IBM Hangs Tough (Update)

In the services business, the company has already closed 65% of its fourth-quarter forecast deals, Loughridge said. The head of the software unit reported seeing "the best pipeline he's ever had," Loughridge said. "On volume, it's up 8% [year over year]. On a dollar basis, it's up 18%."

Shares in the Armonk, N.Y. tech giant were recently up $2.18, or 2.4%, to $93.70 in after-hours trading.

In the third quarter, IBM's hardware division did suffer a setback, primarily due to 18% lower revenue on industry-standard x86 servers.

Revenue in the Systems and Technology Group fell 9.5% year over year to $4.4 billion. The group's revenue is based on sales of hardware systems.

"Industry standard [equipment] is not where we have the opportunity to show our value-add," Loughridge said. Storage system revenue also dropped 3% year over year. "As we go into fourth quarter, we have the opportunity for improved margins on x86," he said.

Server competitor Dell(DELL Quote) likewise warned of a decline in PC demand in the first half of September.

IBM scores higher margins on its premium equipment, such as the latest System z mainframe, on which revenue rose 25% year over year.

IBM's software group had the best quarter overall, at 11.8% growth year over year to $5.2 billion. The group benefits from sales of mainframes with follow-on sales of database software and middleware.

The services business lines, which includes consulting, technology integration and outsourcing, grew 7.9% year over year to $14.8 billion.