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IBM REPORTS 2011 FOURTH-QUARTER AND FULL-YEAR RESULTS

Full-Year 2011:

Full-Year 2012 Expectation:

ARMONK, N.Y., January 19, 2012 . . . IBM (NYSE: IBM) today announced fourth-quarter 2011 diluted earnings of $4.62 per share, compared with diluted earnings of $4.18 per share in the fourth quarter of 2010, an increase of 11 percent. Operating (non-GAAP) diluted earnings were $4.71 per share, compared with operating diluted earnings of $4.25 per share in the fourth quarter of 2010, an increase of 11 percent.

Fourth-quarter net income was $5.5 billion compared with $5.3 billion in the fourth quarter of 2010, an increase of 4 percent. Operating (non-GAAP) net income was $5.6 billion compared with $5.4 billion in the fourth quarter of 2010, an increase of 5 percent.

Total revenues for the fourth quarter of 2011 of $29.5 billion increased 2 percent (1 percent, adjusting for currency) from the fourth quarter of 2010. While currency provided a benefit to revenue growth of approximately 25 basis points in the quarter, currency movements since the company announced its third-quarter earnings in October impacted fourth-quarter revenue by approximately one point of growth, or $300 million.

"We had a strong fourth-quarter performance, capping a year of record earnings per share, revenue, profit and free cash flow," said Ginni Rometty, IBM president and chief executive officer. "We delivered outstanding results in all four of our strategic initiatives for the quarter and the year, as we continued to realize the benefit of our long-term investments in growth markets, business analytics, Smarter Planet solutions and cloud. We are well on track toward our long-term roadmap for operating earnings per share of at least $20 in 2015.""

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

Fourth-quarter operating (non-GAAP) diluted earnings exclude $0.09 per share of net charges: $0.10 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 2012 Expectation

IBM said that it expects to deliver full-year 2012 GAAP earnings per share of at least $14.16; and operating (non-GAAP) earnings per share of at least $14.85. The 2012 operating (non-GAAP) earnings exclude $0.69 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' fourth-quarter revenues were $12.5 billion, an increase of 3 percent (3 percent, adjusting for currency) from the 2010 period. Revenues from Europe/Middle East/Africa were $9.6 billion, up 1 percent (1 percent, adjusting for currency). Asia-Pacific revenues increased 2 percent (down 1 percent, adjusting for currency) to $6.7 billion. OEM revenues were $714 million, down 9 percent compared with the 2010 fourth quarter.

Growth Markets

Revenues from the company's growth markets increased 7 percent (8 percent, adjusting for currency). Revenues in the BRIC countries - Brazil, Russia, India and China - increased 10 percent (11 percent, adjusting for currency).

Services

Global Technology Services segment revenues increased 3 percent (3 percent, adjusting for currency) to $10.5 billion. Global Business Services segment revenues were up 3 percent (2 percent, adjusting for currency) at $4.9 billion.

Pre-tax income from Global Technology Services increased 18 percent; pre-tax margin increased to 18.0 percent. Global Business Services pre-tax income increased 14 percent; pre-tax margin increased to 16.6 percent.

The estimated services backlog at December 31 was $141 billion, up $4 billion as reported ($5 billion, adjusting for currency), quarter to quarter, and down $2 billion as reported (flat, adjusting for currency), year over year. 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 $7.6 billion, an increase of 9 percent (9 percent, adjusting for currency). Software pre-tax income of $3.7 billion increased 12 percent year over year.

Revenues from IBM's key middleware products, which include WebSphere, Information Management, Tivoli, Lotus and Rational products, were $5.2 billion, an increase of 11 percent (11 percent, adjusting for currency) versus the fourth quarter of 2010. Operating systems revenues of $710 million increased 3 percent (3 percent, adjusting for currency) compared with the prior-year quarter.

Revenues from the WebSphere family of software products increased 21 percent year over year. Information Management software revenues increased 9 percent. Revenues from Tivoli software increased 14 percent. Revenues from Lotus software decreased 2 percent, and Rational software increased 4 percent.

Hardware

Revenues from the Systems and Technology segment totaled $5.8 billion for the quarter, down 8 percent (8 percent, adjusting for currency) from the fourth quarter of 2010. Systems and Technology pre-tax income was $790 million, a decrease of 33 percent.

