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Quarterly earnings

Third-Quarter Results Announcement

IBM REPORTS 2011 THIRD-QUARTER RESULTS

ARMONK, N.Y., October 17, 2011 . . . IBM (NYSE: IBM) today announced third-quarter 2011 diluted earnings of $3.19 per share, compared with diluted earnings of $2.82 per share in the third quarter of 2010, an increase of 13 percent. Operating (non-GAAP) diluted earnings were $3.28 per share, compared with operating diluted earnings of $2.85 per share in the third quarter of 2010, an increase of 15 percent.

Third-quarter net income was $3.8 billion compared with $3.6 billion in the third quarter of 2010, an increase of 7 percent. Operating (non-GAAP) net income was $4.0 billion compared with $3.6 billion in the third quarter of 2010, an increase of 9 percent.

Total revenues for the third quarter of 2011 of $26.2 billion increased 8 percent (3 percent, adjusting for currency) from the third quarter of 2010.

"In the third quarter, we drove revenue growth, margin expansion and increased earnings as a result of our innovation-based strategy and continued investment in growth initiatives," said Samuel J. Palmisano, IBM chairman, president and chief executive officer. “Growth markets delivered outstanding revenue performance across software, hardware, and services and contributed to the company's expanded margins. We also achieved strong results in Smarter Planet, business analytics and cloud.

"Based on this performance, we are raising our 2011 full-year operating earnings per share expectations to at least $13.35."

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

Third-quarter operating (non-GAAP) diluted earnings exclude $0.09 per share of net charges: $0.11 per share for the amortization of purchased intangible assets and other acquisition-related charges, offset by ($0.01) per share for retirement-related items driven by changes to plan assets and liabilities primarily related to market performance.

Full-Year 2011 Expectations

IBM raised its expectations for full-year 2011 GAAP diluted earnings per share to at least $12.95 from at least $12.87; and operating (non-GAAP) diluted earnings per share to at least $13.35 from at least $13.25. The 2011 operating (non-GAAP) earnings exclude $0.40 per share of charges for amortization of purchased intangible assets, other acquisition-related charges, and retirement-related items driven by changes to plan assets and liabilities primarily related to market performance.

Geographic Regions

The Americas’ third-quarter revenues were $10.9 billion, an increase of 7 percent (6 percent, adjusting for currency) from the 2010 period. Revenues from Europe/Middle East/Africa were $8.0 billion, up 9 percent (flat, adjusting for currency). Asia-Pacific revenues increased 10 percent (1 percent, adjusting for currency) to $6.5 billion. OEM revenues were $743 million, down 8 percent (8 percent, adjusting for currency) compared with the 2010 third quarter.

Growth Markets

Revenues from the company’s growth markets increased 19 percent (13 percent, adjusting for currency). Revenues in the BRIC countries — Brazil, Russia, India and China — increased 17 percent (13 percent, adjusting for currency). Growth markets revenue represents 23 percent of IBM’s total geographic revenue for the third quarter.

Services

Total Global Services revenues increased 8 percent (2 percent, adjusting for currency). Global Technology Services segment revenues increased 9 percent (3 percent, adjusting for currency) to $10.3 billion. Global Business Services segment revenues were up 6 percent (flat, adjusting for currency) at $4.8 billion.

Total Global Services pre-tax income increased to $2.5 billion, up 13 percent year over year. Pre-tax income from both Global Technology Services and Global Business Services also increased 13 percent.

The estimated services backlog at September 30 was $137 billion, up $2.4 billion year over year at actual rates ($2.3 billion, adjusting for currency). Services backlog at the end of a quarter measures the current value of work under contract expected to be recognized as revenue in future quarters.

Software

Revenues from the Software segment were $5.8 billion, an increase of 13 percent (8 percent, adjusting for currency). Software pre-tax income of $2.2 billion was up 12 percent year over year.

