IBM's quarterly profit rose 11 percent, but its shares fell more than 5 percent as the earnings failed to beat some investors' forecasts and computer hardware sales lagged some targets. The stock had been up 37 percent from a year low last July, raising expectations for the world's largest technology services company.
International Business Machines Corp's quarterly revenue was boosted by a string of software-firm acquisitions, while it also reported on Thursday $17.8 billion in services contracts, an indicator of future business and the best in four years.
Fourth-quarter net income advanced to $3.54 billion, or $2.31 per share, from $3.19 billion, or $1.99 per share, a year earlier. Revenue climbed to $26.3 billion from $24.4 billion. Earnings before special items were $2.26 per share, topping a $2.19 average Wall Street forecast based on Reuters Estimates.
IBM has been expanding in software, its most profitable business, and last year bought 11 software providers including Internet Security Systems Inc and FileNet Corp.
Technology services signings recovered after slumping earlier in 2006, as Armonk, New York-based IBM won deals from the German military and Britain's Vodafone Group Plc.
Revenue from technology services, IBM's largest unit, rose to $12.8 billion from $12 billion. The business's $17.8 billion worth of contract signings were up 55 percent from a year ago.
Chief Financial Officer Mark Loughridge told a conference call with analysts that IBM is optimistic heading into 2007, and is on track to grow 2007 earnings per share by a low-double digit percentage rate, reaffirming IBM's long-term outlook.