Total systems revenues decreased 7 percent (7 percent, adjusting for currency). Revenues from Power Systems increased 6 percent compared with the 2010 period. Revenues from System z mainframe server products decreased 31 percent compared with the year-ago period which was the first full quarter after a new product introduction. Total delivery of System z computing power, as measured in MIPS (millions of instructions per second), decreased 4 percent. Revenues from System x decreased 2 percent. Revenues from System Storage decreased 1 percent, and revenues from Retail Store Solutions increased 9 percent year over year. Revenues from Microelectronics OEM decreased 11 percent.

Financing

Global Financing segment revenues decreased 13 percent (13 percent, adjusting for currency) in the fourth quarter to $548 million. Pre-tax income for the segment decreased 9 percent to $514 million.

***

The company's total gross profit margin was 49.9 percent in the 2011 fourth quarter compared with 49.0 percent in the 2010 fourth-quarter period. Total operating (non-GAAP) gross profit margin was 50.2 percent in the 2011 fourth quarter compared with 49.1 percent in the 2010 fourth-quarter period, with increases in Services and Software.

Total expense and other income increased 2 percent to $7.4 billion compared with the prior-year period. S,G&A expense of $6.1 billion increased 2 percent year over year compared with prior-year expense. R,D&E expense of $1.6 billion decreased 1 percent compared with the year-ago period. Intellectual property and custom development income decreased to $253 million compared with $318 million a year ago. Other (income) and expense was income of $44 million compared with prior-year income of $42 million. Interest expense increased to $113 million compared with $102 million in the prior year.

Total operating (non-GAAP) expense and other income increased 2 percent to $7.4 billion compared with the prior-year period. Operating (non-GAAP) S,G&A expense of $6.0 billion increased 2 percent year over year compared with prior-year expense. Operating (non-GAAP) R,D&E expense of $1.6 billion decreased 2 percent compared with the year-ago period.

Pre-tax income increased 5 percent to $7.3 billion; total operating (non-GAAP) pre-tax income increased 6 percent to $7.4 billion. Pre-tax margin was 24.7 percent, up 0.7 points; total operating (non-GAAP) pre-tax margin was 25.1 percent, up 0.9 points.

IBM's tax rate was 24.5 percent, up 0.1 points year over year; total operating (non-GAAP) tax rate was 24.4 percent, up 0.7 points.

Net income margin increased 0.5 points to 18.6 percent; total operating (non-GAAP) net income margin was 19.0 percent, an increase of 0.5 points.

The weighted-average number of diluted common shares outstanding in the fourth-quarter 2011 was 1.19 billion compared with 1.26 billion shares in the same period of 2010.

In the quarter, IBM generated free cash flow of $9.0 billion excluding Global Financing receivables, up approximately $300 million year over year.

Full-Year 2011 Results

Net income for the year ended December 31, 2011 was $15.9 billion compared with $14.8 billion in the year-ago period, an increase of 7 percent. Operating (non-GAAP) net income was $16.3 billion compared with $15.0 billion in 2010, an increase of 9 percent.

Diluted earnings were $13.06 per share compared with $11.52 per diluted share in 2010, an increase of 13 percent. Operating (non-GAAP) diluted earnings were $13.44 per share, compared with operating diluted earnings of $11.67 per share in 2010, an increase of 15 percent. This was the company's 9th consecutive year of double-digit EPS growth.

Revenues for 2011 totaled $106.9 billion, an increase of 7 percent (3 percent, adjusting for currency), compared with $99.9 billion in 2010.

GAAP - Operating (non-GAAP) Reconciliation

Operating (non-GAAP) diluted earnings for the year exclude $0.38 per share of net charges: $0.41 per share for the amortization of purchased intangible assets and other acquisition-related charges, offset by ($0.03) per share for retirement-related items driven by changes to plan assets and liabilities primarily related to market performance.

Geographic Regions

From a geographic perspective, the Americas' full-year revenues were $44.9 billion, an increase of 7 percent (6 percent, adjusting for currency) from the 2010 period. Revenues from Europe/Middle East/Africa were $34.0 billion, an increase of 7 percent (2 percent, adjusting for currency). Asia-Pacific revenues increased 9 percent (2 percent, adjusting for currency) to $25.3 billion. OEM revenues were $2.7 billion, down 2 percent (3 percent, adjusting for currency) compared with 2010.

