NEW YORK (TheStreet) -- IBM (IBM - Get Report) on Tuesday reported fourth-quarter earnings that beat expectations, but revenues came in light.

For the full year, IBM reported adjusted earnings per share of $16.99, beating expectations of $16.88. The EPS result excludes the impact of second-quarter workforce balancing charges. The "all in" EPS was $16.28, but there was no all-in consensus to compare it with.

Looking specifically at the fourth quarter, IBM reported operating earnings of $6.13 a share versus the consensus target of $5.99. Revenue came in at $27.7 billion, down 5% and below the average expectation of $28.25 billion as upbeat software and cloud performance helped offset the continued drag from its poorly performing hardware business and a strong dollar currency. IBM's tax rate was 11% in the quarter, down 13.4 points year over year, reflecting a number of discrete items including an audit that covers three years of tax returns from 2008 to 2010.

IBM is reportedly trying to divest of its worst performing hardware businesses, namely its xSeries line, as it continues to shift its focus away hardware, to software and services.

Citing people familiar with the matter, the Wall Street Journal reports that IBM is trying to sell its x86 server operation, with Dell and Lenovo looking at the business.

Revenues from the Software segment were up 3% to $8.1 billion. Cloud computing generated more than $4 billion in revenue, up 69%, and ended the year with an annual run rate of more than $2 billion in cloud revenue delivered as a service.

Sales from the Systems and Technology segment totaled $4.3 billion for the quarter, down 26% from the fourth quarter of 2012. Total systems revenue decreased 25%. Global Technology Services segment revenue decreased 4%.

Tallying up the full-year, IBM returned $17.9 billion to shareholders through $4.1 billion in dividends and $13.9 billion of gross share repurchases.

For the 2014 year, IBM is expecting operating EPS of at least $18, compared with $16.28 for 2013, an increase of more than 10%. That's slightly above the Wall Street EPS target of $17.97.

Shares were down 2.09% to $184.38 in afterhours trading.

-- Written by Andrea Tse in New York.

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