IBM's shares fell last night after the company reported flat revenue.

Its net income grew 7% in the first three months of 2012, thanks to strong profit margins in its services business.

IBM's earnings beat Wall Street's expectations, but that is often the case with the technology bellwether.

Investors appeared more worried that revenue fell shy of estimates.

IBM said it earned $3.07 billion, or $2.61 per share, in the first three months of 2012, up from $2.86 billion, or $2.31 per share, a year earlier.

Excluding special items such as acquisition costs and pension-related expenses, it earned $2.78 per share in the latest period, well above the $2.66 per share that analysts were expecting. Revenue was flat at $24.7 billion.

Software and services revenue increased, but IBM's hardware and financing segments saw a decline. The company has been focusing on its software and services offerings lately, which have higher profit margins.

Analysts, on average, were expecting revenue of $24.82 billion. The revenue miss, though narrow, raised questions about IBM's ability to bring in enough new business to keep growing, even as it is able to squeeze out big profits from its software and services units.

IBM also raised its full-year guidance and said it now expects adjusted earnings of at least $15 per share. That is up from its earlier outlook of at least $14.85 per share. Analysts were expecting $14.93 per share.

IBM's long-term goal is to reach at least $20 per share in adjusted earnings by the end of 2015 - a rare example of a long-term target by a major company.

By segment, IBM's software revenue grew 5% to $5.6 billion and hardware revenue fell 7% to $3.7 billion. Technology services revenue grew 2% to $10 billion and business services revenue slid less than 2% to $4.6 billion.

IBM also said yesterday that it would sell its retail store solutions business to Toshiba for $850m.