Q1

Quarterly earnings



IBM reports 2012 third-quarter results

Third-Quarter 2012

ARMONK, N.Y., October 16, 2012 . . . IBM (NYSE: IBM) today announced third-quarter 2012 diluted earnings of $3.33 per share, a year-to-year increase of 4 percent, or $3.44 per share, up 8 percent excluding the impact of UK pension-related charges. Operating (non-GAAP) diluted earnings were $3.62 per share, compared with operating diluted earnings of $3.28 per share in the third quarter of 2011, an increase of 10 percent.

Third-quarter net income was $3.8 billion, flat year-to-year; or $3.9 billion, up 3 percent excluding the impact of UK pension-related charges. Operating (non-GAAP) net income was $4.2 billion compared with $4.0 billion in the third quarter of 2011, an increase of 5 percent.

Total revenues for the third quarter of 2012 of $24.7 billion were down 5 percent (down 2 percent, adjusting for currency) from the third quarter of 2011. Currency negatively impacted revenue growth by nearly $1 billion.

"In the third quarter, we continued to drive margin, profit and earnings growth through our focus on higher-value businesses, strategic growth initiatives and productivity," said Ginni Rometty, IBM chairman, president and chief executive officer.

"Looking ahead, we see good opportunity with a strong product lineup heading into this quarter and annuity businesses that provide a solid base of revenue, profit and cash. We are reiterating our full-year 2012 operating earnings per share expectation of at least $15.10."

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

Third-quarter operating (non-GAAP) diluted earnings exclude $0.29 per share of charges: $0.12 per share for the amortization of purchased intangible assets and other acquisition-related charges, and $0.17 per share for retirement-related charges, including $0.11 per share for the impact of UK pension-related charges.

Full-Year 2012 Expectations

IBM is adjusting its expectation for full-year 2012 GAAP diluted earnings per share to at least $14.29, to reflect the impact of UK pension-related charges. Operating (non-GAAP) diluted earnings per share expectations remain at least $15.10. The 2012 operating (non-GAAP) earnings expectations exclude $0.81 per share of charges for amortization of purchased intangible assets, other acquisition-related charges, and retirement-related charges.

Geographic Regions

The Americas' third-quarter revenues were $10.4 billion, a decrease of 4 percent (down 3 percent, adjusting for currency) from the 2011 period. Revenues from Europe/Middle East/Africa were $7.2 billion, down 9 percent (down 1 percent, adjusting for currency). Asia-Pacific revenues increased 1 percent (up 2 percent, adjusting for currency) to $6.5 billion. OEM revenues were $538 million, down 28 percent compared with the 2011 third quarter.

Growth Markets

Revenues from the company's growth markets decreased 1 percent (up 4 percent, adjusting for currency) and 35 countries had double-digit revenue growth, adjusting for currency. Revenues in the BRIC countries - Brazil, Russia, India and China - increased 4 percent (up 11 percent, adjusting for currency).

Services

Global Technology Services segment revenues decreased 4 percent (up 1 percent, adjusting for currency) to $9.9 billion. Global Business Services segment revenues were down 6 percent (down 3 percent, adjusting for currency) to $4.5 billion.

Pre-tax income from Global Technology Services was flat and pre-tax margin increased to 16.6 percent (up 9 percent and 18.1 percent, respectively, when adjusted for workforce rebalancing charges in the third quarters of 2011 and 2012). Global Business Services pre-tax income decreased 5 percent and pre-tax margin increased to 15.6 percent (up 9 percent and 18 percent, respectively, when adjusted for workforce rebalancing charges in the third quarters of 2011 and 2012).

The estimated services backlog at September 30 was $138 billion, up 1 percent year over year at actual rates (up 1 percent, adjusting for currency).

Software

Revenues from the Software segment were $5.8 billion, down 1 percent (up 3 percent, adjusting for currency) compared with the third quarter of 2011. Software pre-tax income increased 6 percent and pre-tax margin increased to 35.6 percent (up 10 percent and 37.1 percent, respectively, when adjusted for workforce rebalancing charges in the third quarters of 2011 and 2012).

Revenues from IBM's key middleware products, which include WebSphere, Information Management, Tivoli, Lotus and Rational products, were $3.6 billion, down 1 percent (up 3 percent, adjusting for currency) versus the third quarter of 2011. Operating systems revenues of $597 million were flat (up 4 percent, adjusting for currency) compared with the prior-year quarter.

