Currency moves trim IBM revenues IBM reported a drop in sales for the third quarter but increased earnings per share by 10 per cent, beating Wall Street estimates by a penny. The fall in revenues, down 5 per cent on the same period last year to $24.7bn and below analysts's expectations, sent the company's stock down 3.4 per cent in after-hours trading. Mark Loughridge, IBM's chief financial officer, blamed currency volatility for the fall. However, he revealed that several contracts in the company's otherwise strong software business had fallen through late in the quarter while the company had rejected some services contracts because it thought the profit margin too low. "That improves overall profitability but it does have an impact on revenues," Mr Loughridge said. We knew that and we made that trade off. IBM said it lost out on currency fluctuations, mainly in conversion from the euro to the weak dollar. It also lost revenue as a result of the sale of its retail hardware systems, including cash registers and in-store kiosks, to Toshiba. The disposal was part of IBM's strategy to move away from low profit hardware sales and towards higher margin software and services. However, the lacklustre performance in those areas surprised some analysts, raising concern over IBM's strategic direction. "The era of the big deals has gone," said Chris Ambrose, an analyst at Gartner. There is a lot more multi-sourcing on contracts and a lot more competition out there. Mr Loughridge defended IBM's focus on profitability, even at the expense of revenue growth, as it pursues a five-year plan to reach operating earnings per share of $20 by 2015. For the third quarter, net income rose 5 per cent to $4.2bn and earnings per share, on the pro forma basis by which Wall Street judges the company, rose to $3.62, slightly ahead of the $3.61 that had been expected. Those figures do not reflect a one-time expense of $160m, which IBM paid in the third quarter to meet the terms of a UK court ruling that forced the company to cover the pension costs of certain UK retirees starting at age 60, as opposed to 63. IBM is considering an appeal.