Revenues from IBM’s key middleware products, which include WebSphere, Information Management, Tivoli, Lotus and Rational products, were $3.6 billion, an increase of 17 percent (12 percent, adjusting for currency) versus the third quarter of 2010. Operating systems revenues of $598 million increased 9 percent (4 percent, adjusting for currency) compared with the prior-year quarter.

Revenues from the WebSphere family of software products increased 52 percent year over year. Information Management software revenues increased 12 percent. Revenues from Tivoli software increased 8 percent. Revenues from Lotus software increased 6 percent, and Rational software increased 7 percent.

Hardware

Revenues from the Systems and Technology segment totaled $4.5 billion for the quarter, up 4 percent (1 percent, adjusting for currency) from the third quarter of 2010. Systems and Technology pre-tax income was $318 million, an increase of 8 percent year over year.

Systems revenues increased 6 percent (2 percent, adjusting for currency). Revenues from Power Systems increased 15 percent compared with the 2010 period. Revenues from System x increased 1 percent. Revenues from System z mainframe server products decreased 5 percent compared with the year-ago period. Total delivery of System z computing power, as measured in MIPS (millions of instructions per second), decreased 11 percent. Revenues from System Storage increased 8 percent, and revenues from Retail Store Solutions increased 14 percent year over year. Revenues from Microelectronics OEM decreased 6 percent.

Financing

Global Financing segment revenues decreased 2 percent (6 percent, adjusting for currency) in the third quarter to $520 million. Pre-tax income for the segment decreased 4 percent to $481 million.

***

The company’s total gross profit margin was 46.5 percent in the 2011 third quarter compared with 45.3 percent in the 2010 third-quarter period. Total operating (non-GAAP) gross profit margin was 46.8 percent in the 2011 third quarter compared with 45.4 percent in the 2010 third-quarter period, with increases in Software, Services and Systems and Technology.

Total expense and other income increased 13 percent to $7.1 billion compared with the prior-year period. S,G&A expense of $5.7 billion increased 10 percent compared with prior-year expense. R,D&E expense of $1.5 billion increased 6 percent compared with the year-ago period. Intellectual property and custom development income increased to $298 million compared with $278 million a year ago. Other (income) and expense was expense of $128 million compared with prior-year income of $106 million. Interest expense increased to $107 million compared with $95 million in the prior year.

Total operating (non-GAAP) expense and other income increased 12 percent to $7.1 billion compared with the prior-year period. Operating (non-GAAP) S,G&A expense of $5.6 billion increased 10 percent year over year compared with prior-year expense. Operating (non-GAAP) R,D&E expense of $1.6 billion increased 5 percent compared with the year-ago period.

Pre-tax income increased 7 percent to $5.0 billion, and pre-tax margin was 19.2 percent, down 0.1 points. Operating (non-GAAP) pre-tax income increased 10 percent to $5.2 billion and pre-tax margin was 19.8 percent, up 0.4 points.

IBM’s tax rate was 23.6 percent, up 0.4 points year over year; operating (non-GAAP) tax rate was also 23.6 percent, up 0.6 points.

Net income margin decreased 0.1 points to 14.7 percent. Operating (non-GAAP) net income margin increased 0.2 points to 15.1 percent.

The weighted-average number of diluted common shares outstanding in the third-quarter 2011 was 1.20 billion compared with 1.27 billion shares in the same period of 2010. As of September 30, 2011, there were 1.18 billion basic common shares outstanding.

Debt, including Global Financing, totaled $30.2 billion, compared with $28.6 billion at year-end 2010. From a management segment view, Global Financing debt totaled $22.8 billion versus $22.8 billion at year-end 2010, resulting in a debt-to-equity ratio of 7.1 to 1. Non-global financing debt totaled $7.4 billion, an increase of $1.6 billion since year-end 2010, resulting in a debt-to-capitalization ratio of 27.8 percent from 22.6 percent.

IBM ended the third-quarter 2011 with $11.3 billion of cash on hand and generated free cash flow of $3.5 billion, up approximately $300 million year over year. The company returned $4.3 billion to shareholders through $0.9 billion in dividends and $3.4 billion of share repurchases. The balance sheet remains strong, and the company is well positioned to support the business over the long term.

