Overall gross margin was 40.6% in the third quarter, up from 36.5% in the third quarter last year and 39.4% in the previous quarter. Excluding the PC unit, gross margin was 40.0% in the third quarter last year.

Big Blue's services unit, which made up 54% of total sales, posted a 3.3% increase in revenue from a year ago to $11.69 billion. The unit, which suffered a major slowdown in the first quarter and then rebounded in the second quarter, marked its second consecutive quarter of increasing contract bookings, to $11 billion from $9.8 billion last year.

That's a sequential decline, however, from $14.6 billion in signings in the second quarter. Niles noted that shorter-term contract signings -- which he calls a good near-term indicator of the services unit's health -- dropped to $4.7 billion from $5.4 billion in the previous quarter.

Services backlog remained flat sequentially at $113 billion, which represents an increase of $3 billion from a year ago. The services unit's pretax operating margin improved by 1.1 points from a year ago to 9.7%.

On a post-close conference call, CFO Mark Loughridge did not provide explicit fourth-quarter guidance but offered some cryptic clues to help analysts adjust their estimates.

He told investors to "roll through" the company's third-quarter earnings upside to full-year results and to expect double-digit earnings growth for the fourth quarter and full year.

The CFO reiterated that the second half of the year would be characterized more by cost and expense management than by revenue growth, with the fourth quarter "similar in texture" to the third quarter even as the hardware unit benefits from a new mainframe cycle and video-game chip sales.