IBM - the mainframe event A company expanding at 10 per cent a year seems, irrationally, very different from one growing at a mere 9 per cent. Double-digit gains are dynamic; anything less, a bit dull. The number is especially important for IBM, which must increase earnings per share at a rate of 10 per cent to hit its much-trumpeted goal of $20 a share by 2015. Until the end of 2011, IBM was on track to exceed its target. EPS growth was humming along at 15 per cent. But even beautifully-managed IBM is not immune to a sluggish economy. Gross profit growth at IBM's two most important businesses, tech services and software, has slowed to nothing in 2012. Hardware profits have been shrinking as the company awaits the start of a new product cycle in mainframe computers. In the third quarter, reported on Tuesday, IBM's EPS growth was 10 per cent on the nose, 5 percentage points lower than a year earlier. The company, for the first time since the first quarter of 2009, did not raise its annual earnings per share target. The slide in the equipment business accelerated. Suddenly, $20 does not look like such a low bar. The shares fell almost 4 per cent in late trading. IBM might turn things round soon, especially in mainframes, where new products are just now hitting the market. There is another issue to consider as well, though. IBM's five-year plan for 2011-15 calls for the company to devote, on average, $10bn a year to share repurchases. For the past several years repurchases have been roughly $15bn a year, boosting EPS growth (and adding leverage to the balance sheet). If IBM sticks to its plan, the pace of buybacks is going to come down and, indeed, it looks to be doing so already. A key support for growth may weaken just when IBM needs it most. There is a reason not many big companies grow at 10 per cent. It's hard.