Year-To-Date 2011 Results

Net income for the nine months ended September 30, 2011 was $10.4 billion compared with $9.6 billion in the year-ago period, an increase of 8 percent. Diluted earnings per share were $8.48 compared with $7.38 per diluted share for the 2010 period, an increase of 15 percent. Revenues for the nine-month period totaled $77.4 billion, an increase of 9 percent (4 percent, adjusting for currency) compared with $70.9 billion for the nine months of 2010.

Operating (non-GAAP) net income for the nine months ended September 30, 2011 was $10.7 billion compared with $9.7 billion in the year-ago period, an increase of 11 percent. Operating (non-GAAP) diluted earnings per share were $8.77 compared with $7.45 per diluted share for the 2010 period, an increase of 18 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; breaches of data security; 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 supplementary materials presented within the third-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 Supplementary 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. Investors may participate by viewing the Webcast at www.ibm.com/investor/3q11. 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         Nine Months Ended
                           September 30,              September 30,                                      
                                      Percent                     Percent
                       2011     2010*  Change     2011     2010*   Change
                    -------  -------  -------  -------  -------  -------
REVENUE
 
 Global Technology
  Services          $10,322   $9,496      8.7% $30,427  $28,036      8.5%
  Gross margin         35.7%    35.1%             34.5%    34.5%
 
 Global Business
  Services            4,832    4,572      5.7%  14,407   13,465      7.0%
  Gross margin         29.4%    28.6%             28.6%    28.0%
 
 Software             5,817    5,151     12.9%  17,295   15,447     12.0%
  Gross margin         88.1%    87.9%             87.9%    87.2%
 
 Systems and
  Technology          4,482    4,325      3.6%  13,182   11,696     12.7%
  Gross margin         39.8%    36.4%             39.5%    35.2%
 
 Global Financing       520      529     -1.7%   1,555    1,610     -3.4%
  Gross margin         47.4%    53.3%             49.9%    51.1%
 
 Other                  182      199     -8.3%     563      599     -5.9%
  Gross margin        -48.3%   -10.8%            -66.7%   -13.3%
 
TOTAL REVENUE        26,157   24,271      7.8%  77,430   70,852      9.3%
 
 
GROSS PROFIT         12,173   11,001     10.6%  35,416   31,787     11.4%
  Gross margin         46.5%    45.3%             45.7%    44.9%
 
 
EXPENSE AND OTHER INCOME
 
 S,G&A                5,662    5,149     10.0%  17,518   15,886     10.3%
  % of revenue         21.6%    21.2%             22.6%    22.4%
 
 R,D&E                1,546    1,464      5.6%   4,703    4,448      5.7%
  % of revenue          5.9%     6.0%              6.1%     6.3%
 
 Intellectual property
  and custom development
  income               (298)    (278)     7.2%    (855)    (836)     2.2%
 Other (income)
   and expense          128     (106)      nm       23     (746)      nm 
 Interest expense       107       95     13.5%     298      267     11.6%
 
TOTAL EXPENSE AND
 OTHER INCOME         7,146    6,324     13.0%  21,687   19,019     14.0%
  % of revenue         27.3%    26.1%             28.0%    26.8%
 
INCOME BEFORE
 INCOME TAXES         5,027    4,677      7.5%  13,729   12,767      7.5%
  Pre-tax margin       19.2%    19.3%             17.7%    18.0%
 
Provision for
 income taxes         1,188    1,088      9.2%   3,364    3,192      5.4%
  Effective tax
  rate                 23.6%    23.3%             24.5%    25.0%
 
 
NET INCOME           $3,839   $3,589      7.0% $10,365   $9,576      8.2%
                     ======   ======           =======   ======
  Net margin           14.7%    14.8%             13.4%    13.5%
 
