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IBM reported fiscal fourth quarter earnings and there's one thing that stands out: Big Blue is showing big gains in software.

Like EMC, and other hardware firms, IBM has bulked up on the software acquisitions with the latest purchases including FileNet and Internet Security Systems. Wikipedia has a handy list of IBM purchases. 

Overall, IBM reported fourth quarter earnings from continuing operations of $2.26 a share. Backing out one time gains, IBM reported earnings of $2.20, a penny better than Thomson Financial estimates. Revenue was up 7 percent to $26.3 billion in the quarter.

While most focus on IBM's services business–up 7 percent from a year ago with revenue of $8.6 billion, the company's software business is starting to make headway.

These results follow lackluster results from the likes of SAP and Oracle. In the quarter, IBM had software revenue of $5.6 billion, an increase of 14 percent from a year ago. 

"Customers are responding to the breadth of our software portfolio," said CFO Mark Loughridge on a conference call. "We've been investing in the software business internally and externally through acquisitions for a long time."

As far as revenue growth goes, IBM's middleware line, including WebSphere, Information Management, Tivoli, Lotus and Rational products, gained 18 percent from a year ago. By product, IBM's WebSphere family was up 22 percent from a year ago and Lotus revenue increased 30 percent.

Add it up and middleware matters. Loughridge also added that IBM was well positioned as companies move toward SOA.

See: IBM Q4 2006 Earnings Call Transcript

Source: IBM Flexing Muscle In Software