IBM (IBM) Falls As Good Q3 Results Are "Not Good Enough"

Shares of tech giant IBM (NYSE: IBM) are trading off 4% in after-hours trading Thursday as third quarter results, while solid, were not strong enough for many investors. Some also expressed concerns about a drop in Q3 bookings.

IBM's Q3 EPS rose 18% to $2.40, 2 cents better than the analyst estimate of $2.38. Revenue for the quarter was $23.6 billion, which compares to the estimate of $23.38 billion. The revenue number was up 1% from the second quarter, but down 7% (or 5% adjusting for currency) from last year.

IBM raised its full-year 2009 EPS expectations to at least $9.85, which compares to prior guidance of at least $9.70 and the consensus of $9.78. For 2010, IBM said they remain well ahead of pace for EPS of $10 to $11 per share.

IBM signed services contracts totaling $11.8 billion in the quarter, a decrease of 7%, but also indicated they signed three deals in the first two days of October with a total value of nearly $1 billion. Signings in Consulting and Systems Integration and in Integrated Technology Services were $5.1 billion, a decrease of 16%. The estimated services backlog at September 30 was $134 billion at actual rates compared with $132 billion at June 30, 2009, and compared with $129 billion in the third quarter of 2008.

IBM ended the third quarter with $11.5 billion of cash on hand and generated free cash flow of $3.4 billion, excluding Global Financing receivables. The company returned $1.7 billion to shareholders through $726 million in dividends and $930 million of share repurchases.

On the conference call, the company said it gained hardware shares from Sun Micro (Nasdaq: JAVA) and HP (NYSE: HP). In addition, the CFO said they still see $3.5 billion in cost savings.

UPDATE: Click here to see some highlights from IBM's Q3 conference call.

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