Updated from 4:24 p.m. EDT

IBM

(IBM) - Get Report

delivered first-quarter results

largely as expected -- an earnings-per-share figure above analysts' estimates and revenue down 10% but in line with the Street's anticipation.

But investors saw enough to like in the news: Shares of IBM rose $1.04, or 1.3%, to $84.35 in after-hours trading on Instinet following the announcement. The stock also gained earlier in the day, closing the regular session up $1.67, or 2.1%, to $83.39.

The technology giant said after the bell Tuesday that it posted income from continuing operations of $1.7 billion, or $1.08 a share, up from $1.4 billion, or 85 cents a share, a year earlier.

Revenue slipped 10% to $20.7 billion, but was up 4% when adjusting for currency and the divested PC business.

A Thomson First Call survey had expected the company to earn $1.05 a share on revenue of $20.72 billion.

"Overall, IBM hit the first quarter on the button," said Bob Djurdjevic, president of Annex Research, who owns Big Blue shares. "The company is on the slow track to improvement."

IBM's global services unit, which encompasses more than half of the company's business, made $11.6 billion in revenue, a decrease of 1% but up 3% when adjusted for currency. Short-term signings were up 5% and long-term signings were up 20%. New signings for the quarter totaled $11.4 billion, with a backlog of $111 billion.

"We are beginning to see the expected turnaround in our services business, driven by long-term signings growth over the past four quarters," IBM CFO Mark Loughridge said. "We see good opportunities there over the long term."

"For something that had been the crown jewel for IBM, these are small increases," Djurdjevic acknowledged. He will be watching to see if the restructuring of the global services unit into two parts -- global technology services and global business services -- will yield better returns. This was the first quarter that IBM reported global services in two parts.

In the service business, being bigger can mean being slower and not as responsive to customers, Djurdjevic said.

Djurdjevic referred to IBM's decision to split global services as an "amoeba syndrome. The entity splits itself up in order to grow," he said. "So the sum of the parts in the service business tends to be greater than the whole. I think it's a step in that direction. It acknowledges that the size was a problem and they did something about it."

Hardware revenue fell 32% (31% when adjusted for currency) to $4.6 billion, from $6.8 billion a year earlier, which included revenue from the divested PC business. Excluding the PC business, hardware sales were up 3% (or 6% when adjusted for currency).

Thanks to strong demand from the games-processor businesses, microelectronics revenue grew 37% year over year.

Software sales totaled $3.9 billion, up 2% (or 6% when adjusted for currency) from the year-ago quarter. Growth was driven by middleware, the company said. Revenue from WebSphere and Tivoli was notably strong, up 26% (or 30% at constant currency) and 24% (or 28% at constant currency), respectively.

Gross profit margin was 39.1%, up 3.1 points from the same quarter last year. Excluding the divested PC business, gross margin was up five-tenths of a point.

Samuel J. Palmisano, IBM chairman and chief executive officer, said that "IBM had a good quarter with excellent earnings-per-share results. We continued to improve our profit performance with our strategic focus on higher-value segments of the marketplace, as well as with our emphasis on productivity and global integration."

For the next, or current, quarter, Thomson First Call analysts predict, on average, that Big Blue will make $1.28 a share on sales of $22.05 billion.