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Computing giant

International Business Machines

(IBM) - Get International Business Machines Corporation Report

reported a 3% rise in its first-quarter earnings Tuesday, exceeding Wall Street's estimates. The increase was driven by strength in the company's server business, and Internet application software and business services units.

Still, IBM's shares fell in after-hours trading after rallying during the normal session, as the company posted lower revenues and projected some weakness in the second quarter. The stock closed regular trading up 3 1/4, or 2.9%, at 115 1/8, but fell back to 112 in after-hours trading, according to



The Armonk, N.Y.-based company's first-quarter net income rose to $1.52 billion, or 83 cents a diluted share, compared with $1.47 billion, or 78 cents a share, a year earlier. A poll of analysts by

First Call/Thomson Financial

had forecast earnings of 78 cents a share.

The rise in IBM's earnings occurred despite falling revenues. The company reported overall revenues fell 5%, to $19.3 billion, from $20.3 billion in the first quarter of 1999. Regionally, IBM's revenues in the Europe, Middle East and African regions were down 13%, to $5.4 billion. In the Americas, revenue was down 4%, to $8.4 billion. However, revenue in the Asia-Pacific region surged 15%, to $4.0 billion.

John Joyce, senior vice president and chief financial officer, said in a conference call that increased growth in Asia was attributable to a jump in demand for servers, PCs and in services. He added that IBM is also seeing growing opportunities in outsourcing, particularly in Japan.

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IBM says its aggressive investment in business-to-business Internet commerce initiatives, Internet hosting and wireless technologies will keep the company's growth on track through 2000.

"We continue to believe that 2000 will be a good year for IBM," said Louis V. Gerstner, chairman and chief executive officer at IBM.

Although Gerstner expressed confidence in the company's overall growth in 2000, Joyce noted that second-quarter earnings and revenues could continue to be affected by slower sales of memory chips, disk drives and other data storage systems.

But Joyce added that business should snap back in the second half of 2000, and expects double-digit growth in revenues and earnings through the second half of the year.

For the first quarter, declining revenues were largely the result of so-called "Y2K lockdowns" for its larger accounts, referring to the slowdown in computer and network purchases near the turn of the century, which some worried would cause computers to malfunction if they interpreted the year 2000 as 1900. The company also cited a drop in revenues from its disk-drive operations as prices in that sector have declined precipitously.

The company's hardware revenues decreased 12%, and revenue from its enterprise investments units, which includes customized hardware and software products, fell 13%. Part of that drop was attributable to a 8% drop in revenues for personal computer systems.

Global services revenues were flat due to the sale of the company's Global Network last year to



, and a sharp year-over-year decline in Y2K services.

Revenues from the company's global financing unit rose 15.8% and software revenues were up 0.2% largely because of strength in the company's database and Lotus Notes product lines.

The company also spent about $2.1 billion on common stock repurchases in the first quarter, shrinking the number of outstanding shares to 1.78 billion vs. 1.82 billion a year earlier.