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IBM has reported a 19 per cent decline in Q3 profits, saying sales were dragged below estimates by the global economy downturn.

Sales for the quarter, ended 30 September, hit $20.4 billion, down from $21.78 billion a year earlier.

PC, hard disk, and distributed software sales were all hit by deferred spending. The company's hardware division reported a 21 per cent drop in revenue to $7.5 billion; PC sales slumped by 29 per cent. Lou Gerstner, IBM chairman and chief executive, said: "The PC segment of our industry remains in trouble, and this negatively affected our PC and hard disk drive businesses."

IBM claimed servers had performed well and that it had grabbed market share in the Unix sector. It said revenues from z900 mainframe servers grew strongly, revenues from the iSeries mid- market servers increased in all geographic areas, while pSeries revenues declined in part because customers were awaiting the new Regatta servers.

IBM Global Services brought in $8.7 billion in the quarter, up five per cent on the year-ago quarter. This is the second consecutive quarter that the division has made up the major slice of IBM's sales.

Gerstner said: "The third quarter saw an acceleration of the fundamental shift in customer buying behaviour that is altering our industry's landscape. Customers now allocate an increasing percentage of their spending to solutions, not boxes."

IBM signed $10 billion in services contracts and concluded the quarter with a contract backlog of $97 billion. ®

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