IBM recently sold off its PC hardware division

The US computer giant made a net profit of $3.1bn (�1.6bn), or $1.81 a share, between October and December 2004, up 12% on $2.71bn a year earlier.

Analysts had, on average, been expecting IBM to report a profit of $1.78 a share.

Solid last quarter sales at IBM were further boosted by the beneficial impact of the weak dollar on its overseas operations.

IBM's fourth quarter sales from continuing operations were $27.7bn, up 7% compared to $25.9bn during the final quarter of 2003.

Analysts impressed

Samuel J Palmisano, IBM chairman and chief executive, said the company had never had a stronger fourth quarter.

It looks like IBM's earnings were solid from top to bottom Analyst Steve Neimeth

"IBM delivered a powerful fourth quarter, reflecting the strength of our integrated business model," Mr Palmisano said.

Analyst Steve Neimeth, a portfolio manager for AIG SunAmerica, predicted that IBM's results would rally the whole technology sector.

"The earnings per share numbers were great," he said.

"They even beat the highest 'whisper' number. It looks like earnings were solid from top to bottom."

Last month IBM sold its PC hardware division to China's number one computer maker Lenovo.