For as complex as IBM's (NYSE:IBM) business can be, the simple truth is that this stock was too cheap before investors began selling it this morning.

Let's get right to the numbers. Revenue was down 7% from last year to $23.6 billion and failed to meet the Street's consensus of $23.86 billion. But there were bright spots in the revenue picture: Software sales were down just 2.6%, and technology services revenue was down 4.4% year over year.

The numbers improve further down the income statement. Across-the-board cost cuts helped Big Blue improve gross margin by 180 basis points. That, plus a reduced share count, led to higher earnings per share: IBM booked $2.40 in per-share income for the third-quarter, an 18% improvement over last year's third quarter.

I'll understand if you're still skeptical. Bottom-line growth without corresponding top-line growth never lasts. Big Blue is going to have to boost revenue again at some point.

But it's hard not to like where IBM is headed. Management raised full-year earnings guidance to at least $9.85 per share, up from $9.70 after last quarter's report. CEO Sam Palmisano credited higher-value deals for his company's more bullish outlook.

"We continued to invest for growth in areas where clients see potential for value creation including Smarter Planet solutions, cloud computing and advanced business analytics," Palmisano said in a press release.

He and his team need to make good on their strategy. Until they do, 12 times earnings is going to seem reasonable for a company of Big Blue's size and history. Growth may not last, and fierce competitors are getting fiercer: Dell (NASDAQ:DELL) bid $30 per share to acquire Perot Systems (NYSE:PER), giving it more services clout. And new cloud-based mail software will put IBM in direct conflict with Google (NASDAQ:GOOG), as well as Microsoft (NASDAQ:MSFT).

But at its current multiple -- again, 12 times IBM's revised full-year earnings projection -- the stock seems priced more for the risks Big Blue faces than the rewards it could yield from prudent investments in massive-growth opportunities.

Some will call that cautious. I call it crazy. What do you think? Sound off using the comments box below.

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Fool contributor Tim Beyers had stock and options positions Google and a stock position in IBM at the time of publication. Check out Tim's portfolio holdings and Foolish writings, or connect with him on Twitter as @milehighfool. The Motley Fool is also on Twitter as @TheMotleyFool. The Fool's disclosure policy can go big, but never gets blue.