Revenues from the WebSphere family of software products increased 2 percent year over year. Information Management software revenues decreased 1 percent. Revenues from Tivoli software increased 5 percent. Revenues from Lotus software decreased 10 percent, and Rational software decreased 16 percent.

Hardware

Revenues from the Systems and Technology segment totaled $3.9 billion for the quarter, down 13 percent (down 12 percent, adjusting for currency) from the third quarter of 2011. Excluding Retail Store Solutions (RSS), revenues were down 11 percent (9 percent, adjusting for currency). Systems and Technology pre-tax income decreased $0.2 billion.

Total systems revenues, excluding RSS, decreased 8 percent (down 6 percent, adjusting for currency). Revenues from Power Systems were down 2 percent compared with the 2011 period. Revenues from System x were down 5 percent. Revenues from System z mainframe server products decreased 20 percent compared with the year-ago period. Total delivery of System z computing power, as measured in MIPS (millions of instructions per second), decreased 2 percent. Revenues from System Storage decreased 10 percent. Revenues from Retail Store Solutions decreased 79 percent year over year as a result of the divestiture in the quarter. Revenues from Microelectronics OEM decreased 25 percent.

Financing

Global Financing segment revenues were down 9 percent (down 5 percent, adjusting for currency) in the third quarter at $472 million. Pre-tax income for the segment decreased 1 percent to $476 million.

Gross Profit

The company's total gross profit margin was 47.4 percent in the 2012 third quarter compared with 46.5 percent in the 2011 third-quarter period. Total operating (non-GAAP) gross profit margin was 48.1 percent in the 2012 third quarter compared with 46.8 percent in the 2011 third-quarter period, with increases in Global Technology Services and Global Business Services.

Expense

Total expense and other income decreased 7 percent to $6.7 billion, or a decrease of 9 percent to $6.5 billion, excluding $162 million for UK pension-related charges, compared with the prior-year period. S,G&A expense of $5.9 billion increased 4 percent year over year, or expense of $5.7 billion, up 1 percent excluding the impact of UK pension-related charges. S,G&A expense includes $408 million for workforce rebalancing, which negatively impacted net income by approximately $310 million. R,D&E expense of $1.5 billion decreased 1 percent compared with the year-ago period. Intellectual property and custom development income increased to $303 million compared with $298 million a year ago. Other (income) and expense was income of $606 million compared with prior-year expense of $128 million. This increase in income was primarily due to a $447 million gain from the divestiture of Retail Store Solutions, which contributed approximately $280 million to net income. Interest expense increased to $124 million compared with $107 million in the prior year.

Total operating (non-GAAP) expense and other income decreased 10 percent to $6.4 billion compared with the prior-year period. Operating (non-GAAP) S,G&A expense of $5.6 billion increased 1 percent compared with prior-year expense. Operating (non-GAAP) R,D&E expense of $1.5 billion decreased 2 percent compared with the year-ago period.

***

Pre-tax income increased 1 percent to $5.1 billion, or 4 percent to $5.2 billion excluding the impact of UK pension-related charges. Pre-tax margin increased 1.3 points to 20.5 percent, or 1.9 points to 21.2 percent excluding the impact of UK pension-related charges, compared with the prior-year period. Operating (non-GAAP) pre-tax income increased 7 percent to $5.5 billion and pre-tax margin was 22.3 percent, up 2.5 points.

IBM's tax rate was 24.6 percent, up 1.0 points year over year; operating (non-GAAP) tax rate was 24.7 percent, up 1.1 points compared to the year-ago period.

Net income margin increased 0.8 points to 15.5 percent, or 1.3 points to 16.0 percent excluding the impact of UK pension-related charges. Total operating (non-GAAP) net income margin increased 1.7 points to 16.8 percent.

The weighted-average number of diluted common shares outstanding in the third-quarter 2012 was 1.15 billion compared with 1.20 billion shares in the same period of 2011. As of September 30, 2012, there were 1.13 billion basic common shares outstanding.