Growth Markets

Revenues from the company's growth markets increased 16 percent (11 percent, adjusting for currency), and represents 22 percent of IBM's total geographic revenue. Revenues in the BRIC countries - Brazil, Russia, India and China - increased 19 percent (16 percent, adjusting for currency).

Segments

Total Global Services revenues increased 7 percent (2 percent, adjusting for currency). Revenues from the Global Technology Services segment totaled $40.9 billion, an increase of 7 percent (3 percent, adjusting for currency) compared with 2010. Revenues from the Global Business Services segment were $19.3 billion, up 6 percent (1 percent, adjusting for currency). Software segment revenues in 2011 totaled $24.9 billion, an increase of 11 percent (8 percent, adjusting for currency). Systems and Technology segment revenues were $19.0 billion, an increase of 6 percent (3 percent, adjusting for currency). Global Financing segment revenues totaled $2.1 billion, a decrease of 6 percent (9 percent, adjusting for currency).

***

The company's total gross profit margin was 46.9 percent in 2011 compared with 46.1 percent in 2010. Overall gross profit margins improved year over year for the 8th consecutive year. Total operating (non-GAAP) gross profit margin was 47.2 percent in the 2011 period compared with 46.1 percent in the 2010 period, with increases in Services, Software, and Systems and Technology.

The weighted-average number of diluted common shares outstanding in 2011 was 1.21 billion compared with 1.29 billion shares in 2010. As of December 31, 2011, there were 1.16 billion basic common shares outstanding.

Debt, including Global Financing, totaled $31.3 billion, compared with $28.6 billion at year-end 2010. From a management segment view, Global Financing debt totaled $23.3 billion versus $22.8 billion at year-end 2010, resulting in a debt-to-equity ratio of 7.2 to 1. Non-global financing debt totaled $8.0 billion, an increase of $2.2 billion since year-end 2010, resulting in a debt-to-capitalization ratio of 32.0 percent from 22.6 percent.

IBM ended 2011 with $11.9 billion of cash on hand and generated free cash flow of $16.6 billion excluding Global Financing receivables, up approximately $300 million year over year. The company returned $18.5 billion to shareholders through $3.5 billion in dividends and $15.0 billion of share repurchases. The balance sheet remains strong, and the company is well positioned to support the business over the long term.

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 fourth-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. EST, today. Investors may participate by viewing the Webcast at www.ibm.com/investor/4q11. 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
            (Dollars in millions except per share amounts)
 
                        Three Months Ended        Twelve Months Ended
                           December 31,               December 31,                                      
                                      Percent                    Percent
                       2011     2010*  Change     2011     2010*  Change
                    -------  -------  -------  -------  -------  -------
REVENUE
 
 Global Technology
  Services          $10,452  $10,165      2.8% $40,879  $38,201      7.0%
   Gross margin        36.6%    34.5%             35.0%    34.5%
 
 Global Business
  Services            4,877    4,758      2.5%  19,284   18,223      5.8%
   Gross margin        29.3%    28.0%             28.8%    28.0%
 
 Software             7,648    7,039      8.7%  24,944   22,485     10.9%
   Gross margin        89.8%    89.6%             88.5%    87.9%
 
 Systems and     
  Technology          5,803    6,277     -7.6%  18,985   17,973      5.6%
   Gross margin        40.5%    43.6%             39.8%    38.1%
 
 Global Financing       548      628    -12.9%   2,102    2,238     -6.1%
   Gross margin        49.7%    51.8%             49.8%    51.3%
 
 Other                  159      151      4.7%     722      750     -3.8%
   Gross margin       -11.0%    10.3%            -54.5%    -8.6%
 
TOTAL REVENUE        29,486   29,019      1.6% 106,916   99,870      7.1%
 
 
GROSS PROFIT         14,722   14,227      3.5%  50,138   46,014      9.0%
  Gross margin         49.9%    49.0%             46.9%    46.1%
 
 
EXPENSE AND OTHER INCOME
 
 S,G&A                6,076    5,951      2.1%  23,594   21,837      8.0%
  % of revenue         20.6%    20.5%             22.1%    21.9%
 
 R,D&E                1,555    1,578     -1.5%   6,258    6,026      3.8%
  % of revenue          5.3%     5.4%              5.9%     6.0%
 
