IBM suffered a 10% fall in sales over the past three months as the disposal of its PC business last year impacted on its trading performance.
IBM said its business model was working well
IBM, which sold its PC arm to Chinese firm Lenovo for $1.7bn (£954m) saw sales fall in all major regions compared to the same period in 2005.
However, profits from continuing operations rose 21% to $1.7bn.
IBM said efforts to reposition its business had been effective and it had a positive cash balance of $12bn.
IBM generated total sales of $20.6bn in the first quarter compared to $22.9bn in the same period last year, when results from its PC arm were still included.
"We continue to improve our profit performance with our strategic focus on higher value-segments of the marketplace, as well as our emphasis on productivity and global integration," said IBM's chairman and chief executive officer Samuel Palmisano.
IBM's shares rose 1.4% in after-hours trading after the results were announced, with analysts saying the figures were better than expected.
"It looked like a solid quarter," said Chris Whitmore, an analyst at Deutsche Bank Securities.