Debt, including Global Financing, totaled $33.7 billion, compared with $31.3 billion at year-end 2011. From a management segment view, Global Financing debt totaled $23.3 billion versus $23.3 billion at year-end 2011, resulting in a debt-to-equity ratio of 7.1 to 1. Non-global financing debt totaled $10.3 billion, an increase of $2.4 billion since year-end 2011, resulting in a debt-to-capitalization ratio of 36.0 percent from 32.0 percent.

IBM ended the third-quarter 2012 with $12.3 billion of cash on hand and generated free cash flow of $3.1 billion, excluding Global Financing receivables, down 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. The balance sheet remains strong, and the company is well positioned to support the business over the long term.

Year-To-Date 2012 Results

Net income for the nine months ended September 30, 2012 was $10.8 billion, a year-to-year increase of 4 percent, or $10.9 billion, up 5 percent, excluding the impact of UK pension-related charges. Diluted earnings per share were $9.27 compared with $8.48 per diluted share for the 2011 period, an increase of 9 percent, or $9.38, up 11 percent excluding the impact of UK pension-related charges. Revenues for the nine-month period totaled $75.2 billion, a decrease of 3 percent (flat, adjusting for currency) compared with $77.4 billion for the nine months of 2011.

Operating (non-GAAP) net income for the nine months ended September 30, 2012 was $11.5 billion compared with $10.7 billion in the year-ago period, an increase of 7 percent. Operating (non-GAAP) diluted earnings per share were $9.90 compared with $8.77 per diluted share for the 2011 period, an increase of 13 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 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 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/3q12. 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
                               2012     2011   Change     2012     2011  Change
                            -------  -------   ------- -------  -------  -------
REVENUE  

Global Technology Services   $9,922  $10,322     -3.9% $29,952  $30,427    -1.6%
 Gross profit margin          37.3%    35.7%             36.3%    34.5%
 
Global Business Services      4,542    4,832     -6.0%  13,846   14,407    -3.9%
 Gross profit margin          31.2%    29.4%             30.0%    28.6%
 
Software                      5,763    5,817     -0.9%  17,533   17,295     1.4%
 Gross profit margin          88.0%    88.1%             87.8%    87.9%
 
Systems and Technology        3,895    4,482    -13.1%  11,903   13,182    -9.7%
 Gross profit margin          37.3%    39.8%             36.7%    39.5%
 
Global Financing                472      520     -9.2%   1,478    1,555    -4.9%
 Gross profit margin          45.8%    47.4%             47.5%    49.9%
 
Other                           154      182    -15.9%     490      563   -13.0%
 Gross profit margin         -80.4%   -48.3%            -71.3%   -66.7%
 
TOTAL REVENUE                24,747   26,157     -5.4%  75,203   77,430    -2.9%   
 
 
GROSS PROFIT                 11,732   12,173     -3.6%  35,131   35,416    -0.8%
 Gross profit margin          47.4%    46.5%             46.7%    45.7%
 
 
EXPENSE AND OTHER INCOME 
S,G&A                         5,908    5,662      4.3%  17,632   17,518     0.6%
 Expense to revenue           23.9%    21.6%             23.4%    22.6%

R,D&E                         1,534    1,546     -0.8%   4,722    4,703     0.4%
 Expense to revenue            6.2%     5.9%              6.3%     6.1%

Intellectual property
 and custom development
 income                       (303)    (298)      1.4%   (847)    (855)    -0.9%

Other (income) and expense    (606)      128        NM   (796)       23       NM
 
Interest expense                124      107     15.2%     350      298    17.7%
 
TOTAL EXPENSE AND
 OTHER INCOME                 6,657    7,146     -6.8%  21,060   21,687    -2.9%
 Expense to revenue           26.9%    27.3%             28.0%    28.0%
 
INCOME BEFORE
 INCOME TAXES                 5,074    5,027      0.9%  14,071   13,729     2.5%
 Pre-tax margin               20.5%    19.2%             18.7%    17.7% 

Provision for income taxes    1,251    1,188      5.2%   3,300    3,364    -1.9%
 Effective tax rate           24.6%    23.6%             23.5%    24.5% 
 
NET INCOME                   $3,824   $3,839     -0.4% $10,771  $10,365     3.9%
                             ======   ======            ======   ======
 Net income margin            15.5%    14.7%             14.3%    13.4% 
 
