UPDATE 2-IBM confident on profit, looks to emerging markets

Revenue from IBM's services business, its largest segment, climbed 8 percent to $14.8 billion. Revenue at its software division, its most profitable, rose 12 percent to $5.2 billion. Hardware sales fell 10 percent to $4.4 billion.

Loughridge said that the software division has a healthy pipeline of business prospects that should enable it to keep business growing even given the current weak economy.

Sales to companies in the financial services sector, IBM's largest group of customers, rose 7 percent to $7 billion. Within that group its revenue in the United States fell 1 percent.

Its government business rose 9 percent to $4 billion, while sales to small and mid-sized businesses rose 5 percent to $4.7 billion.

The Armonk, New York company said that third-quarter net income rose to $2.8 billion, or $2.05 per share, from $2.4 billion, or $1.68 per share, a year earlier. Revenue rose 5 percent to $25.3 billion.

IBM shares were quoted at $93.75 in extended trade. They had climbed $3.23 to $91.52 on the New York Stock Exchange before the results were released. (Reporting by Jim Finkle, editing by Richard Chang)