Updated from 4:44 p.m. EST

IBM's

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fourth-quarter revenue came in a little lighter than Wall Street was expecting at $22.8 billion, with earnings of $1.33 a share.

Reporting after the bell Thursday, IBM earnings sneaked past Wall Street consensus estimates of a holiday profit surge to $1.32, while revenue missed the Street's $23.7 billion projections, as gathered by Multex.com.

In after-hours trading on Instinet, IBM was down $4.90, or 4.1%, to $115. Investors had something different in mind during Thursday trading, when IBM shares moved up 2% to $119.90 ahead of the news.

IBM sales fell 11% year over year from the fourth quarter of 2000's $25.6 billion, while profits dropped 10%. The technology giant recovered from a poor third quarter, though, pushing revenue forward 12% and growing profits 48%.

CEO Louis Gerstner singled out the PC segment as well as the technology group that includes original equipment manufacturing of storage subsystems and chips as two laggards that dragged down IBM's results. IBM considers both those units primed for a turnaround, and said that in doing so during 2002, it would be able to meet current consensus forecasts for 2002 revenues of $91 billion and $4.81 a share earnings, 6% and 11% increases, respectively, from 2001 results.

IBM did not further elaborate on its first quarter or the rest of 2002, declaring that the economy would tell the tale. CFO John Joyce attempted to deflate theories that if the economy improves, customers will move from conservative dealings with IBM and go back to the less-stable small vendors. "There will be no telecoms and dot-coms waiting with open checkbooks," Joyce quipped.

Wall Street will not be thrilled with a slowdown in progress at IBM's Global Services unit, which grew revenue 5% from the third to fourth quarters to $9.1 billion, but was able to eke out only a 1% improvement in the fourth quarter of 2001 when compared with the final quarter of 2000.

The admired services unit posted 5% year-over-year growth in the third quarter. Joyce attributed the stunted revenues to a late-quarter surge in orders that left $15 billion in signings out of the fourth-quarter's reach. "We expected a fairly fast start" to the quarter, Joyce said. "Customers did sign by the end of the year, but it came very very late? We did not get any revenue from those contracts in 2001."

Hardware-segment numbers rebounded 16% sequentially, however, going from the third quarter's $7.5 billion to $8.7 billion. PC and printing segments pulled down the group, improving 3% from the depressed third quarter with $2.93 billion in revenues but sagging 31% year over year. The storage component and chip business, singled out by Gerstner with the computer unit, grew 5% sequentially, putting the PC business to shame.

PC problems aren't a good sign in a quarter that saw PC-heavy IBM competitors

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produce 14%, 7% and 24% sequential revenue gains, respectively. As an example of IBM's dedication to improving results in the PC segment, the company moved in early January to outsource its NetVista PC desktop manufacturing business to

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to reduce costs.

Given the hampered performance by the services segment, IBM was forced to save its praise for the software unit. With 80% of its revenues coming from middleware, the software group made a dramatic 19% sequential climb and an 8% gain from the fourth quarter of 2000. According to Joyce, software and services generated 80% of IBM's profits in 2001.