IBM Corp’s third quarter figures came in two cents above analysts’ consensus estimates and thereby restored some of the luster the stock analysis business lost last week when company after company contrived to embarrass Wall Street. The IBM shares s lipped $1.625 to $127.75 at the opening before recovering a little after chief financial officer Rick Thoman regaled analysts with his thoughts for the quarter, the shares advanced $0.375 to close at $130.00. IBM reported third quarter net profit of $1.3bn or $2.45 a share, where the Street consensus had been $2.43 a share. IBM says that revenue grew in all geographies apart from Europe where the squeeze to get deficits down is driving many of the major economies back into recession – a development that bodes ill for Digital Equipment Corp’s figures, due any day. Third quarter revenue was up 8% to $18.1bn but on a constant currency basis would have been up 11%. IBM also said, worryingly, that its overall gross profit margins fell in the quarter compared with a year ago and currency fluctuations worked against the company. The firm’s gross margins fell to 40.2% of revenues from 41.3% a year ago – but were up on the 39.5% of last quarter.

Very good quarter

Revenue in North America was up 14% to $8.2bn, Asia Pacific was up 8% to $3.5bn and Latin America rose 12% to $811m but Europe was flat at $5.6bn. Total hardware sales were $8.4bn, up 8% on last year, with personal computer, AS/400 and storage systems sales up, while RS/6000, mainframes – where shipments of mainframe computing capacity as measured in MIPS nevertheless increased 77%, and semiconductors – hit by pricing pressures, particularly on those memory chips – all fell. Service business w as up 26% to $3.9bn but software revenues were off 1% to $3.1bn , largely due to a decline in host-based software – the company is under enormous and still growing pressure to cut its mainframe software prices further. Distributed software revenue s grew significantly, but maintenance revenues fell 7% to $18bn. So what kind of quarter was it – sounds pretty mixed to us? This was a very good quarter, said Louis Gerstner: a highlight was the continued roll-out of integrated solutions that help fulfill the promise of a networked world to our customers and the personal computer business had another outstanding quarter. Total expenses increased 9% in the quarter, primarily due to ongoing restructuring, advertising and promotional expen ses associated with the 1996 Olympics, and to increased investments in customer implementations from IBM’s vertical market units. Rentals and financing revenues increased 4% to $933m. The company’s tax rate was 35.1% in the third quarter, down from 37.3% in the same period last year. After buy-ins, total shares out are down to 521.8m.