International Business Machines Corp. (IBM) -- the world's biggest computer-service company's fourth quarter profit rose 11 percent and beat Wall Street expectations, but its shares fell 5 percent, according to media reports Friday.

The company, in the last three months of 2006, earned 3.54 billion U.S. dollars, 2.31 dollars per share, on revenue of 26.3 billion dollars. The numbers were boosted 6 cents per share by tax changes and 5 cents per share from gains related to discontinued operations.

But IBM shares fell 5.6 percent to 93.79 dollars from their New York Stock Exchange close of 99.45 dollars Thursday. A Nasdaq index of computer hardware stocks fell 2.4 percent on disappointing forecasts this week from Intel Corp, the world's top computer chip maker, and iPod maker Apple Inc.

"Everybody's expectations were high going into it, technology is having an awful day, and IBM was the last to sell off," said Marc Heilweil, manager of Spectrum Advisory Services' Marathon Value Portfolio

Refering to the stock's decline, he added, it "has to do a lot with psychology, plus the fact that it has had a run-up."

He added revenue growth in IBM's hardware business fell short of some analysts' estimates. Hardware revenue rose 4.3 percent to 7.2 billion dollars, while its gross profit margin slipped to 41 percent from 42 percent.

IBM has been expanding in software, its most profitable business, and last year it bought 11 software providers including Internet Security Systems Inc and FileNet Corp.

Chief financial officer Mark Loughridge told the media that IBM is optimistic and is on track to grow 2007 earnings per share by a low-double digit percentage rate, reaffirming its long-term outlook.

"We would expect earnings per share for 2007 to again be in line with our longer-term model," Loughridge said.

Editor: Yan