 Intellectual property
  and custom development
  income               (253)    (318)   -20.4%  (1,108)  (1,154)    -4.0%
 Other (income)
   and expense          (44)     (42)     4.9%     (20)    (787)   -97.4%
 Interest expense       113      102     11.6%     411      368     11.6%
 
TOTAL EXPENSE AND
 OTHER INCOME         7,448    7,271      2.4%  29,135   26,291     10.8%
  % of revenue         25.3%    25.1%             27.3%    26.3%
 
INCOME BEFORE
 INCOME TAXES         7,274    6,956      4.6%  21,003   19,723      6.5%
  Pre-tax margin       24.7%    24.0%             19.6%    19.7%
 
Provision for
 income taxes         1,784    1,698      5.1%   5,148    4,890      5.3%
  Effective tax
   rate                24.5%    24.4%             24.5%    24.8%
 
 
NET INCOME           $5,490   $5,257      4.4% $15,855  $14,833      6.9%
                     ======   ======           =======  =======
  Net margin           18.6%    18.1%            14.8%    14.9%
 
 
EARNINGS PER SHARE
 OF COMMON STOCK:
 ASSUMING DILUTION    $4.62    $4.18     10.5%  $13.06   $11.52     13.4%
 BASIC                $4.68    $4.24     10.4%  $13.25   $11.69     13.3%
 
WEIGHTED-AVERAGE NUMBER
 OF COMMON SHARES OUT-
 STANDING (M's):
  ASSUMING DILUTION 1,188.7  1,258.4           1,213.8  1,287.4
  BASIC             1,172.2  1,240.1           1,197.0  1,268.8

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


                   INTERNATIONAL BUSINESS MACHINES CORPORATION
                   CONSOLIDATED STATEMENT OF FINANCIAL POSITION

                                                           At	         At
(Dollars in Millions)                                  December 31,    December 31,
                                                           2011            2010
                                                       ------------    ------------
ASSETS
 
Current Assets:
Cash and cash equivalents                                   $11,922         $10,661
Marketable securities                                           --              990
Notes and accounts receivable - trade
  (net of allowances of $256 in 2011 and $324 in 2010)       11,179          10,834
Short-term financing receivables
  (net of allowances of $311 in 2011 and $342 in 2010)       16,901          16,257
Other accounts receivable
  (net of allowances of $11 in 2011 and $10 in 2010)          1,481           1,134
Inventories, at lower of average cost or market:
  Finished goods                                                589             432
  Work in process and raw materials                           2,007           2,018
                                                       ------------    ------------
Total inventories                                             2,595           2,450
Deferred taxes                                                1,601           1,564
Prepaid expenses and other current assets                     5,249           4,226
                                                       ------------   -------------
Total Current Assets                                         50,928          48,116
 
Property, plant and equipment                                40,124          40,289
  Less: Accumulated depreciation                             26,241          26,193
                                                       ------------    ------------
Property, plant and equipment - net                          13,883          14,096
Long-term financing receivables
  (net of allowances of $38 in 2011 and $58 in 2010)         10,776          10,548
Prepaid pension assets                                        2,843           3,068
Deferred taxes                                                3,503           3,220
Goodwill                                                     26,213          25,136
Intangible assets - net                                       3,392           3,488
Investments and sundry assets                                 4,895           5,778
                                                       ------------    ------------
Total Assets                                               $116,433        $113,452
                                                       ============    ============
LIABILITIES AND EQUITY 
 
Current Liabilities:
Taxes                                                        $3,313          $4,216
Short-term debt                                               8,463           6,778
Accounts payable                                              8,517           7,804
Compensation and benefits                                     5,099           5,028
Deferred income                                              12,197          11,580
Other accrued expenses and liabilities                        4,535           5,156
                                                       ------------    ------------
Total Current Liabilities                                    42,123          40,562
 
Long-term debt                                               22,857          21,846
Retirement and nonpension postretirement
  benefit obligations                                        18,374          15,978
Deferred income                                               3,847           3,666
Other liabilities                                             8,996           8,226
                                                       ------------    ------------
Total Liabilities                                            96,197          90,279

Contingencies and commitments

EQUITY
IBM Stockholders' Equity:
  Common stock                                               48,129          45,418
  Retained earnings                                         104,857          92,532
  Treasury stock -- at cost                                (110,963)        (96,161)
  Accumulated other comprehensive income/(loss)             (21,885)        (18,743)
                                                       ------------    ------------
  Total IBM stockholders' equity                             20,138          23,046
 
Noncontrolling interests                                         97             126
                                                       ------------    ------------
Total Equity                                                 20,236          23,172
                                                       ------------    ------------
Total Liabilities and Equity                               $116,433        $113,452
                                                       ============    ============


                     INTERNATIONAL BUSINESS MACHINES CORPORATION
                               CASH FLOW ANALYSIS
                                      							
                                              Three Months       Twelve Months
                                                  Ended               Ended
(Dollars in Millions)                           December 31,        December 31,
                                              2011      2010      2011      2010
 			                     ------    ------   -------   -------

Net Cash from Operating Activities per GAAP: $7,097    $6,795   $19,846   $19,549
 
     Less: the change in Global Financing (GF) 
	     Receivables                     (2,927)   (2,991)     (817)     (734)
                                             ------    ------   -------   -------
Net Cash from Operating Activities
     (Excluding GF Receivables)              10,024     9,786    20,663    20,283
 
Capital Expenditures, Net                    (1,059)   (1,103)   (4,059)   (3,984)
 
Free Cash Flow
     (Excluding GF Receivables)               8,965     8,683    16,604    16,299
 
     Acquisitions                            (1,588)   (2,928)   (1,811)   (5,922)
     Divestitures                                10        55        14        55
     Dividends                                 (880)     (808)   (3,473)   (3,177)
     Share Repurchase                        (3,581)   (3,601)  (15,046)  (15,375)
     Non-GF Debt                                599       745     1,692     2,279
     Other (includes GF Receivables, and
	      GF Debt)			     (2,906)   (1,582)    2,291     3,518 
 
Change in Cash, Cash Equivalents and
Short-term Marketable Securities               $619      $564      $271   ($2,322)
                                            =======   =======   =======   =======
 

                    INTERNATIONAL BUSINESS MACHINES CORPORATION
                                  SEGMENT DATA

 
                                         FOURTH-QUARTER 2011
                            -----------------------------------------------  
 (Dollars in Millions)       --------- Revenue ---------   Pre-tax   Pre-tax
                            External Internal     Total    Income    Margin
                            -------- --------  --------   -------   -------
SEGMENTS
 
Global Technology Services  $10,452     $299   $10,751    $1,930      18.0%
  Y-T-Y change                  2.8%     0.2%      2.7%     18.0%
 
Global Business Services      4,877      193     5,069       841      16.6%
  Y-T-Y change                  2.5%    -3.4%      2.3%     14.4%
 
Software                      7,648      851     8,499     3,710      43.7%
  Y-T-Y change                  8.7%     9.9%      8.8%     12.5%
 
Systems and Technology        5,803      186     5,989       790      13.2%
  Y-T-Y change                 -7.6%   -19.8%     -8.0%    -32.6%
 
Global Financing                548      569     1,116       514      46.1%
  Y-T-Y change                -12.9%    -1.1%     -7.2%     -9.1%
 
TOTAL REPORTABLE SEGMENTS   $29,328   $2,098   $31,425    $7,786      24.8%
  Y-T-Y change                  1.6%     0.9%      1.5%      5.1%
 
Eliminations / Other            159   (2,098)   (1,939)     (512)
 
TOTAL IBM CONSOLIDATED      $29,486       $0   $29,486    $7,274      24.7%
  Y-T-Y change                  1.6%               1.6%      4.6%


                                         FOURTH-QUARTER 2010
                            -----------------------------------------------                                                       
(Dollars in Millions)       --------- Revenue ---------   Pre-tax   Pre-tax
                            External Internal     Total    Income*   Margin* 
                            -------- --------  --------   -------   -------
SEGMENTS
 
Global Technology Services  $10,165     $299   $10,464    $1,635      15.6%
 
Global Business Services      4,758      199     4,957       735      14.8%
 
Software                      7,039      774     7,813     3,299      42.2%
 
Systems and Technology        6,277      232     6,509     1,173      18.0%
 
Global Financing                628      575     1,203       566      47.0%
 
TOTAL REPORTABLE SEGMENTS   $28,867   $2,079   $30,947    $7,408      23.9%
 
Eliminations / Other            151   (2,079)   (1,928)     (452)
 
TOTAL IBM CONSOLIDATED      $29,019       $0   $29,019    $6,956      24.0%
 
* Reclassified to conform with 2011 presentation.


