Chips and middleware help IBM top quarterly profits

IBM inched three cents ahead of analysts' earnings expectations for the first quarter 2006, hauling in $1.08 per share--up 27 percent compared to the same period last year--on revenues of $20.7 billion. Overall, revenue was down 10 percent compared to first quarter last year but grew 4 percent when adjusted for currency and divestment of IBM's PC business to Lenovo. The company's services revenue was up 3 percent, adjusted for currency. Hardware was up 6 percent in constant currency on good microelectronics and storage sales, although some of its server lines saw declines. Software revenue was up 6 percent as well, with double-digit growth in WebSphere and Tivoli product lines.

In a conference call with finanical analysts, IBM senior vice president Michael Loughridge said that IBM continues to make changes to its business model to improve its profits by moving into high-margin businesses while exiting low-margin product lines, such as displays, disk drives and PCs. He added that profits were aided by reduced expenses, due in part to a restructuring of its European operations, stemming from a surprise revenue decline in the first quarter 2005.