IBM Earnings Dissappoint -- As Expected

IBM's second-quarter earnings report has just hit the wires and the stock has dropped over 3.25% in after-hours trading. Revenue was below analysts' consensus at $23.7 Bil, while EPS came in at $2.61 per share. I published my estimates for the Tech Giant on June 15th and advised my readers to "Buy Puts" just before today's market close. Once again, it appears that another Trading Recommendation has been proven accurate.  If the stock opens tomorrow's session at it's current after-market price, those who followed my advice would incur a gain on their option position of approximately 30%.

IBM's Q2 Earnings Report

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Disclaimer:
· At the time of publication, I do not have any open positions.
· Opinions, estimates and projections contained in this report are of the author as of the date published and are subject to change without notice.
· This report is not, nor should it be construed as, an offer to sell or solicitation of an offer to buy any securities.
· Unless otherwise noted, all research reports provide information of a general nature and do not address the circumstances of any particular investor.
· It is important to do your own due diligence on any position you enter.

Virtualization

VMware, Inc

Q2 Rev Est.:  $658.24 M

Q2 EPS Est.:  $0.33

On average, analysts are expecting second-quarter revenue for VMware, Inc (“VMW”) to come in at $654.02 M with earnings of $0.32 per share.  Both of these figures are lower than my estimates of $658.24 M in revenue and $0.33 in earnings.  Shares of the software maker have risen a shocking 70% year-to-date.  This is in comparison to the DJI being slightly negative over the same time period.  Even more spectacular is the 1-year chart, showing a 140% increase in VMW share price compared to a < 20% rise in the DOW.  With the estimates that I have generated, there is a 3.13% EPS surprise built in.  While this is a seemingly positive indicator, readers must be aware that this is in comparison to an average surprise of 14.7% over the previous four quarters.  As a result of these factors, I have decided to place a buy puts Trading Recommendation on the stock. 

Income Statement
For the three months ended June 30, 2010
Total Revenue	$658,239
Operating Ex:
Cost of License Rev	$13,436
Cost of Services Rev	$66,952
R&D	$128,622
S&M	$212,282
G&A	$60,140
Operating Income	$176,806
Investment Income	$926
Interest Ex.	-$991
Other Ex.	-$1,836
Income before Taxes	$174,906
Taxes	$36,730
Net Income	$138,175
Diluted EPS	$0.33

Trading Recommendation:  Buy Puts

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VMW Ownership

Author:   NO

Author’s Family:  NO

Disclaimer:
· Opinions, estimates and projections contained in this report are of the author as of the date published and are subject to change without notice.
· This report is not, nor should it be construed as, an offer to sell or solicitation of an offer to buy any securities.
· Unless otherwise noted, all research reports provide information of a general nature and do not address the circumstances of any particular investor.

· It is important to do your own due diligence on any position you enter.

Cappuccinos!

Starbucks Corporation

Q3 Rev Est.:  $2.62 Bil

Q3 EPS Est.:  $0.30

On average, analysts are expecting $2.55 Bil in third-quarter revenue for Starbucks (“SBUX”) with earnings of $0.29 per share.  Both of these figures are below my estimates of $2.62 Bil in revenue and $0.30 in earnings.  Shares of the premium coffee maker have risen more than 80% over the past twelve months and 12.5% year-to-date.  Going into the late-July announcement, I am cautiously optimistic.  SBUX has a history of high earnings surprises.  If the stock is below $25 the day of the release, I recommend buying calls. 

Income Statement
For the three months ended June 27, 2010
Total Net Revenues	$2,618.83
Cost of Sales	$1,099.91
Store Operating Ex.	$856.36
Other Operating Ex.	$65.46
Depreciation	$133.92
G&A	$141.42
Restructuring	$8.16
Total Operating Ex.	$2,305.21
Income from Equity Investees	$35.80
Operating Income	$349.42
Interest Income	$11.78
Interest Ex.	-$8.27
EBT	$352.93
Taxes	$122.42
NC Interests	$0.81
Net Income	$229.70
Adj:  Restructuring	$5.14
Net Income for EPS	$234.84
Diluted EPS	$0.30

Trading Recommendation:  Buy Calls (read above)

For more on what a “Trading Recommendation” means, please click HERE.

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SBUX Ownership

Author:   NO

Author’s Family:  NO

Disclaimer:
· Opinions, estimates and projections contained in this report are of the author as of the date published and are subject to change without notice.
· This report is not, nor should it be construed as, an offer to sell or solicitation of an offer to buy any securities.
· Unless otherwise noted, all research reports provide information of a general nature and do not address the circumstances of any particular investor.

· It is important to do your own due diligence on any position you enter.