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IBM's 3Q tops views but shares hit by worries

IBM Corp.'s third quarter was a textbook example of how the company makes money even in an uncertain economy. The results, reported Monday after the stock market closed, topped Wall Street's forecasts and demonstrated IBM's skill at increasing profits faster than its businesses are growing.

Net income rose 12 percent as the company wrung more out of its services and software divisions and got a lift from a new mainframe computer. Revenue rose 3 percent, or 4 percent excluding currency fluctuations.

IBM also raised its forecast slightly for the remainder of the year, in what has become a ritual in the company's quarterly reports.

But the flip side of being a company with a nearly eight-year streak of higher profits, and a stock that is trading at all-time highs, is that perceived missteps are punished swiftly.

Investors were apparently rattled by a dip in IBM's outsourcing business, and sent its shares falling 3.3 percent, or $4.73, to $138.10 in extended trading. The stock had finished the regular trading session up 1.3 percent, or $1.77, at $142.83.

IBM's results help Wall Street check in on corporations' appetite for new technologies, though it's a cloudy window. IBM has some unusual characteristics that help it ride out economic slumps, such as its enormous pipeline of long-term service contracts that provide steady revenue even when new sales dry up.

As the world's biggest provider of technology services, one key barometer for IBM is the number of services deals it signs during a particular quarter.


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