Updated version 1 - With trading delays easing, IBM raises annual software revenue expectations.

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Anhata Rooprai

Reuters, October 21 - IBM IBM.N Chief Financial Officer James Kavanaugh said on Wednesday that the delayed software deals which unsettled investors last quarter are now beginning to close. Meanwhile, the company raised its performance outlook for the segment and reported third-quarter results that beat expectations.

Kavanaugh told Reuters in an interview that IBM now expects annual software revenue growth of about 7% to 8%, higher than the previously expected 6% to 8%. IBM shares rose about 4% in after-hours trading.

Here are more details:

• According to data compiled by LSEG, third-quarter revenue grew 4.7% to $17.1 billion, beating the average analyst forecast of $16.82 billion.

• Adjusted earnings per share were $2.95, higher than the market expectation of $2.86.

• CEO Arvind Krishna said in July that IBM had “not performed well” in adapting to a shift in customer spending from software to data center infrastructure (link), which triggered the company's steepest single-day share price drop in over a century.

• Third-quarter software revenue grew 8.3% to $7.8 billion, surpassing the expected $7.62 billion.

• Within this segment, sales in the hybrid cloud unit rose 11%, and transaction processing software revenue rose 9%, rebounding from last quarter’s unexpected decline.

• Kavanaugh said about 25% of transaction processing revenue came from deals delayed in the second quarter, while “the remaining 75% is net new business.”

• Infrastructure segment revenue rose 4.2% to $3.71 billion, with 31% growth in distributed infrastructure, including servers and storage systems, helping offset weakness in the Z mainframe business.

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(To accommodate non-English speakers, Reuters provides automated translations of its reports into several other languages. Because automated translation may contain errors or lack necessary context, Reuters does not guarantee the accuracy of the translated text, which is provided for convenience only. Reuters assumes no responsibility for any damage or loss arising from use of the automated translation.)