Despite raising its earnings estimate for fiscal 2011, IBM saw its shares slump nearly 4% after hours Monday as investors eyed potential revenue weakness in Big Blue's third-quarter results.
Shares of IBM (NYSE: IBM) finished the extended trading session down 7.44, or 3.99%, to 179.15 from Monday's closing price of 186.59.
IBM reported after Monday's trading session third-quarter net income of $3.84 billion, or $3.19 a share, up 7% from the $3.59 billion, or $2.82 a share, in profit from last year's Q3.
Big Blue's revenue for the third quarter was $26.2 billion, up 8% from $24.3 billion a year ago. But the company noted that, adjusting for global currency exchange rates, revenue grew just 3%.
This, along with a lower-than-expected total of signed service contracts and a drop in IBM's backlog from the second quarter, apparently prompted the after-hours sell-off.
Analysts had been expecting Q3 net income of $3.22 a share on revenue of $26.3 billion.
New service contracts were worth $12.3 billion, an increase of 12% from the year-ago quarter. However, they were 14% below the $14.3 billion in new service contracts from the second quarter.
The company's services backlog also declined to $137 billion from $144 billion in Q2.
The biggest revenue generator for IBM is its Global Technology Services division, which had $103 billion in Q3 revenue, or 39.5% of total revenue.
Software, which generated $5.8 billion in Q3 revenue, up 12.9% from a year ago, comprised 22.2% of total sales.
IBM increased its earnings outlook for the fiscal year to at least $13.35 a share from its previous guidance of at least $13.25 a share.
Shares of IBM were up 27.1% for the year through Monday's close.