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IBM Serves Up a Beat

NEW YORK ( TheStreet) -- Boosted by increases in mainframe, software and services revenue, International Business Machines (IBM - Get Report) topped Wall Street's expectations for its fourth-quarter results by a healthy margin.

After the closing bell, Big Blue reported adjusted earnings of $4.18 per share on sales of $29 billion for the three months ended Dec. 31, well ahead of the average estimate of analysts polled by Thomson Reuters for a profit of $4.08 per share on revenue of $28.26 billion.

The company's gross profit margin came in at 49%, up 0.8 points year-over-year.

"We completed an outstanding year, with record profit and free cash flow, and exceeded the high end of our 2010 earnings per share roadmap objective," said Sam Palmisano, the company's chairman, president and chief executive officer, in a prepared statement. "As IBM enters its second century, we will continue to focus on our long-term strategic initiatives -- growth markets, Smarter Planet Solutions, cloud and business analytics -- as we drive to achieve our new roadmap target of operating earnings per share of at least $20 in 2015."

IBM said revenue from its business analytics business, which the company hopes to grow in 2011, was up 19% from last year's equivalent quarter. Last week, the Dow component introduced the world to Watson, its supercomputer that can somewhat understand English as it is naturally spoken. To demonstrate Watson's ability -- and appeal? -- IBM has set up a series of Jeopardy! matches between Watson and two long-running Jeopardy! champs, shows that will air Feb. 14 - 16.

While the game show setting is intended to introduce the computer to the masses, IBM has longer-term plans for the software that powers Watson. IBM said that eventually, corporate clients should be able to use Watson's technology to more efficiently process -- and make sense of -- data.

For 2011, IBM forecast non-GAAP [generally accepted accounting principles] earnings of at least $13 per share. Wall Street's current consensus estimate is for earnings of $12.58 a share in fiscal 2011.

IBM shares were last quoted at $154.30, up 2.4%, on volume of more than 700,000 in extended trading, according to Nasdaq.com.

--Written by Maggie Overfelt in New York.

>To follow the writer on Twitter, go to http://twitter.com/maggieoverfelt.

>To submit a news tip, send an email to: tips@thestreet.com.

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