IBM's quarterly profit rose 11 per cent, but its shares fell more than 5 per cent as the earnings failed to beat some investors' forecasts.
The stock had been up 37 per cent from a year low last July, raising expectations for the world's largest technology services company.
IBM's quarterly revenue was boosted by a string of software-firm acquisitions, while it also reported $17.8 billion in services contracts, an indicator of future business and the best in four years.
Fourth-quarter net income advanced to $3.54 billion, or $2.31 per share, from $3.19 billion, or $1.99 per share, a year earlier. Revenue climbed to $26.3 billion from $24.4 billion. Earnings before special items were $2.26 per share.
But IBM shares fell 5.2 per cent to $94.24 in after-hours trade from a New York Stock Exchange close of $99.45. A Nasdaq index of computer hardware stocks fell 2.4 per cent last night on disappointing forecasts this week from top computer chip maker Intel and iPod maker Apple.
The IBM stock, up about 21 per cent in the last 12 months prior to the results, had been trading at 15 times expected 2007 earnings per share.