International Business Machines Corp. (IBM) Faces $2.5bn Lawsuit

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International Business Machines Corp. (NYSE:IBM) is facing a lawsuit filed by Iusacell SA de CV, a mobile operator in Mexico for allegedly making fraudulent representations, which resulted to its profit losses of approximately $2.5 billion.

Lawsuit details

According to Reuters, the Mexican mobile operator filed its lawsuit against the multinational technology and consulting company at the federal district court in New York. The report indicated that the complaint was heavily redacted, thus it hard to comprehend majority of the accusations against International Business Machines Corp. (NYSE:IBM).

The lawsuit centered on an agreement between Iusacell SA de CV and International Business Machines Corp. (NYSE:IBM) entered in Mexico. In its complaint, the Mexican mobile operator argued, “Events subsequent to the execution of the agreement have revealed that IBM both knowingly misrepresented and wrongfully concealed from Iusacell material facts both before and during the parties relationship.” Iusacell SA de CV is seeking $2.5 billion in damages.

IBM signs $500 million cloud deal

Separately, International Business Machines Corp. (NYSE:IBM) announced its six-year, $500 million technology services agreement with Hartford Financial Services Group Inc (NYSE:HIG) to implement a new service model including a private cloud infrastructure.

According to Andy Napoli, president of consumer markets and enterprise business services at Hartford Financial Services Group Inc (NYSE:HIG), “The partnership with IBM will help The Hartford implement a strategic technology infrastructure that will provide us with greater agility and offer us more flexibility and transparency as we continue to grow our businesses.”

Under the agreement, International Business Machines Corp. (NYSE:IBM) will also provide several other services related to mainframe, storage, backup and resiliency. Hartford will move to a private cloud-based infrastructure on IBM’s PureFlex System.

Earnings estimates

International Business Machines Corp. (NYSE:IBM) is scheduled to release its financial results today around 4:30 PM Eastern Time. Wall Street analysts expect the company to deliver an average of $2.54 earnings per share in $22.91 billion revenue for the first quarter of this year. During the previous quarter, IBM reported $6.13 earnings per share on $27.7 billion revenue.

Cantor Fitzgerald analyst Brian White is optimistic that the company will meet the firm’s expectation of $2.53 earnings per share for the quarter. He also expects all the business segments of International Business Machines Corp. (NYSE:IBM) to experience a sequential decline due to seasonality. He believed that IBM’s profit cycle bottomed out in the first quarter and investors will “warm up” on the stock this year. He recommended a Buy rating with a $220 price target for the stock.

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