EARNINGS PER SHARE
OF COMMON STOCK:
 ASSUMING DILUTION            $3.33    $3.19      4.4%   $9.27    $8.48     9.3%
 BASIC                        $3.36    $3.23      4.0%   $9.38    $8.60     9.1%
 
WEIGHTED-AVERAGE NUMBER
OF COMMON SHARES OUT-
STANDING (M's):
 ASSUMING DILUTION          1,149.3  1,204.9           1,161.8  1,222.1
 BASIC                      1,137.2  1,188.6           1,148.4  1,205.2

NM -- Not Meaningful



                                 INTERNATIONAL BUSINESS MACHINES CORPORATION
                                 CONSOLIDATED STATEMENT OF FINANCIAL POSITION
                                                 (Unaudited)
 
                                                           At 	         At
(Dollars in Millions)                                 September 30,    December 31,
                                                          2012            2011
                                                      -------------    ------------
ASSETS:
 
Current Assets:
Cash and cash equivalents                                   $11,909         $11,922
Marketable securities                                           345             -- 
Notes and accounts receivable - trade
  (net of allowances of $250 in 2012 and $256 in 2011)        9,772          11,179
Short-term financing receivables
  (net of allowances of $277 in 2012 and $311 in 2011)       14,925          16,901
Other accounts receivable
  (net of allowances of $20 in 2012 and $11 in 2011)          2,066           1,481
Inventories, at lower of average cost or market:
  Finished goods                                                649             589
  Work in process and raw materials                           1,937           2,007
                                                           --------        --------
Total inventories                                             2,586           2,595
Deferred taxes                                                1,522           1,601
Prepaid expenses and other current assets                     5,016           5,249
                                                           --------        --------
Total Current Assets                                         48,141          50,928
 
Property, plant and equipment                                40,716          40,124
  Less: Accumulated depreciation                             26,688          26,241
                                                           --------        --------
Property, plant and equipment - net                          14,027          13,883
Long-term financing receivables
  (net of allowances of $65 in 2012 and $38 in 2011)         10,791          10,776
Prepaid pension assets                                        3,424           2,843
Deferred taxes                                                2,555           3,503
Goodwill                                                     28,270          26,213
Intangible assets - net                                       3,565           3,392
Investments and sundry assets                                 5,006           4,895
                                                           --------        --------
Total Assets                                               $115,778        $116,433
                                                           ========        ========
LIABILITIES:
 
Current Liabilities:
Taxes                                                        $2,147          $3,313
Short-term debt                                               9,334           8,463	
Accounts payable                                              7,085           8,517
Compensation and benefits                                     4,730           5,099
Deferred income                                              11,230          12,197
Other accrued expenses and liabilities                        4,973           4,535
                                                           --------        --------
Total Current Liabilities                                    39,499          42,123
 
Long-term debt                                               24,333          22,857
Retirement and nonpension postretirement
  benefit obligations                                        16,682          18,374
Deferred income                                               4,263           3,847
Other liabilities                                             9,335           8,996
                                                           --------        --------
Total Liabilities                                            94,112          96,197

EQUITY:

IBM Stockholders' Equity:
  Common stock                                               49,603          48,129
  Retained earnings                                         112,773         104,857
  Treasury stock -- at cost                               (120,115)       (110,963)
  Accumulated other comprehensive income/(loss)            (20,720)        (21,885)
                                                           --------        --------
  Total IBM stockholders' equity                             21,541          20,138
 
Noncontrolling interests                                        126              97
                                                           --------        --------
Total Equity                                                 21,666          20,236
                                                           --------        --------
Total Liabilities and Equity                               $115,778        $116,433   
                                                           ========        ========




                       INTERNATIONAL BUSINESS MACHINES CORPORATION
                                   CASH FLOW ANALYSIS
                                       (Unaudited)
  
                                            Three Months Ended   Nine Months Ended
(Dollars in Millions)                        	September 30,       September 30,
                                                2012      2011      2012      2011
                                              ------    ------    ------    ------
Net Cash from Operating Activities per GAAP:  $4,514    $4,678   $13,240   $12,750
 
     Less: the change in Global Financing (GF) 
	     Receivables                         327       207     1,245     2,110
                                              ------    ------    ------    ------
Net Cash from Operating Activities
     (Excluding GF Receivables)                4,187     4,471    11,995    10,640
 
