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Management discussion
International Business Machines Corporation and Subsidiary Companies

Prior year in review

The Prior Year in Review section provides a summary of the company’s financial performance in 2007 as compared to 2006. For a detailed discussion of 2007 performance, see the company’s 2007 Annual Report.

($ and shares in millions except per share amounts)
For the year ended December 31: 2007 2006 Yr.-to-Yr. Percent/
Margin Change

* 4.2 percent adjusted for currency.

** At December 31.

NM — Not meaningful

Revenue $98,786 $91,424 8.1%*
Gross profit margin 42.2% 41.9% 0.4 pts.
Total expense and other income $27,240 $24,978 9.1%
Total expense and other income-to-revenue ratio 27.6% 27.3% 0.3 pts.
Income from continuing operations before income taxes $14,489 $13,317 8.8%
Provision for income taxes 4,071 3,901 4.4%
Income from continuing operations 10,418 9,416 10.6%
Income/(loss) from discontinued operations 76 NM
Net income $10,418 $9,492 9.7%
Net income margin 10.5% 10.4% 0.2 pts.
Earnings per share of common stock:      
Assuming dilution:      
Continuing operations $7.18 $6.06 18.5%
Discontinuing operations (0.00) 0.05 NM
Total $7.18 $6.11 17.5%
Weighted-average shares outstanding:
Assuming dilution 1,450.6 1,553.5 (6.6)%
Assets** $120,431 $103,234 16.7%
Liabilities** $91,962 $74,728 23.1%
Equity** $28,470 $28,506 (0.1)%
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