When it preannounced earnings on Oct. 8, Big Blue's revealed that its top line came up short of analysts' expectations, while beating the Street's earnings estimate. The company earned $2.05 a share, up 22% year over year, on revenue of $25.3 billion in the quarter. Analysts had been expecting EPS of $2.01 on revenue of $26.5 billion.
The shortfall came in the Systems and Technology Group, where revenue fell 9.5% year over year to $4.4 billion. The group's revenue is based on sales of hardware systems, such as x86 servers and mainframes.
warned of a decline in PC demand in the first half of September.
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.
Services contract signings of $12.7 billion was 4% lower year over year, while short-term services signings rose 13%, reflecting a shift in corporate spending patterns to covering only immediate business needs.
Net income rose 20% to $2.8 billion, from $2.4 billion, or $1.68 a share, in the year ago period.
Gross margin rose to 43.3% from 41.3% for the same quarter of last year.
The company spent $2.7 billion to repurchase shares on a cash basis.