     Capital Expenditures, Net               (1,046)     (991)   (3,326)   (3,000)
 
Free Cash Flow
     (Excluding GF Receivables)                3,141     3,481     8,670     7,640
 
     Acquisitions                              (342)      (64)   (2,266)     (223)
     Divestitures                                573         0       587         4
     Dividends                                 (968)     (893)   (2,816)   (2,593)
     Share Repurchase                        (2,986)   (3,444)   (8,988)  (11,465)
     Non-GF Debt                                 694        86     2,284     1,093
     Other (includes GF Receivables and
      GF Debt)                                   954       374     2,861     5,196 
 
Change in Cash, Cash Equivalents and 
Short-term Marketable Securities              $1,067    ($461)      $331    ($348)
                                            ========  ========  ========  ========



                     INTERNATIONAL BUSINESS MACHINES CORPORATION
                                    SEGMENT DATA
                                     (Unaudited) 

 
                                          THIRD-QUARTER 2012
                          -------------------------------------------------
                                                         Pre-tax
(Dollars in Millions)      --------- Revenue ---------   Income/   Pre-tax
                           External Internal     Total    (Loss)    Margin
                           -------- --------   ------- ---------   -------
SEGMENTS

Global Technology Services   $9,922     $285   $10,206    $1,697     16.6%
  Y-T-Y change                -3.9%   -10.0%     -4.1%      0.1%
 
Global Business Services      4,542      175     4,717       738     15.6%
  Y-T-Y change                -6.0%   -12.0%     -6.2%     -4.8%
 
Software                      5,763      843     6,606     2,355     35.6%
  Y-T-Y change                -0.9%     4.9%     -0.2%      6.3%
 
Systems and Technology        3,895      181     4,076       124      3.0%
  Y-T-Y change                -13.1    -4.6%    -12.8%    -61.1%

Global Financing                472      491       963       476     49.4%
  Y-T-Y change                -9.2%     2.5%     -3.6%     -1.2%
 
TOTAL REPORTABLE SEGMENTS   $24,594   $1,976   $26,570    $5,389     20.3%
  Y-T-Y change                -5.3%    -0.6%     -5.0%     -1.7% 
 
Eliminations / Other            154  (1,976)   (1,822)     (315)       
 
TOTAL IBM CONSOLIDATED      $24,747       $0   $24,747    $5,074     20.5%
  Y-T-Y change                -5.4%              -5.4%      0.9%


 
                                          THIRD-QUARTER 2011
                          -------------------------------------------------
                                                         Pre-tax
(Dollars in Millions)      --------- Revenue ---------   Income/   Pre-tax
                           External Internal     Total    (Loss)    Margin                            	                    
                           -------- --------   ------- ---------   -------
SEGMENTS
 
Global Technology Services  $10,322     $316   $10,638    $1,695     15.9%
 
Global Business Services      4,832      199     5,031       775     15.4%
 
Software                      5,817      804     6,621     2,214     33.4%
 
Systems and Technology        4,482      190     4,672       318      6.8%
 
Global Financing                520      480       999       481     48.2%
 
TOTAL REPORTABLE SEGMENTS   $25,974   $1,989   $27,963    $5,484     19.6%
 
Eliminations / Other            182  (1,989)   (1,806)     (457)
 
TOTAL IBM CONSOLIDATED      $26,157       $0   $26,157    $5,027     19.2%



                       INTERNATIONAL BUSINESS MACHINES CORPORATION
                                      SEGMENT DATA
                                       (Unaudited) 
 
                                         NINE-MONTHS 2012
                          -------------------------------------------------
                                                         Pre-tax
(Dollars in Millions)      --------- Revenue ---------   Income/   Pre-tax
                           External Internal     Total    (Loss)    Margin
                           -------- --------   ------- ---------   -------
SEGMENTS
 
Global Technology Services  $29,952     $869   $30,821    $4,934     16.0%
  Y-T-Y change                -1.6%    -7.9%     -1.8%     13.3%     
 
Global Business Services     13,846      538    14,384     2,142     14.9%
  Y-T-Y change                -3.9%   -11.0%     -4.2%     -1.1%
 
Software                     17,533    2,459    19,992     6,793     34.0%
  Y-T-Y change                 1.4%     1.4%      1.4%      8.5%

