Q2

Quarterly earnings



IBM reports 2012 second-quarter results

Second-Quarter 2012

ARMONK, N.Y., July 18, 2012 . . . IBM (NYSE: IBM) today announced second-quarter 2012 diluted earnings of $3.34 per share, compared with diluted earnings of $3.00 per share in the second quarter of 2011, an increase of 11 percent. Operating (non-GAAP) diluted earnings were $3.51 per share, compared with operating diluted earnings of $3.09 per share in the second quarter of 2011, an increase of 14 percent.

Second-quarter net income was $3.9 billion compared with $3.7 billion in the second quarter of 2011, an increase of 6 percent. Operating (non-GAAP) net income was $4.1 billion compared with $3.8 billion in the second quarter of 2011, an increase of 8 percent.

Total revenues for the second quarter of 2012 of $25.8 billion were down 3 percent (up 1 percent, adjusting for currency) from the second quarter of 2011. Currency negatively impacted revenue growth by approximately $1 billion.

"In the second quarter, we delivered strong profit, earnings per share and free cash flow growth. This performance reflects continued strength in our growth initiatives and investments in higher value opportunities," said Ginni Rometty, IBM president and chief executive officer. "These are fundamental elements of our long-term business model.

"Looking ahead, we are well positioned to deliver greater value to a wider range of clients and to our shareholders. Given our performance in the first half and our outlook for the second half, we are raising our full-year operating earnings per share expectations to at least $15.10."

Second-Quarter GAAP - Operating (non-GAAP) Reconciliation

Second-quarter operating (non-GAAP) diluted earnings exclude $0.17 per share of charges: $0.11 per share for the amortization of purchased intangible assets and other acquisition-related charges, and $0.06 per share for retirement-related charges driven by changes to plan assets and liabilities primarily related to market performance.

Full-Year 2012 Expectations

IBM raised its expectations for full-year 2012 GAAP diluted earnings per share to at least $14.40 from at least $14.27 and operating (non-GAAP) diluted earnings per share to at least $15.10 from at least $15.00. The 2012 operating (non-GAAP) earnings expectations exclude $0.70 per share of charges for amortization of purchased intangible assets, other acquisition-related charges, and retirement-related charges driven by changes to plan assets and liabilities primarily related to market performance.

Geographic Regions

The Americas' second-quarter revenues were $11.1 billion, a decrease of 1 percent (up 1 percent, adjusting for currency) from the 2011 period. Revenues from Europe/Middle East/Africa were $7.9 billion, down 9 percent (flat, adjusting for currency). Asia-Pacific revenues increased 2 percent (up 4 percent, adjusting for currency) to $6.3 billion. OEM revenues were $512 million, down 24 percent compared with the 2011 second quarter.

Growth Markets

Revenues from the company's growth markets increased 2 percent (up 8 percent, adjusting for currency) and more than 30 countries had double-digit revenue growth, adjusting for currency. Revenues in the BRIC countries - Brazil, Russia, India and China - increased 5 percent (up 12 percent, adjusting for currency).

Services

Global Technology Services segment revenues decreased 2 percent (up 2 percent, adjusting for currency) to $10.0 billion. Global Business Services segment revenues were down 4 percent (down 1 percent, adjusting for currency) to $4.7 billion.

Pre-tax income from Global Technology Services increased 24 percent and pre-tax margin increased to 17.1 percent. Global Business Services pre-tax income increased 7 percent and pre-tax margin increased to 16.6 percent.

The estimated services backlog at June 30 was $136 billion, down 6 percent year over year at actual rates (flat, adjusting for currency).

Software

Revenues from the Software segment were $6.2 billion, flat (up 4 percent, adjusting for currency) compared with the second quarter of 2011. Software pre-tax income increased 8 percent and pre-tax margin increased to 35.9 percent.

Revenues from IBM's key middleware products, which include WebSphere, Information Management, Tivoli, Lotus and Rational products, were $3.9 billion, flat (up 4 percent, adjusting for currency) versus the second quarter of 2011. Operating systems revenues of $628 million were flat (up 3 percent, adjusting for currency) compared with the prior-year quarter.

Revenues from the WebSphere family of software products increased 3 percent year over year. Information Management software revenues decreased 1 percent. Revenues from Tivoli software increased 2 percent. Revenues from Lotus software decreased 8 percent, and Rational software decreased 7 percent.

Hardware

Revenues from the Systems and Technology segment totaled $4.3 billion for the quarter, down 9 percent (down 7 percent, adjusting for currency) from the second quarter of 2011. Systems and Technology pre-tax income decreased $159 million.

Total systems revenues decreased 7 percent (down 5 percent, adjusting for currency). Revenues from Power Systems were down 7 percent compared with the 2011 period. Revenues from System x were down 8 percent. Revenues from System z mainframe server products decreased 11 percent compared with the year-ago period. Total delivery of System z computing power, as measured in MIPS (millions of instructions per second), decreased 8 percent. Revenues from System Storage decreased 4 percent, and revenues from Retail Store Solutions decreased 4 percent year over year. Revenues from Microelectronics OEM decreased 22 percent.

Financing

Global Financing segment revenues were flat (up 4 percent, adjusting for currency) in the second quarter at $517 million. Pre-tax income for the segment increased 6 percent to $528 million.

***

The company's total gross profit margin was 47.6 percent in the 2012 second quarter compared with 46.4 percent in the 2011 second-quarter period. Total operating (non-GAAP) gross profit margin was 48.2 percent in the 2012 second quarter compared with 46.8 percent in the 2011 second-quarter period, with increases in Global Technology Services and Global Business Services.

Total expense and other income decreased 5 percent to $7.1 billion compared with the prior-year period. S,G&A expense of $5.8 billion decreased 3 percent year over year. R,D&E expense of $1.6 billion increased 1 percent compared with the year-ago period. Intellectual property and custom development income decreased to $289 million compared with $295 million a year ago. Other (income) and expense was income of $132 million compared with prior-year expense of $97 million. Interest expense increased to $117 million compared with $97 million in the prior year.

Total operating (non-GAAP) expense and other income decreased 6 percent to $7.0 billion compared with the prior-year period. Operating (non-GAAP) S,G&A expense of $5.7 billion decreased 4 percent compared with prior-year expense. Operating (non-GAAP) R,D&E expense of $1.6 billion was flat compared with the year-ago period.

Pre-tax income increased 6 percent to $5.2 billion and pre-tax margin of 20.0 percent, up 1.7 points compared with the prior-year period. Operating (non-GAAP) pre-tax income increased 8 percent to $5.4 billion and pre-tax margin was 21.1 percent, up 2.2 points.

IBM's tax rate was 24.8 percent, down 0.2 points year over year; operating (non-GAAP) tax rate was 25.0 percent, flat compared to the year-ago period.

Net income margin increased 1.3 points to 15.1 percent. Total operating (non-GAAP) net income margin increased 1.6 points to 15.8 percent.

The weighted-average number of diluted common shares outstanding in the second-quarter 2012 was 1.16 billion compared with 1.22 billion shares in the same period of 2011. As of June 30, 2012, there were 1.14 billion basic common shares outstanding.

Debt, including Global Financing, totaled $32.4 billion, compared with $31.3 billion at year-end 2011. From a management segment view, Global Financing debt totaled $22.6 billion versus $23.3 billion at year-end 2011, resulting in a debt-to-equity ratio of 7.0 to 1. Non-global financing debt totaled $9.8 billion, an increase of $1.8 billion since year-end 2011, resulting in a debt-to-capitalization ratio of 36.1 percent from 32.0 percent.

IBM ended the second-quarter 2012 with $11.2 billion of cash on hand and generated free cash flow of $3.7 billion, excluding Global Financing receivables, up approximately $0.3 billion year over year. The company returned $4.0 billion to shareholders through $1.0 billion in dividends and $3.0 billion of share repurchases.

Year-To-Date 2012 Results

Net income for the six months ended June 30, 2012 was $6.9 billion compared with $6.5 billion in the year-ago period, an increase of 6 percent. Diluted earnings per share were $5.95 compared with $5.30 per diluted share for the 2011 period, an increase of 12 percent. Revenues for the six-month period totaled $50.5 billion, a decrease of 2 percent (up 1 percent, adjusting for currency) compared with $51.3 billion for the six months of 2011.

Operating (non-GAAP) net income for the six months ended June 30, 2012 was $7.3 billion compared with $6.8 billion in the year-ago period, an increase of 9 percent. Operating (non-GAAP) diluted earnings per share were $6.29 compared with $5.50 per diluted share for the 2011 period, an increase of 14 percent.

Forward-Looking and Cautionary Statements

Except for the historical information and discussions contained herein, statements contained in this release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on the company's current assumptions regarding future business and financial performance. These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially, including the following: a downturn in economic environment and corporate IT spending budgets; the company's failure to meet growth and productivity objectives, a failure of the company's innovation initiatives; risks from investing in growth opportunities; failure of the company's intellectual property portfolio to prevent competitive offerings and the failure of the company to obtain necessary licenses; cybersecurity and data privacy considerations; fluctuations in financial results and purchases, impact of local legal, economic, political and health conditions; adverse effects from environmental matters, tax matters and the company's pension plans; ineffective internal controls; the company's use of accounting estimates; the company's ability to attract and retain key personnel and its reliance on critical skills; impacts of relationships with critical suppliers and business with government clients; currency fluctuations and customer financing risks; impact of changes in market liquidity conditions and customer credit risk on receivables; reliance on third party distribution channels; the company's ability to successfully manage acquisitions and alliances; risk factors related to IBM securities; and other risks, uncertainties and factors discussed in the company's Form 10-Q, Form 10-K and in the company's other filings with the U.S. Securities and Exchange Commission (SEC) or in materials incorporated therein by reference. Any forward-looking statement in this release speaks only as of the date on which it is made. The company assumes no obligation to update or revise any forward-looking statements.

Presentation of Information in this Press Release

In an effort to provide investors with additional information regarding the company's results as determined by generally accepted accounting principles (GAAP), the company has also disclosed in this press release the following non-GAAP information which management believes provides useful information to investors:

IBM results and expectations —

The rationale for management's use of non-GAAP measures is included as part of the supplemental materials presented within the second-quarter earnings materials. These materials are available on the IBM investor relations Web site at www.ibm.com/investor and are being included in Attachment II ("Non-GAAP Supplemental Materials") to the Form 8-K that includes this press release and is being submitted today to the SEC.

Conference Call and Webcast

IBM's regular quarterly earnings conference call is scheduled to begin at 4:30 p.m. EDT, today. The Webcast may be viewed at www.ibm.com/investor/2q12. Presentation charts will be available on the Web site shortly before the Webcast.

Financial Results Below (certain amounts may not add due to use of rounded numbers; percentages presented are calculated from the underlying whole-dollar amounts).


       

                  INTERNATIONAL BUSINESS MACHINES CORPORATION
                       COMPARATIVE FINANCIAL RESULTS
          (Unaudited; Dollars in millions except per share amounts)
 

                           Three Months Ended         Six Months Ended
                                June 30,                  June 30,
                                          Percent                   Percent
                          2012     2011   Change     2012     2011  Change
                       -------  -------   ------- -------  -------  -------
REVENUE
 
 Global Technology 
 Services               $9,995  $10,241     -2.4% $20,031  $20,104    -0.4%
  Gross profit margin    36.3%    34.0%             35.8%    33.9%
 
 Global Business
 Services                4,667    4,866     -4.1%   9,304    9,575    -2.8%
  Gross profit margin    30.7%    28.9%             29.4%    28.2%
 
 Software                6,171    6,169      0.0%  11,770   11,478     2.5%
  Gross profit margin    88.4%    88.4%             87.7%    87.8%
 
 Systems and
 Technology              4,259    4,681     -9.0%   8,008    8,700    -7.9%
  Gross profit margin    38.3%    40.6%             36.4%    39.3%
 
 Global Financing          517      519     -0.4%   1,006    1,035    -2.8%
  Gross profit margin    46.0%    48.7%             48.3%    51.1%
 
 Other                     175      191     -8.4%     336      381   -11.7%
  Gross profit margin   -60.0%   -57.7%            -67.1%   -75.5%
 
TOTAL REVENUE           25,783   26,666     -3.3%  50,456   51,273    -1.6%   
     
GROSS PROFIT            12,281   12,385     -0.8%  23,400   23,243     0.7%
 Gross margin            47.6%    46.4%             46.4%    45.3%
 

EXPENSE AND OTHER INCOME
 
 S,G&A                   5,837    6,030     -3.2%  11,723   11,856    -1.1%
  Expense to revenue     22.6%    22.6%             23.2%    23.1%
 
 R,D&E                   1,587    1,569      1.1%   3,188    3,156     1.0%
  Expense to revenue      6.2%     5.9%              6.3%     6.2%
 
 Intellectual property
  and custom development
  income                 (289)    (295)     -1.8%   (545)    (557)    -2.2%
 Other (income)
  and expense            (132)       97        NM   (190)    (105)    80.9%
 Interest expense          117       97     20.4%     226      190    19.1%
 
TOTAL EXPENSE AND
OTHER INCOME             7,120    7,500     -5.1%  14,403   14,541    -0.9%
 Expense to revenue      27.6%    28.1%             28.5%    28.4%
 
INCOME BEFORE
INCOME TAXES             5,161    4,885      5.7%   8,997    8,702     3.4%
 Pre-tax margin          20.0%    18.3%             17.8%    17.0%

Provision for
income taxes             1,280    1,221      4.8%   2,049    2,175    -5.8%
 Effective tax
 rate                    24.8%    25.0%             22.8%    25.0%
 
NET INCOME              $3,881   $3,664      5.9%  $6,948   $6,526     6.5%
                        ======   ======            ======   ======
 Net income margin       15.1%    13.7%             13.8%    12.7%
 
EARNINGS PER SHARE
OF COMMON STOCK:
 ASSUMING DILUTION       $3.34    $3.00     11.3%   $5.95    $5.30    12.3%
 BASIC                   $3.38    $3.04     11.2%   $6.02    $5.38    11.9%
 
WEIGHTED-AVERAGE NUMBER
OF COMMON SHARES OUT-
STANDING (M's):
  ASSUMING DILUTION    1,161.9  1,221.4           1,168.1  1,230.7
  BASIC                1,149.0  1,204.8           1,154.1  1,213.5

NM -- Not Meaningful



                      INTERNATIONAL BUSINESS MACHINES CORPORATION
                     CONSOLIDATED STATEMENT OF FINANCIAL POSITION
                                     (Unaudited)
 
                                                             At            At
(Dollars in Millions)                                     June 30,    December 31,
                                                            2012          2011
                                                       ------------   -------------
ASSETS
 
Current Assets:
Cash and cash equivalents                                   $10,864         $11,922
Marketable securities                                           323             -- 
Notes and accounts receivable - trade
  (net of allowances of $264 in 2012 and $256 in 2011)       10,172          11,179
Short-term financing receivables
  (net of allowances of $271 in 2012 and $311 in 2011)       14,982          16,901
Other accounts receivable
  (net of allowances of $11 in 2012 and $11 in 2011)          1,703           1,481
Inventories, at lower of average cost or market:
  Finished goods                                                752             589
  Work in process and raw materials                           2,006           2,007
                                                          ---------       ---------
Total inventories                                             2,758           2,595
Deferred taxes                                                1,478           1,601
Prepaid expenses and other current assets                     5,113           5,249
                                                          ---------       ---------
Total Current Assets                                         47,392          50,928
 
Property, plant and equipment                                40,158          40,124
  Less: Accumulated depreciation                             26,293          26,241
                                                          ---------       ---------
Property, plant and equipment - net                          13,865          13,883
Long-term financing receivables
  (net of allowances of $55 in 2012 and $38 in 2011)         10,795          10,776
Prepaid pension assets                                        2,862           2,843
Deferred taxes                                                2,795           3,503
Goodwill                                                     27,735          26,213
Intangible assets - net                                       3,657           3,392
Investments and sundry assets                                 4,730           4,895
                                                          ---------       ---------
Total Assets                                               $113,832        $116,433
                                                          =========       =========
LIABILITIES AND EQUITY
 
Current Liabilities:
Taxes                                                        $2,183          $3,313
Short-term debt                                               7,669           8,463	
Accounts payable                                              7,482           8,517
Compensation and benefits                                     4,656           5,099
Deferred income                                              12,311          12,197
Other accrued expenses and liabilities                        4,602           4,535
                                                          ---------       ---------
Total Current Liabilities                                    38,903          42,123
 
Long-term debt                                               24,766          22,857
Retirement and nonpension postretirement
  benefit obligations                                        16,544          18,374
Deferred income                                               3,889           3,847
Other liabilities                                             9,166           8,996
                                                          ---------       ---------
Total Liabilities                                            93,269          96,197

Equity:
IBM Stockholders' Equity:
  Common stock                                               49,157          48,129
  Retained earnings                                         109,928         104,857
  Treasury stock -- at cost                               (117,116)       (110,963)
  Accumulated other comprehensive income/(loss)            (21,498)        (21,885)
                                                          ---------       ---------
  Total IBM stockholders' equity                             20,472          20,138
 
Noncontrolling interests                                         92              97
                                                          ---------       ---------
Total Equity                                                 20,563          20,236
                                                          ---------       ---------
Total Liabilities and Equity                               $113,832        $116,433   
                                                          =========       =========



                         INTERNATIONAL BUSINESS MACHINES CORPORATION
                                     CASH FLOW ANALYSIS
                                        (Unaudited)
  
                                            Three Months Ended   Six Months Ended
(Dollars in Millions)                        	  June 30,            June 30,
                                                 2012      2011      2012      2011
                                              -------   -------   -------   -------
Net Cash from Operating Activities per GAAP:   $4,435    $4,279    $8,726    $8,071
 
  Less: the change in Global Financing (GF) 
	   Receivables                          (507)      (33)       918     1,903
                                               ------    ------    ------    ------
Net Cash from Operating Activities
  (Excluding GF Receivables)                    4,942     4,313     7,809     6,168
 
  Capital Expenditures, Net                   (1,278)     (952)   (2,279)   (2,010)
 
Free Cash Flow
  (Excluding GF Receivables)                    3,664     3,361     5,529     4,159
 
  Acquisitions                                  (606)     (107)   (1,925)     (159)
  Divestitures                                     13         4        13         4
  Dividends                                     (978)     (905)   (1,848)   (1,700)
  Share Repurchase                            (2,988)   (3,976)   (6,002)   (8,021)
  Non-GF Debt                                     933      (20)     1,590     1,007
  Other (includes GF Receivables, and 
   GF Debt)                                   (1,187)       162     1,907     4,822 
 
Change in Cash, Cash Equivalents and
Short-term Marketable Securities             ($1,148)  ($1,481)    ($736)      $113
                                             ========  ========    ======    ======


                         INTERNATIONAL BUSINESS MACHINES CORPORATION
                                         SEGMENT DATA
                                          (Unaudited)
 

                                         SECOND-QUARTER 2012
                          -------------------------------------------------
                                                          Pre-tax
(Dollars in Millions)       --------- Revenue ---------   Income/   Pre-tax
                            External Internal     Total    (Loss)    Margin
                            -------- -------- --------- ---------   -------
SEGMENTS
 
Global Technology Services   $9,995     $291   $10,286    $1,757      17.1%
  Y-T-Y change                -2.4%    -9.1%     -2.6%     23.7%
 
Global Business Services      4,667      180     4,847       803      16.6%
  Y-T-Y change                -4.1%   -12.2%     -4.4%      7.0%
 
Software                      6,171      776     6,946     2,493      35.9%
  Y-T-Y change                 0.0%    -2.0%     -0.2%      7.9%
 
Systems and Technology        4,259      159     4,418       234       5.3%
  Y-T-Y change                -9.0%   -27.3%     -9.8%    -40.4%

Global Financing                517      515     1,032       528      51.1%
  Y-T-Y change                -0.4%    -5.7%     -3.2%      6.4%
 
TOTAL REPORTABLE SEGMENTS   $25,608   $1,921   $27,529    $5,814      21.1%
  Y-T-Y change                -3.3%    -7.7%     -3.6%      8.3% 
 
Eliminations / Other            175  (1,921)   (1,746)     (653)       
 
TOTAL IBM CONSOLIDATED      $25,783     $(0)   $25,783    $5,161      20.0%
  Y-T-Y change                -3.3%              -3.3%      5.7%


                                         SECOND-QUARTER 2011
                          -------------------------------------------------
                                                          Pre-tax
(Dollars in Millions)       --------- Revenue ---------   Income/   Pre-tax
                            External Internal     Total    (Loss)    Margin                            	                      
                            -------- -------- --------- ---------   -------
SEGMENTS
 
Global Technology Services  $10,241     $320   $10,561    $1,420      13.4%
 
Global Business Services      4,866      205     5,071       750      14.8%
 
Software                      6,169      792     6,961     2,310      33.2%
 
Systems and Technology        4,681      218     4,899       393       8.0%
 
Global Financing                519      547     1,066       496      46.5%
 
TOTAL REPORTABLE SEGMENTS   $26,476   $2,082   $28,558    $5,370      18.8%
 
Eliminations / Other            191  (2,082)   (1,891)     (485)
 
TOTAL IBM CONSOLIDATED      $26,666     $(0)   $26,666    $4,885      18.3%
 


                         INTERNATIONAL BUSINESS MACHINES CORPORATION
                                         SEGMENT DATA
                                          (Unaudited)
 
 
                                          SIX-MONTHS 2012
                          -------------------------------------------------
                                                          Pre-tax
(Dollars in Millions)       --------- Revenue ---------   Income/   Pre-tax
                            External Internal     Total    (Loss)    Margin
                            -------- -------- --------- ---------   -------
SEGMENTS
 
Global Technology Services  $20,031     $584   $20,615    $3,237      15.7%
  Y-T-Y change                -0.4%    -6.9%     -0.6%     21.8%     
 
Global Business Services      9,304      363     9,667     1,404      14.5%
  Y-T-Y change                -2.8%   -10.5%     -3.1%      1.0%
 
Software                     11,770    1,615    13,386     4,438      33.2%
  Y-T-Y change                 2.5%    -0.4%      2.2%      9.7%

Systems and Technology        8,008      309     8,317       130       1.6%
  Y-T-Y change                -7.9%   -33.1%     -9.2%    -75.3%
 
Global Financing              1,006    1,000     2,006     1,040      51.8%
  Y-T-Y change                -2.8%    -4.2%     -3.5%      2.4%
 
TOTAL REPORTABLE SEGMENTS   $50,120   $3,872   $53,991   $10,248      19.0%
  Y-T-Y change                -1.5%    -6.9%     -1.9%      6.4%
 
Eliminations / Other            336  (3,872)   (3,535)   (1,252)
 
TOTAL IBM CONSOLIDATED      $50,456     $(0)   $50,456    $8,997      17.8%
  Y-T-Y change                -1.6%              -1.6%      3.4%

 
                                           SIX-MONTHS 2011
                          -------------------------------------------------
                                                          Pre-tax
(Dollars in Millions)       --------- Revenue ---------   Income/   Pre-tax
                            External Internal     Total    (Loss)    Margin
                            -------- -------- --------- ---------   -------
SEGMENTS
 
Global Technology Services  $20,104     $627   $20,732    $2,658      12.8%
 
Global Business Services      9,575      405     9,980     1,390      13.9%
 
Software                     11,478    1,621    13,099     4,045      30.9%
 
Systems and Technology        8,700      462     9,162       525       5.7%
 
Global Financing              1,035    1,044     2,079     1,015      48.8%
 
TOTAL REPORTABLE SEGMENTS   $50,892   $4,160   $55,052    $9,634      17.5%
 
Eliminations / Other            381  (4,160)   (3,779)     (932)
 
TOTAL IBM CONSOLIDATED      $51,273     $(0)   $51,273    $8,702      17.0%



                       INTERNATIONAL BUSINESS MACHINES CORPORATION 
                      U.S. GAAP TO OPERATING RESULTS RECONCILIATION
                 (Unaudited; Dollars in millions except per share amounts)


                                               SECOND-QUARTER 2012
                                ------------------------------------------------
                                          Acquisition-  Retirement-
                                            Related       Related      Operating
                                  GAAP    Adjustments*  Adjustments** (Non-GAAP)
                                -------- ------------  ------------   ----------
Gross Profit                     $12,281          $93           $66      $12,440
 
Gross Profit Margin                47.6%       0.4Pts        0.3Pts        48.2%
  
S,G&A                              5,837         (87)          (33)        5,717
 
R,D&E                              1,587            0             5        1,592
  
Other (Income) & Expense           (132)          (1)             0        (133)

Total Expense & Other (Income)     7,120         (88)          (28)        7,004
 
Pre-Tax Income                     5,161          181            94        5,436
 
Pre-Tax Income Margin              20.0%       0.7Pts        0.4Pts        21.1%
  
Provision for Income Taxes***      1,280           49            30        1,359
 
Effective Tax Rate                 24.8%       0.1Pts        0.1Pts        25.0%
 
Net Income                         3,881          132            64        4,077
 
Net Income Margin                  15.1%       0.5Pts        0.2Pts        15.8%
 
Diluted Earnings Per Share         $3.34        $0.11         $0.06        $3.51


                                               SECOND-QUARTER 2011
                                ------------------------------------------------
                                          Acquisition-  Retirement-
                                            Related       Related      Operating
                                  GAAP    Adjustments*  Adjustments** (Non-GAAP)
                                -------- ------------  ------------   ----------
Gross Profit                     $12,385          $87            $6      $12,477
 
Gross Profit Margin                46.4%       0.3Pts        0.0pts        46.8%
 
S,G&A                              6,030         (76)           (5)        5,950
 
R,D&E                              1,569            0            24        1,593
 
Other (Income) & Expense              97          (1)             0           96

Total Expense & Other (Income)     7,500         (77)            18        7,441
 
Pre-Tax Income                     4,885          163          (12)        5,036
 
Pre-Tax Income Margin              18.3%       0.6Pts       -0.0Pts        18.9%
  
Provision for Income Taxes***      1,221           38             0        1,259
 
Effective Tax Rate                 25.0%      -0.1Pts        0.1Pts        25.0%
 
Net Income                         3,664          126          (13)        3,777
 
Net Income Margin                  13.7%       0.5Pts       -0.0Pts        14.2%
 
Diluted Earnings Per Share         $3.00        $0.10       ($0.01)        $3.09


*  Includes amortization of acquired intangible assets and other acquisition-related 
charges.
**  Includes retirement-related items driven by changes to plan assets and liabilities primarily 
related to market performance.
***  Tax impact on operating (non-GAAP) pre-tax income is calculated under the same 
accounting principles applied to the GAAP pre-tax income which employs an annual 
effective tax rate method to the results.



                   INTERNATIONAL BUSINESS MACHINES CORPORATION
                  U.S. GAAP TO OPERATING RESULTS RECONCILIATION
             (Unaudited; Dollars in millions except per share amounts)
 
 
                                               SIX-MONTHS 2012
                                ------------------------------------------------
                                          Acquisition-  Retirement-
                                            Related       Related      Operating
                                  GAAP    Adjustments*  Adjustments** (Non-GAAP)
                                -------- ------------  ------------  -----------
Gross Profit                     $23,400         $181          $137      $23,718
 
Gross Profit Margin                46.4%       0.4Pts        0.3Pts        47.0%
 
S,G&A                             11,723        (171)          (69)       11,483
 
R,D&E                              3,188            0            10        3,197
 
Other (Income) & Expense           (190)          (2)             0        (192) 

Total Expense & Other (Income)    14,403        (172)          (60)       14,171
 
Pre-Tax Income                     8,997          354           197        9,547
 
Pre-Tax Income Margin              17.8%       0.7Pts        0.4Pts        18.9%
 
Provision for Income Taxes***      2,049           96            60        2,205
 
Effective Tax Rate                 22.8%       0.2Pts        0.2Pts        23.1%
 
Net Income                         6,948          258           137        7,342
 
Net Income Margin                  13.8%       0.5Pts        0.3Pts        14.6%
 
Diluted Earnings Per Share         $5.95        $0.22         $0.12        $6.29
 

                                                 SIX-MONTHS 2011
                                ------------------------------------------------
                                          Acquisition-  Retirement-
                                            Related       Related      Operating
                                  GAAP    Adjustments*  Adjustments** (Non-GAAP)
                                -------- ------------  ------------   ----------
Gross Profit                     $23,243         $172           $19      $23,434
 
Gross Profit Margin                45.3%       0.3Pts        0.0Pts        45.7%
  
S,G&A                             11,856        (152)          (15)       11,689
  
R,D&E                              3,156            0            43        3,199
 
Other (Income) & Expense           (105)          (5)             0        (110) 

Total Expense & Other (Income)    14,541        (157)            28       14,412
 
Pre-Tax Income                     8,702          329           (8)        9,022 

Pre-Tax Income Margin              17.0%       0.6Pts       -0.0Pts        17.6%
 
Provision for Income Taxes***      2,175           86           (5)        2,256
 
Effective Tax Rate                 25.0%       0.0Pts        0.0Pts        25.0%
 
Net Income                         6,526          243           (3)        6,767
 
Net Income Margin                  12.7%       0.5Pts       -0.0Pts        13.2%
 
Diluted Earnings Per Share         $5.30        $0.20       ($0.00)        $5.50
                               

*  Includes amortization of acquired intangible assets and other acquisition-related 
charges.
**  Includes retirement-related items driven by changes to plan assets and liabilities primarily 
related to market performance.
***  Tax impact on operating (non-GAAP) pre-tax income is calculated under the same 
accounting principles applied to the GAAP pre-tax income which employs an annual 
effective tax rate method to the results.


	

Contact:  IBM
          Mike Fay, 914/499-6107
          mikefay@us.ibm.com

          John Bukovinsky, 732/618-3531
          jbuko@us.ibm.com