IBM SHARES DRIVEN HIGHER BY EXECUTIVE'S REMARKS.

Byline: Laurence Zuckerman The New York Times

IBM reported solid but unspectacular third-quarter earnings Monday, led by strong sales of computer hardware and services.

But upbeat comments from the company's management touched off a rally that sent IBM shares soaring to their highest point in more than five years before most of the gains were lost in later trading.

Big Blue reported net earnings of $1.29 billion, or $2.45 a share, compared with earnings in the third quarter of 1995 of $1.3 billion, or $2.30 a share, excluding a $1.84 billion charge for the acquisition of Lotus Development Corp. The Wall Street consensus had been $2.43.

While operating profit fell because of higher expenses, revenue growth for the quarter rose nearly 8 percent to $18.1 billion compared with $16.8 billion.

Richard Thoman, chief financial officer, called it the second-strongest quarter of revenue growth since IBM began to recover from record losses in the early 1990s.

``We are very pleased with the quarter,'' Thoman said. ``I'm still very comfortable for our prospects for 1996 and how we are positioned for growth going forward.''

That was all that investors, who had bid IBM shares up 44 percent since midsummer, apparently needed to hear. IBM's shares, which had traded down in the early morning, soared as high as $135.375 during Thoman's presentation before falling back sharply to close at $130.125 a share, up 75 cents, on the New York Stock Exchange.

The decline seemed to echo the views of analysts who upon closer examination of Thoman's comments found little to cheer about.

Steve Milunovich, an analyst at Morgan Stanley in New York, said he thought that Thoman did a good job of ``emphasizing the positives.'' But, he added, ``as I am doing my numbers, they are not really going up.''

David Wu, an analyst at Chicago Corp. in New York, had a similar reaction. ``There are number of things going against the company that would prevent them from blowing out the fourth quarter,'' he said.

These include continued slow growth in Europe, which has plagued IBM and other computer makers this year; unfavorable foreign-exchange rates, which Thoman said would cost Big Blue more in the current quarter than the 8 cents a share that earnings were reduced by in the third quarter; and from $300 million to $400 million in new restructuring expenses, as much as twice that expected by analysts.

The stock's performance seemed to indicate that despite IBM's best efforts to persuade Wall Street that it is on a solid growth curve after the company's disastrous stumble in the early 1990s, many investors were still wary of buying the stock above its previous high this year of $128.75, reached in February.

During the third quarter, IBM's performance was helped by a new line of more powerful mainframe computers that were introduced on Sept. 10.

The new machines cost much less than a previous generation, resulting in a drop in mainframe sales revenues compared with a year earlier. But because the new machines are much more profitable than the older ones, and because they help spur sales of IBM software, they are a big boon to the company.

The shortfall in revenue was apparently more than made up for by the company's recovering personal-computer business, which Thoman said had turned in the best quarterly performance in three years. He said that in each of the last two quarters the unit had seen its revenue grow by 25 percent from a year earlier.

Thoman added that the PC division had a better expense-to-revenue ratio and unit volume growth than the industry leader, Compaq Computer, but still had lower profit margins and higher inventory.

Sales of the AS/400 line of minicomputers were also strong, but the RS6000 computers saw a decline in sales as customers awaited a new set of products introduced earlier this month, Thoman said.

IBM's services business continued its strong growth, increasing revenue 26 percent compared with a year earlier by signing $11 billion worth of long-term contracts to manage or build large systems for Lucent Technologies, Bell Canada and Prudential.