 
EARNINGS PER SHARE
 OF COMMON STOCK:
 ASSUMING DILUTION    $3.19    $2.82     13.1%   $8.48    $7.38     14.9%
 BASIC                $3.23    $2.86     12.9%   $8.60    $7.49     14.8%
 
WEIGHTED-AVERAGE NUMBER
 OF COMMON SHARES OUT-
 STANDING (M's):
  ASSUMING DILUTION 1,204.9  1,272.8           1,222.1  1,297.0
  BASIC             1,188.6  1,255.2           1,205.2  1,278.3

nm -- not meaningful

*  Segment gross profit margins in 2010 reclassified to conform with 
2011 presentation.


                      INTERNATIONAL BUSINESS MACHINES CORPORATION
                      CONSOLIDATED STATEMENT OF FINANCIAL POSITION
                                     (Unaudited)
 
                                                           At	         At
(Dollars in Millions)                                 September 30,    December 31,
                                                           2011            2010
                                                      -------------    ------------
ASSETS
 
Current Assets:
Cash and cash equivalents                                   $11,303         $10,661
Marketable securities                                           --              990
Notes and accounts receivable - trade
    (net of allowances of $282 in 2011 and $324 in 2010)      9,719          10,834
Short-term financing receivables
    (net of allowances of $266 in 2011 and $342 in 2010)     14,145          16,257
Other accounts receivable
    (net of allowances of $11 in 2011 and $10 in 2010)        1,123           1,134
Inventories, at lower of average cost or market:
  Finished goods                                                618             432
  Work in process and raw materials                           2,045           2,018
                                                      -------------   -------------
Total inventories                                             2,663           2,450
Deferred taxes                                                1,247           1,564
Prepaid expenses and other current assets                     5,172           4,226
                                                      -------------   -------------
Total Current Assets                                         45,373          48,116
 
Plant, rental machines, and other property                   40,139          40,289
   Less: Accumulated depreciation                            26,252          26,193
                                                      -------------   -------------
Plant, rental machines, and other property - net             13,887          14,096
Long-term financing receivables
    (net of allowances of $37 in 2011 and $58 in 2010)        9,830          10,548
Prepaid pension assets                                        5,131           3,068
Deferred taxes                                                2,570           3,220
Goodwill                                                     24,913          25,136
Intangible assets - net                                       3,033           3,488
Investments and sundry assets                                 5,422           5,778
                                                      -------------   -------------
Total Assets                                               $110,158        $113,452
                                                      =============   =============
LIABILITIES 
 
Current Liabilities:
Taxes                                                        $2,360          $4,216
Short-term debt                                               6,071           6,778
Accounts payable                                              7,093           7,804
Compensation and benefits                                     4,826           5,028
Deferred income                                              11,252          11,580
Other accrued expenses and liabilities                        4,426           5,156
                                                      -------------   -------------
Total Current Liabilities                                    36,028          40,562
 
Long-term debt                                               24,089          21,846
Retirement and nonpension postretirement
   benefit obligations                                       15,375          15,978
Deferred income                                               3,634           3,666
Other liabilities                                             8,654           8,226
                                                      -------------   -------------
Total Liabilities                                            87,781          90,279

EQUITY
IBM Stockholders' Equity:
  Common stock                                               47,558          45,418
  Retained earnings                                         100,266          92,532
  Treasury stock -- at cost                                (107,434)        (96,161)
  Accumulated other comprehensive income/(loss)             (18,099)        (18,743)
                                                      -------------   -------------
  Total IBM stockholders' equity                             22,291          23,046
 
Noncontrolling interests                                         87             126
                                                      -------------   -------------
Total Equity                                                 22,378          23,172
                                                      -------------   -------------
Total Liabilities and Equity                               $110,158        $113,452
                                                      =============   =============

 

                    INTERNATIONAL BUSINESS MACHINES CORPORATION
                                CASH FLOW ANALYSIS
                                   (Unaudited)
  
                                            Three Months Ended  Nine Months Ended
(Dollars in Millions)                          September 30,       September 30,
                                              2011      2010      2011      2010
                                             ------	   ------   -------   -------

Net Cash from Operating Activities per GAAP: $4,678    $4,551   $12,750   $12,754
 
     Less: the change in Global Financing (GF) 
	     Receivables                        207       374     2,110     2,257
                                             ------    ------   -------   ------
Net Cash from Operating Activities
     (Excluding GF Receivables)               4,471     4,177    10,640    10,497
 
     Capital Expenditures, Net                 (991)   (1,007)   (3,000)   (2,881)
 
Free Cash Flow
     (Excluding GF Receivables)               3,481     3,169     7,640     7,616
 
     Acquisitions                               (64)   (1,984)     (223)   (2,993)
     Divestitures                                 0         0         4         0
     Dividends                                 (893)     (818)   (2,593)   (2,369)
     Share Repurchase                        (3,444)   (3,653)  (11,465)  (11,774)
     Non-GF Debt                                 86       273     1,093     1,534
     Other (includes GF Receivables, and
	      GF Debt)			        374     1,858     5,196     5,099 
 
Change in Cash, Cash Equivalents and
Short-term Marketable Securities              ($461)  ($1,154)    ($348)  ($2,887)

 
                   INTERNATIONAL BUSINESS MACHINES CORPORATION
                                    SEGMENT DATA
                                     (Unaudited)
 
 
                                          THIRD-QUARTER 2011
                            -----------------------------------------------  
                                                         
(Dollars in Millions)       --------- Revenue ---------   Pre-tax   Pre-tax
                            External Internal     Total    Income    Margin
                            -------- --------  --------   -------   -------
SEGMENTS
 
Global Technology Services  $10,322     $316   $10,638    $1,695      15.9%
  Y-T-Y change                  8.7%   -12.6%      7.9%     12.5%
 
Global Business Services      4,832      199     5,031       775      15.4%
  Y-T-Y change                  5.7%     0.1%      5.5%     12.8%
 
Software                      5,817      804     6,621     2,214      33.4%
  Y-T-Y change                 12.9%    10.4%     12.6%     12.0%
 
Systems and Technology        4,482      190     4,672       318       6.8%
  Y-T-Y change                  3.6%    -3.2%      3.3%      7.8%
 
Global Financing                520      480       999       481      48.2%
  Y-T-Y change                 -1.7%    10.9%      4.0%     -4.0%
 
TOTAL REPORTABLE SEGMENTS   $25,974   $1,989   $27,963    $5,484      19.6%
  Y-T-Y change                  7.9%     3.7%      7.6%     10.4%
 
Eliminations / Other            182   (1,989)   (1,806)     (457)
 
TOTAL IBM CONSOLIDATED      $26,157       $0   $26,157    $5,027      19.2%
  Y-T-Y change                  7.8%               7.8%      7.5%


                                          THIRD-QUARTER 2010
                            -----------------------------------------------                                                       
(Dollars in Millions)       --------- Revenue ---------   Pre-tax   Pre-tax
                            External Internal     Total    Income*   Margin* 
                            -------- --------  --------   -------   -------
SEGMENTS
 
Global Technology Services   $9,496     $362    $9,857    $1,506      15.3%
 
Global Business Services      4,572      199     4,771       687      14.4%
 
Software                      5,151      728     5,879     1,978      33.6%
 
Systems and Technology        4,325      196     4,521       295       6.5%
 
Global Financing                529      432       961       502      52.2%
 
TOTAL REPORTABLE SEGMENTS   $24,072   $1,917   $25,990    $4,968      19.1%
 
Eliminations / Other            199   (1,917)   (1,718)     (291)
 
TOTAL IBM CONSOLIDATED      $24,271       $0   $24,271    $4,677      19.3%
 
* Reclassified to conform with 2011 presentation.


