IBM Profit Up Despite Drop in Revenue

IBM, the world’s biggest computer-services company, Tuesday said first-quarter profit rose 22% because of lower costs and strong sales of advanced microprocessors for video game machines.

Net income rose to $1.71 billion, or $1.08 a share, from $1.4 billion, or 84 cents, a year earlier. Revenue fell 9.6% to $20.7 billion from $22.9 billion, mainly reflecting the sale of its unprofitable PC business in 2005.

Profit was 3 cents a share better than analysts’ average estimate of $1.05 a share, according to Reuters Estimates.

Shares of IBM rose 99 cents, or about 1%, to $84.30 in after-hours trading following the earnings report. In regular trading, they closed up $1.67 at $83.31.

Revenue from software, IBM’s most profitable business, fell 2.4% to $3.91 billion, while the business’ gross profit margin increased to 84.2% from 83.8%.

Computer hardware revenue fell 32% to $4.57 billion after the company sold its PC business. Not including the PC business, hardware revenue increased 3%.

Microelectronics revenue was up 37%, helped by sales of “Cell” processors developed with Toshiba Corp. and Sony Corp. for gaming consoles including Sony’s PlayStation 3, scheduled for release in Japan in November.