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Chips and middleware help IBM top quarterly profits

Big Blue's first quarter 2006 earnings per share grows 27 percent.

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.