                   INTERNATIONAL BUSINESS MACHINES CORPORATION
                                    SEGMENT DATA
                                     (Unaudited)
 
 
                                           NINE-MONTHS 2011
                            -----------------------------------------------                                                          
(Dollars in Millions)       --------- Revenue ---------   Pre-tax   Pre-tax
                            External Internal     Total    Income    Margin
                            -------- --------  --------   -------   -------
SEGMENTS
 
Global Technology Services  $30,427     $943   $31,370    $4,353      13.9%
  Y-T-Y change                  8.5%    -7.0%      8.0%     12.7%
 
Global Business Services     14,407      604    15,012     2,166      14.4%
  Y-T-Y change                  7.0%     0.9%      6.7%     19.6%
 
Software                     17,295    2,425    19,720     6,260      31.7%
  Y-T-Y change                 12.0%    11.4%     11.9%      1.5%
 
Systems and Technology       13,182      652    13,834       843       6.1%
  Y-T-Y change                 12.7%    14.1%     12.8%    197.9%
 
Global Financing              1,555    1,524     3,078     1,497      48.6%
  Y-T-Y change                 -3.4%    20.3%      7.0%      7.6%
 
TOTAL REPORTABLE SEGMENTS   $76,866   $6,148   $83,015   $15,118      18.2%
  Y-T-Y change                  9.4%     9.3%      9.4%     11.9%
 
Eliminations / Other            563   (6,148)   (5,585)   (1,389)
 
TOTAL IBM CONSOLIDATED      $77,430       $0   $77,430    $13,729     17.7%
  Y-T-Y change                  9.3%               9.3%      7.5%


                                          NINE-MONTHS 2010
                            -----------------------------------------------                                                         
 (Dollars in Millions)      --------- Revenue ---------   Pre-tax   Pre-tax
                            External Internal     Total    Income*   Margin*
                            -------- --------  --------  --------   -------
SEGMENTS
 
Global Technology Services  $28,036   $1,014   $29,050    $3,863      13.3%
 
Global Business Services     13,465      599    14,064     1,811      12.9%
 
Software                     15,447    2,176    17,623     6,167      35.0%
 
Systems and Technology       11,696      572    12,267       283       2.3%
 
Global Financing              1,610    1,267     2,877     1,391      48.3%

TOTAL REPORTABLE SEGMENTS   $70,253   $5,627   $75,880   $13,514      17.8%                    
 
Eliminations / Other            599   (5,627)   (5,028)     (747)
 
TOTAL IBM CONSOLIDATED      $70,852       $0   $70,852   $12,767      18.0%                   
                
* Reclassified to conform with 2011 presentation.


                   INTERNATIONAL BUSINESS MACHINES CORPORATION
                  U.S. GAAP TO OPERATING RESULTS RECONCILIATION
             (Unaudited, Dollars in millions except per share amounts)
 
 
                                                THIRD-QUARTER 2011
                                -----------------------------------------------
                                        Acquisition-  Retirement-
                                           Related       Related      Operating
                                  GAAP   Adjustments*  Adjustments   (Non-GAAP)
                                -------- ------------ ------------- -----------
Gross Profit                     $12,173          $87           ($7)    $12,253
 
Gross Profit Margin                 46.5%      0.3Pts        0.0Pts        46.8%
 
S,G&A                              5,662          (75)           (0)      5,587
 
R,D&E                              1,546            0            22       1,568
 
Other (Income) & Expense             128          (18)            0         111 

Total Expense & Other (Income)     7,146          (92)           21       7,075
 
Pre-Tax Income                     5,027          180           (29)      5,178
 
Pre-Tax Income Margin               19.2%      0.7Pts       -0.1Pts        19.8%
 
Provision for Income Taxes**       1,188           47           (11)      1,224
 
Effective Tax Rate                  23.6%      0.1Pts       -0.1Pts        23.6% 
 
Net Income                         3,839          133           (17)      3,954
 
Net Income Margin                   14.7%      0.5Pts       -0.1Pts        15.1%
 
Diluted Earnings Per Share         $3.19        $0.11        ($0.01)      $3.28
 

                                                THIRD-QUARTER 2010
                                -----------------------------------------------
                                         Acquisition-  Retirement-
                                           Related       Related      Operating
                                  GAAP   Adjustments*  Adjustments   (Non-GAAP)
                                -------- ------------ ------------- ----------- 
  
