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IBM Earnings Beat, but Revenue Falls Short

CNBC.com With Reuters
Tuesday, 16 Oct 2012 | 5:07 PM ET

International Business Machines reported quarterly earnings that beat analysts' expectations on Tuesday, though revenue fell short as demand for its software services and tight cost management offset the effect of a stronger dollar on the technology and consulting company.

After the earnings announcement, the world's largest technology-services company's shares fell in extended-hours trading. (Click here to get the latest quotes for IBM.)

IBM, which has shifted its focus to higher-margin software and services from tech products, posted third-quarter earnings excluding items of $3.62 per share, up from $3.28 a share in the year-earlier period.

Revenue eased 5 percent due to a negative currency impact of almost $1 billion, decreasing to $24.7 billion from $26.16 billion a year ago.

Inside IBM's Report
Shaw Wu, Sterne Agee analyst, discusses the worries that are weighing on "Big Blue", and explains why he has a "buy" rating on the stock and $230 price target.

Analysts had expected the company to report earnings excluding items of $3.61 a share on $25.36 billion in revenue, according to a consensus estimate from Thomson Reuters.

In a conference call following the earnings report, IBM said the first two months of the quarter were stronger than the third and that the weakness was in global business services and software — in North America and growth markets. In software, a few big deals fell out, which accounted for some of the revenue shortfall, the company said.

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