given the macro challenges in this region.
We currently have a $219 Trefis price estimate for IBM which is about 8 percent higher than the current market rate.Notes: