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Consolidated financial statements (audited)
International Business Machines Corporation and Subsidiary Companies

Consolidated statement of earnings (audited)

($ in millions except per share amounts)
For the year ended December 31: Notes 2008 2007 2006

The accompanying notes are an integral part of the financial statements.

Revenue:        
Services   $58,892 $54,057 $48,328
Sales   42,156 42,202 40,716
Financing   2,582 2,526 2,379
Total Revenue   103,630 98,786 91,424
Cost:        
Services   40,937 39,160 35,065
Sales   15,776 16,552 16,882
Financing   1,256 1,345 1,182
Total cost   57,969 57,057 53,129
Gross profit   45,661 41,729 38,295
Expense and other income:        
Selling, general and administrative   23,386 22,060 20,259
Research, development and engineering Q 6,337 6,153 6,107
Intellectual property and custom development income   (1,153) (958) (900)
Other (income) and expense   (298) (626) (766)
Interest expense K&L 673 611 278
Total expense and other income   28,945 27,240 24,978
Income from continuing operations before income taxes   16,715 14,489 13,317
Provision for income taxes P 4,381 4,071 3,901
Income from continuing operations   12,334 10,418 9,416
Discontinued operations:        
Income/(loss) from discontinued operations, net of tax   (00) 76
Net income   $12,334 $10,418 $9,492
Earnings/(loss) per share of common stock:        
Assuming dilution:        
Continuing operations R $8.93 $7.18 $6.06
Discontinued operations   (0.00) 0.05
Total R $8.93 $7.18 $6.11
Basic:        
Continuing operations R $9.07 $7.32 $6.15
Discontinued operations R (0.00) 0.05
Total R $9.07 $7.32 $6.20
Weighted-average number of common shares outstanding:        
Assuming dilution   1,381,773,136 1,450,570,579 1,553,535,384
Basic   1,359,769,923 1,423,039,793 1,530,806,987
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