Updated at 1:56 p.m. PST, with additional earnings information and after-hours trading performance.
IBM reported Tuesday a 12 percent increase in fourth-quarter earnings, coming in stronger than analysts' expectations.
Big Blue generated net income of $4.4 billion, or $3.28 a share, for the quarter, up 12 percent over the same period a year ago.
Wall Street had expected Big Blue to post earnings of $3.03 a share for the three-month period.
The technology bellwether also reported that it is not only on track to achieve its previously stated goal of generating an annual profit of $10 to $11 a share in 2010, but that it's ahead of the pace it set out to get there.
IBM shares were up nearly 4 percent, to $85.14, in after-hours trading Tuesday.
"With our strong financial position, solid recurring revenue and profit streams, and global reach, we are confident about 2009 and, based on our 2008 performance, we are ahead of pace on our roadmap for $10 to $11 per share," Samuel Palmisano, IBM chief executive, said in a statement.
Revenue, meanwhile, reached $27 billion in the fourth quarter, down 6 percent over last year. But when accounting for currency changes, the revenue decline was 1 percent. Analysts had expected IBM to generate revenue of $28.3 billion for the quarter.
"A strong fourth quarter capped an outstanding year," Palmisano said. "In 2008, IBM performed well in an extremely difficult economic environment. Clearly our strategic transformation--migrating to the more profitable segments of the industry, investing in growth regions of the world, and driving productivity through global integration--is continuing to pay dividends."
During the quarter, the Americas generated revenue of $11.5 billion, up 2 percent over last year when adjusting for currency changes, for example.
Big Blue's software revenue was up 9 percent, when adjusting for currency, to $6.4 billion, while revenue in global technology services was up 3 percent to $9.6 billion when adjusting for currency.
Its global business services was flat, when adjusting for currency, to $4.7 billion, while its outsourcing services contracts generated $17.2 billion in revenue in the quarter, up 2 percent when factoring in currency changes.