INTERNATIONAL Business Machines Corp said yesterday it earned $1.3 billion (£764 million) in the second quarter and, though the results were down from $1.7 billion a year earlier, they were stronger than Wall Street had expected.

The profit, equal to $2.51 a share, compared with $2.97 a year ago and came on increased revenue of $18.18 billion, up from $17.53 billion.

Wall Street analysts had expected IBM to report income of $1.44a share, according to First Call.

IBM employs 500 people directly in Ireland and its sister company Lotus employs 400. It has recently announced that it will create 750 new jobs in a new European customer services centre in Dublin.

IBM chairman, Mr Louis V. Gerstner said results were affected by short term factors, including a drop in the prices of computer memory chips and currency exchange. "This was a tough quarter, as we had expected," Mr Gerstner said.

IBM said its total gross profit margin slipped to 39.5 per cent from 43.5 per cent. Sales of hardware totalled $8.6 billion, down 1 per cent from a year earlier, while personal computer sales increased in all market segments, the company said.

Revenues from North America increased 11 per cent from a year, ago to $7.8 billion. Revenues from Europe/Middle East/Africa declined 2 per cent to $6 billion. Asia Pacific revenues were flat at $3.6 billion, and revenues from Latin America grew 6 per cent to $786 million.

Mr Gerstner said shipments of Lotus Notes software doubled during the quarter. Since IBM's acquisition of Lotus Notes a year ago, the number of individual users has increased to 6.3 million from 2.2 million, he said.

Mr Gerstner noted that IBM took steps to strengthen its position in the computer memory storage area through an agreement with Storage Technology that provides customers with a wider range of storage products.

He said IBM's acquisition of Tivoli Systems, a computer network management company acquired in the first quarter, produced "outstanding" results.

IBM said it closed nearly $4 billion in new service contracts in the quarter as its services business revenues grew 23 per cent. During the first six months of the current year, IBM earned 52.11 billion, or 53.92 a share, on revenue of $3,4.74 billion.