Could Big Blue Be Ready for a Comeback?

While new tech-stock offerings continue to elbow each other for investors’ attention, could IBM Corp. be waiting in the wings to grab the spotlight back?

IBM shares surged last week after a Lehman Bros. analyst released monthly survey data showing the potential for strong quarterly growth in IBM’s mainframe computer sales.

In a research note, Lehman analyst Don Young said an analysis of monthly data on demand for IBM mainframe capacity showed that total customer demand was up 80% in the first quarter compared with the same period a year ago.

IBM’s stock jumped $7.25 to $117.375 on Tuesday after Young’s report was released, and the stock inched up further by week’s end, to close Thursday at $117.75. It had been languishing near $110 for two weeks, down from a 1996 high of $128.875 reached in February.

The mainframe rumor “kind of warmed up the stock,” said Michael Murphy, publisher of California Technology Stock Letter in Half Moon Bay, Calif. The shares had fallen in recent weeks on fears of slower PC sales in the U.S. and weak mainframe computer demand in Europe, which accounts for nearly half of IBM’s mainframe business.

Several analysts noted that the stock’s gains may have accelerated when some short-sellers chose to cover their positions as the stock suddenly surged Tuesday.

“As soon as the rumor started, [short-sellers] just got out of the way,” said Murphy, who said he personally doubted whether first-quarter mainframe demand in Europe was as strong as the Lehman data suggested.

Lehman’s Young said his monthly survey of mainframe demand for MIPS, or millions of instructions per second, of mainframe computer capacity showed demand for IBM’s newer CMOS-based mainframes was exploding.

Young also noted that working in favor of the stock may be the absence of any cautionary comments from IBM regarding first-quarter earnings, which are due to be announced next week.