ARMONK, N.Y. (
) -- Despite falling revenue,
beat analysts' estimates in its
and raised its 2009 profit outlook.
The tech bellwether posted revenue of $23.6 billion, down 7% on the same period last year but above analysts' estimate of $23.4 billion.
IBM earned $2.40 a share on net income of $3.2 billion, up from $2.04 a share and net income of $2.8 billion in the third quarter of 2008. Analysts surveyed by Thomson Reuters had expected earnings of $2.38 a share.
its profit forecast for 2009 and 2010, IBM also issued bullish guidance after the market closed. For fiscal 2009, the company now expects earnings of at least $9.85 a share, up from its previous estimate of $9.70. Analysts had forecast earnings of $9.78.
Despite a tough IT
, IBM continues to enjoy profit growth thanks to its focus on high-margin areas like services and software.
The company's gross profit margin reached 45.1% in the third quarter, up 1.8 points year-over-year.
"Our long-term strategic shift to higher-value businesses again enabled us to deliver outstanding margin, earnings and cash flow growth in the third quarter," said IBM CEO
, in a statement. "We also saw improved revenue trends in our business and share gains in hardware and software."
Palmisano said that he is "optimistic" about 2009, adding that the firm is ahead of pace in its plan to earn $10 to $11 a share in 2010. The company also expects 2009 pre-tax income for its software and services businesses to grow at double-digit rates and reach around $8 billion.
Total revenue from IBM's Global Services division, however, decreased 7% year over year, although pre-tax income increased 11%. Software revenue was $5.1 billion, down 3% on the prior year's quarter, although sales of middleware such as WebSphere and Tivoli grew 2%.
IBM's Systems & Technology group generated third-quarter revenue of $3.9 billion, down 12% on the same period last year. The company said that it gained share with its System p, System x, tape and disk storage products during the quarter.
IBM nonetheless faces a rapidly-changing competitive landscape, as evidenced by
"We have competed against them both for a long time," Jesse Greene, IBM's vice president of financial management, told
in an interview late Thursday. "We have proved that we can compete and take share against the competitors that exist in the marketplace - we did that this quarter."
The company's System p and System x products gained 5 and 2 share points, respectively, he added, highlighting direct competitors to Sun hardware.
IBM shares fell $4.78, or 3.72%, to $123.57 in extended trading.
-- Reported by James Rogers in New York