IBM just announced an increase in its annual earnings, yet its stock price fell. What is the explanation?

Normally before the announcement, the stock analyst from research house would make an earnings projection and also a guidance for the following quarter announcement.

When a company like IBM declare an earnings announcement which beat the analyst projections but fail to meet analyst guidance, the stock price will tumble. It usually result in gaping down of stock price when the market open the following session.

Most likely the company's earnings grew less than was expected--this can often be bad news for a stock's price per share.

The explanation is expectation.

Wall St (aka "The Street") analysts had an expectation that either the earnings would be higher, the source of earnings would be different, the projected growth is lower, or the cost of goods is more than expected.

So even though the stock's earnings (HISTORY) was higher, the stock's forward looking earnings (FUTURE) is negatively impacted and therefore the price goes down.

Good Luck
ED

because investors are stupid

Projected future earnings will often cause a stock to decline. If they cut their 2008 estimates, that will do it.