IBM 3Q profit jumps 20 percent

SAN FRANCISCO -- IBM Corp.'s third-quarter profit jumped nearly 20 percent, surpassing analyst estimates, as the technology company overcame slumping hardware sales and signed a healthy number of new services contracts.

The Armonk, N.Y.-based company had released partial results for the July-September period last week to try to reassure investors who had been driving down the company's stock price. The move helped stop a steeper decline, but Wall Street was still waiting for word about how much new business IBM brought in during the period.

In a closely watched indicator, IBM signed $12.7 billion in new services contracts in the quarter, down 4 percent, which still showed it was able to lock in lots of new business despite the tough economic times. Short-term contract signings were up 13 percent to $6.1 billion.

IBM gets about half its revenue from annuity-like payments flowing from contracts it may have inked months or years ago for services like consulting or technology outsourcing.

Profit came in two cents per share ahead of analysts' recently revised estimates.

IBM earned $2.82 billion, or $2.05 per share, in the three months ended Sept. 30. That compares with net income of $2.36 billion, or $1.68 per share, in the year-ago period.

Analysts surveyed by Thomson Reuters were expecting $2.03 per share.

Sales fell short, however.

IBM's revenue grew 4.9 percent to $25.3 billion. Stripping out currency fluctuations, sales grew 2 percent. Analysts expected $25.9 billion.

Sales were hurt by a 9.5 percent decline in the hardware business, which includes mainframes and computer servers. While mainframe sales were up 25 percent, one line of servers saw an 82 percent plunge.

IBM shares gained 65 cents to $92.17 in extended trading after IBM reported its results. The stock gained $3.23, 3.7 percent, to close at $91.52 during the regular trading session.