Big Blue's sales grew 9 percent, below Wall Street forecasts, while earnings rose 5 percent.
October 15, 2003: 4:46 PM EDT
By Paul R. La Monica, CNN/Money Senior Writer
NEW YORK (CNN/Money) - IBM's earnings grew 5 percent in the third quarter, in line with Wall Street forecasts, but sales came in a bit lower than analysts had expected for the world's largest computer maker.
Armonk, N.Y.-based IBM said Wednesday that net income rose to $1.8 billion, or $1.02 a share, in the quarter, from $1.7 billion, or 99 cents a share, a year earlier.
Sales rose 9 percent to $21.5 billion, below Wall Street's consensus estimate of $21.9 billion, according to First Call.
IBM (IBM: Research, Estimates) stock fell 2.5 percent in after-hours trading, according to Island ECN, after inching higher during the regular session.
International Business Machines Corp. CEO Sam Palmisano expressed some cautious optimism about the outlook for next year.
"We are beginning to see signs that the economy has stabilized. As we look to 2004, more customers are expected to increase their investments in information technology," Palmisano said in a statement. But he added that "it is too early to say that a rebound is at hand."
Sales in IBM's biggest division, global services, jumped 17 percent from a year earlier, due in large part to the acquisition of PricewaterhouseCoopers' consulting division earlier this year.
Another bright spot was software. IBM posted an 11 percent increase in software sales.
IBM has been stepping up its presence in these two areas since they are far more profitable than the business of selling computers and semiconductors.
To that end, IBM reported pretax operating profit margins of 22 percent for the software business and 11 percent for the services division while Big Blue's PC and chip divisions lost money in the quarter.
Total hardware sales fell 1 percent in the quarter although sales of servers and storage systems grew 6 percent.
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