Net income in the second quarter climbed to $2.02 billion, or $1.30 per share, from $1.83 billion, or $1.12 per share, in the same period last year. Revenue declined 1.7 percent to $21.9 billion from $22.3 billion, which included $557 million from the PC business that IBM sold to Lenovo Group in May, 2005.

Analysts, on average, had forecast second-quarter earnings before exceptional items of $1.29 per share and revenue of $21.9 billion, according to Reuters Estimates.

Earnings at IBM of Armonk, N.Y., have been rising after it cut expenses by slashing about 16,000 jobs and focused on smaller, higher-profit services and consulting contracts, a business that accounts for about half of revenue. IBM also has been helped by sales of microchips for Sony's PlayStation 3 video game console.

Shares of IBM have fallen about 11 percent this year, compared with the 1 percent decline of the Standard & Poor's 500 index. The stock trades at just under 13 times estimated 2006 earnings per share, less than the 16 percent multiple of the Merrill Lynch Tech 100 index.