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Software acquisitions helped IBM report sharply higher third-quarter profits and revenues on Tuesday, underscoring the success of the company’s strategy of expanding its higher margin software portfolio.

Income in the third quarter rose to $2.22bn, or $1.45 per share, from $1.52bn, or 94 cents per share, a year earlier, when IBM recorded a $525m tax charge related to the repatriation of overseas earnings.

Excluding that charge from a year ago, net income increased by 15 per cent, beating analysts’ expectations.

IBM’s profit has now exceeded analysts’ average estimates for five quarters in a row.

Revenue climbed to $22.6bn, from $21.5bn in the same quarter a year ago, buoyed by sales in IBM’s software unit, which increased by 8.5 per cent to $4.41bn.

Since taking over as IBM’s chief executive at the start of 2003, Sam Palmisano
has spent $11.4bn on 50 acquisitions.

Of these 31 have been software companies, including the $865m purchase of Micromuse in February.

These deals have helped the group to focus on higher-value, higher-growth segments of the IT industry.

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