IBM (NYSE: IBM) on Thursday raised its full-year outlook and reported higher-than-expected quarterly profit as its growing focus on higher-margin software and services businesses helped it cope with weak technology spending.

International Business Machines Corp said it expects full-year earnings of at least $9.85 per share, up from its previous outlook of at least $9.70 a share.

IBM reported its third-quarter net profit rose to $3.2 billion, or $2.40 a share, from $2.8 billion, or $2.04 a share, a year earlier. Analysts on average expected a profit of $2.38 per share, according to Thomson Reuters I/B/E/S.

Revenue fell 7 percent from a year earlier to $23.6 billion, although it rose 1 percent from the previous quarter. Wall Street expected $23.4 billion. The company forecast a return to revenue growth in the fourth quarter.

IBM shares, which had risen about 24 percent in the past three months on hopes of a recovery in technology spending, fell 3.3 percent to $123.80 after closing at $127.98 on the New York Stock Exchange.

(Reporting by Ritsuko Ando; Editing by Gary Hill)

Copyright 2009 Thomson Reuters

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