Gross Profit                     $11,001          $65         ($53)     $11,013
 
Gross Profit Margin                 45.3%      0.3Pts      -0.2Pts         45.4%
 
S,G&A                              5,149          (76)          20        5,094
 
R,D&E                              1,464            0           31        1,495
 
Other (Income) & Expense            (106)           1            0         (105)

Total Expense & Other (Income)     6,324          (75)          51        6,301
 
Pre-Tax Income                     4,677          139         (104)       4,712
 
Pre-Tax Income Margin               19.3%      0.6Pts      -0.4Pts         19.4%
  
Provision for Income Taxes**       1,088           34          (38)       1,084
 
Effective Tax Rate                  23.3%      0.0Pts      -0.3Pts         23.0%
 
Net Income                         3,589          105          (66)       3,628
 
Net Income Margin                   14.8%      0.4Pts      -0.3Pts         14.9%
 
Diluted Earnings Per Share         $2.82        $0.08       ($0.05)       $2.85


*  Includes amortization of acquired intangible assets and other acquisition-related 
charges.
**  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)
 
 
                                               NINE-MONTHS 2011
                                -----------------------------------------------
                                         Acquisition-  Retirement-
                                           Related       Related      Operating
                                  GAAP   Adjustments*  Adjustments   (Non-GAAP)
                                -------- ------------ ------------- -----------
Gross Profit                     $35,416         $259           $12     $35,687
 
Gross Profit Margin                 45.7%      0.3Pts        0.0Pts        46.1%
 
S,G&A                             17,518         (226)          (16)     17,276
 
R,D&E                              4,703            0            65       4,768
 
Other (Income) & Expense              23          (23)            0           1  

Total Expense & Other (Income)    21,687         (249)           49      21,487
 
Pre-Tax Income                    13,729          508           (37)     14,200
 
Pre-Tax Income Margin               17.7%      0.7Pts        0.0Pts        18.3%
 
Provision for Income Taxes**       3,364          132           (17)      3,479
 
Effective Tax Rate                  24.5%      0.1Pts       -0.1Pts        24.5%
 
Net Income                        10,365          376           (20)     10,721
 
Net Income Margin                   13.4%      0.5Pts        0.0Pts        13.8%
 
Diluted Earnings Per Share         $8.48        $0.31        ($0.02)      $8.77
 

                                                NINE-MONTHS 2010
                                -----------------------------------------------
                                         Acquisition-  Retirement-
                                           Related       Related      Operating
                                  GAAP   Adjustments*  Adjustments   (Non-GAAP)
                                -------- ------------ ------------- ----------- 
  
Gross Profit                     $31,787         $178         ($144)    $31,820
 
Gross Profit Margin                 44.9%      0.3Pts       -0.2Pts        44.9%
 
S,G&A                             15,886         (199)           56      15,744
 
R,D&E                              4,448            0            93       4,541
 
Other (Income) & Expense            (746)          (2)            0        (747) 

Total Expense & Other (Income)    19,019         (200)          149      18,968
 
Pre-Tax Income                    12,767          378          (293)     12,853
 
Pre-Tax Income Margin               18.0%      0.5Pts       -0.4Pts        18.1%
  
Provision for Income Taxes**       3,192          106          (114)      3,184
 
Effective Tax Rate                  25.0%      0.1Pts       -0.3Pts        24.8%
 
Net Income                         9,576          272          (179)      9,669
 
Net Income Margin                   13.5%      0.4Pts       -0.3Pts        13.6%
 
Diluted Earnings Per Share         $7.38        $0.21        ($0.14)      $7.45

*  Includes amortization of acquired intangible assets and other acquisition-related 
charges.
**  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.