IBM's Smart World

In this year's letter to shareholders, IBM (NYSE: IBM) CEO Sam Palmisano says, "We will not simply ride out the storm. … Rather we will take a long-term view, and go on offense."

IBM has been firing on all cylinders lately. Earnings per share soared by 24 percent year over year in 2008, while sales rose 5 percent to $103.6 billion. Big Blue has nearly $13 billion in cash equivalents.

That sets IBM up to jump on the hottest opportunities out there. To Palmisano, that means investing in a new world order, using global interconnectedness to run everything "smarter," and tackling problems such as inefficient energy usage, traf- fic congestion, and unnecessarily expensive food production. All can be improved with technology. And IBM wants to be the company that makes it all happen.

IBM's early efforts in "smart" infrastructure technology around the world have already decongested Stockholm, improved water management in Brazil and started work on an automated power grid in Malta. IBM has also partnered up with Google for smarter electronic storage of health records.

With such a large war chest and a welldefined plan of attack, IBM seems poised to make this "smart world" vision a reality, but that's not to say there won't be competition. Still, with a recent P/E ratio around 10 and a dividend yield above 2 percent, IBM is an attractive blue-chip.