Systems and Technology       11,903      491    12,394       253      2.0%
  Y-T-Y change                -9.7%   -24.8%    -10.4%    -70.0%
 
Global Financing              1,478    1,492     2,970     1,516     51.0%
  Y-T-Y change                -4.9%    -2.1%     -3.5%      1.3%

TOTAL REPORTABLE SEGMENTS   $74,713   $5,848   $80,561   $15,637     19.4%
  Y-T-Y change                -2.8%    -4.9%     -3.0%      3.4%
 
Eliminations / Other            490  (5,848)   (5,358)   (1,566)
 
TOTAL IBM CONSOLIDATED      $75,203       $0   $75,203   $14,071     18.7%
  Y-T-Y change                -2.9%              -2.9%      2.5%

 
 
                                         NINE-MONTHS 2011
                          -------------------------------------------------
                                                         Pre-tax
(Dollars in Millions)      --------- Revenue ---------   Income/   Pre-tax
                           External Internal     Total    (Loss)    Margin
                           -------- --------   ------- ---------   -------
SEGMENTS
 
Global Technology Services  $30,427     $943   $31,370    $4,353     13.9%
 
Global Business Services     14,407      604    15,012     2,166     14.4%
 
Software                     17,295    2,425    19,720     6,260     31.7%
 
Systems and Technology       13,182      652    13,834       843      6.1%
 
Global Financing              1,555    1,524     3,078     1,497     48.6%
 
TOTAL REPORTABLE SEGMENTS   $76,866   $6,148   $83,015   $15,118     18.2%
 
Eliminations / Other            563  (6,148)   (5,585)   (1,389)
 
TOTAL IBM CONSOLIDATED      $77,430       $0   $77,430   $13,729     17.7%

                 

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

                                               THIRD-QUARTER 2012
                                -----------------------------------------------
                                          Acquisition-  Retirement-
                                            Related      Related      Operating
                                  GAAP    Adjustments* Adjustments** (Non-GAAP)
                                -------- ------------ ------------    ---------
Gross Profit                     $11,732          $95          $67      $11,894
 
Gross Profit Margin                47.4%       0.4Pts       0.3Pts        48.1%
  
S,G&A                              5,908         (88)        (196)        5,625
 
R,D&E                              1,534            0            5        1,539
  
Other (Income) & Expense           (606)          (5)            0        (611)

Total Expense & Other (Income)     6,657         (92)        (191)        6,374
 
Pre-Tax Income                     5,074          188          258        5,520
 
Pre-Tax Income Margin              20.5%       0.8Pts       1.0Pts        22.3%
  
Provision for Income Taxes***      1,251           47           67        1,364
 
Effective Tax Rate                 24.6%       0.0Pts       0.1Pts        24.7%
 
Net Income                         3,824          141          191        4,155
 
Net Income Margin                  15.5%       0.6Pts       0.8Pts        16.8%
 
Diluted Earnings Per Share         $3.33        $0.12        $0.17        $3.62



                                               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


*  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)
 
 
                                               NINE-MONTHS 2012
                                -----------------------------------------------
                                          Acquisition-   Retirement-
                                            Related       Related     Operating
                                  GAAP    Adjustments*  Adjustments**(Non-GAAP)
                                -------- ------------ -------------  ----------
Gross Profit                     $35,131         $276          $204     $35,611
 
Gross Profit Margin                46.7%       0.4Pts        0.3Pts       47.4%
 
S,G&A                             17,632        (258)         (265)      17,108
 
R,D&E                              4,722            0            14       4,736
 
Other (Income) & Expense           (796)          (7)             0       (803) 

Total Expense & Other Income      21,060        (265)         (251)      20,545
 
Pre-Tax Income                    14,071          541           454      15,067
 
Pre-Tax Income Margin              18.7%       0.7Pts        0.6Pts       20.0%
 
Provision for Income Taxes***      3,300          143           127       3,569
 
Effective Tax Rate                 23.5%       0.1Pts        0.1Pts       23.7%
 
Net Income                        10,771          399           328      11,498
 
Net Income Margin                  14.3%       0.5Pts        0.4Pts       15.3%
 
Diluted Earnings Per Share         $9.27        $0.34         $0.28       $9.90
 

                                                 
                                                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
                               

*  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