The only hardware stuff that IBM may be even making a slight profit on is their ThinkPad line of laptops and their high-end servers. And even then, their regular customers with these products are most often big corporations, and not the average home user.
To say that IBM is not making money on their software because they are a "hardware company" is simply wrong. When they acquired Lotus, the whole suite of Domino and Notes became theirs, and that means getting the businesses of thousands of corporations that rely on the collaboration platform. The same goes for their development software, such as the Rational suite, WebSphere, and everything else, which costs quite a bunlde in annual licensing terms.
When they make a sale to clients, they really do in fact almost "give away" their hardware and software, and in return their money comes from long-term licensing.
IBM's realm is the high-end or enterprise market, where money is constantly flowing. While they have a Consumer PC division, don't expect that one to be critical to IBM's financial health, since even mass sales is pocket change to what they can earn elsewhere.