Just after 4:30 p.m. EDT when the market closed, IBM announced results for its first quarter, and the news was not good, but not terrible.

Here are the key stats:

• Revenue $23.4 billion. This is down five percent from last year, but only down three percent when adjusted for inflation.
• EPS is up three percent to $2.70
• Software revenue up 1 percent
• Services revenue down four percent
• Systems and technology revenue down 17 percent
• Cloud revenue up 70 percent
• Smarter Planet revenue up some 25%

In this tense economy, Wall Street had been watching IBM closely and was expecting a bit of good news as two of the company’s core markets, tech services and software, historically both boast high margins.

That led analysts to predict revenue of nearly $25 billion ($24.69 billion to be exact, not that it matters now) and earnings per share of $3.05. Those revenue predictions were flat, year over year, but earnings were expected to rise 9.7 percent from last year’s $2.78.

The reality, as you can see, was somewhat less than expected.

The bright spot wasn’t revenue, but the fact that earnings when up even when revenue went down. In fact IBM has been on an earnings tear for some time.

“A $1,000 initial investment on March 31, 1993 and held until March 8, 2013 would have grown to $16,516.  That represents a 15.1 percent compounded annual return in contrast to only a 6.4 percent compounded annual return on an equal $1,000 investment in the S&P 500,” write Forbes Writer Chuck Carnevale. Forbes even thinks IBM may be an innovation company and an earnings juggernaut as much of this growth is based on forging into new businesses.

Big Blue a Blue Chip?

IBM is much like Microsoft, pounding out record quarter after record, but failing to register the monumental, explosive growth of a Google or Apple.

Microsoft was on this roll until last year when that steady, predictable sequence of increased revenue suddenly ceased. In fact, Microsoft lost money, nearly a half billion dollars to be exact, for the first time in over a quarter century last summer. However, much of this was attributed to a massive write-down for its acquisition of aQuantive. In fact revenue actually increased that quarter.  Unfortunately, revenue dipped for Redmond in Q3 2012 and Q1 2013.

Microsoft’s Latest Numbers

Like IBM, Microsoft today announced its latest quarterlies and despite the lukewarm at best reception for Windows 8, analysts were expecting good things out of Redmond for Q3 2013.

Expectations were for revenue of $20.54 billion with earnings per share of 68 cents, compared to last year’s quarter with an EPS of 60 cents on revenues of $17.42 – not too shabby.

PCs Plummet

Last week TechZone360’s Tony Rizzo reported that PC sales slumped nearly 14 percent this past quarter on a year-to-year basis. Rizzo doesn’t see this as the death of the PC, but it sure wasn’t healthy for Dell who was hit particularly hard by PC problems and the, ahem, lack of excitement over Windows 8. This, meanwhile, is all really inconsequential to the bean counters in Armonk.

Yet, Microsoft came through unfazed by the PC problems, with ….

The New Big Blue

In the 80’s, IBM had three things going for it—mainframes, minis and PCs. If any of these sunk, it hit the IBM bottom line hard.

These days IBM isn’t dependent on any one business, but has a huge range of hardware architectures, software, middleware, the cloud and tons of services.

It still has mainframes and the old minicomputer legacy lives in some mid-level servers. But fortunately for IBM, it is out of the PC game, having sold off to Lenovo.

The huge troubles in the PC market therefore were no worry for Big Blue, which skated through the quarter. PC sales can go up and down based on the economy, customer whim, and spending shifting to tablets, cloud services and smartphones.

Meanwhile, IBM is in a far safer set of businesses with long term contracts for high-end products and regularly occurring revenue for service and consulting deals.

In fact, nearly all the new businesses IBM has entered in the last decade have nothing to do with PCs or consumer technologies.

Not that IBM is easy street. The cloud is a hugely disruptive force and new players can take the place of the old guard with relative ease. Just look at Facebook and Google. And in business software, Oracle is nothing if not aggressive. And after buying Sun, Oracle is also going after IBM’s core data center business.

Despite years of earnings strength, IBM’s prospects are decidedly mixed, at least as far as growth is concerned. Last year, the company actually saw its revenue go down by two percent, from nearly $107 billion to $104.5 billion.

Of course the economy was soft, particularly in Europe and currency fluctuations weren’t kind to Big Blue. Last year, however, software sales went up three percent, with IBM doing particularly well in operating systems and middleware. And the cloud. Boy, that business was up a raging 80 percent!.