                    INTERNATIONAL BUSINESS MACHINES CORPORATION
                                   SEGMENT DATA

 
                                          TWELVE-MONTHS 2011
                            -----------------------------------------------                                                          
(Dollars in Millions)       --------- Revenue ---------   Pre-tax   Pre-tax
                            External Internal     Total    Income    Margin
                            -------- --------  --------   -------   -------
SEGMENTS
 
Global Technology Services  $40,879    $1,242  $42,121    $6,284      14.9%
  Y-T-Y change                  7.0%    -5.3%      6.6%     14.3%
 
Global Business Services     19,284      797    20,081     3,006      15.0%
  Y-T-Y change                  5.8%    -0.2%      5.6%     18.1%
 
Software                     24,944    3,276    28,219     9,970      35.3%
  Y-T-Y change                 10.9%    11.0%     10.9%      5.3%
 
Systems and Technology       18,985      838    19,823     1,633       8.2%
  Y-T-Y change                  5.6%     4.3%      5.6%     12.2%
 
Global Financing              2,102    2,092     4,195     2,011      47.9%
  Y-T-Y change                 -6.1%    13.6%      2.8%      2.8%
 
TOTAL REPORTABLE SEGMENTS  $106,194   $8,246  $114,440   $22,904      20.0%
  Y-T-Y change                  7.1%     7.0%      7.1%      9.5%
 
Eliminations / Other            722   (8,246)   (7,524)   (1,901)
 
TOTAL IBM CONSOLIDATED     $106,916       $0  $106,916    $21,003     19.6%
  Y-T-Y change                  7.1%               7.1%      6.5%


                                          TWELVE-MONTHS 2010
                            -----------------------------------------------                                                         
 (Dollars in Millions)      --------- Revenue ---------   Pre-tax   Pre-tax
                            External Internal     Total    Income*   Margin*
                            -------- --------  --------  --------   -------
SEGMENTS
 
Global Technology Services  $38,201   $1,313   $39,514    $5,499      13.9%
 
Global Business Services     18,223      798    19,021     2,546      13.4%
 
Software                     22,485    2,950    25,436     9,466      37.2%
 
Systems and Technology       17,973      804    18,777     1,456       7.8%
 
Global Financing              2,238    1,842     4,080     1,956      48.0%

TOTAL REPORTABLE SEGMENTS   $99,120   $7,707  $106,827   $20,923      19.6%                    
 
Eliminations / Other            750   (7,707)   (6,956)   (1,200)
 
TOTAL IBM CONSOLIDATED      $99,870       $0   $99,870   $19,723      19.7%                   
                
* Reclassified to conform with 2011 presentation.


                   INTERNATIONAL BUSINESS MACHINES CORPORATION
                  U.S. GAAP TO OPERATING RESULTS RECONCILIATION
                 (Dollars in millions except per share amounts)
 
 
                                               FOURTH-QUARTER 2011
                                -----------------------------------------------
                                          Acquisition-  Retirement-
                                            Related       Related      Operating
                                  GAAP    Adjustments*  Adjustments** (Non-GAAP)
                                -------- ------------  ------------   ----------
Gross Profit                     $14,722          $81          ($10)    $14,793
 
Gross Profit Margin                 49.9%      0.3Pts       -0.0Pts        50.2%
 
S,G&A                              6,076          (82)            2       5,996
 
R,D&E                              1,555            0            23       1,578
 
Other (Income) & Expense             (44)          (2)            0         (46)

Total Expense & Other (Income)     7,448          (85)           25       7,388
 
Pre-Tax Income                     7,274          166           (35)      7,405
 
Pre-Tax Income Margin               24.7%      0.6Pts       -0.1Pts        25.1%
 
Provision for Income Taxes***      1,784           47           (24)      1,808
 
Effective Tax Rate                  24.5%      0.1Pts       -0.2Pts        24.4% 
 
Net Income                         5,490          119           (12)      5,597
 
Net Income Margin                   18.6%      0.4Pts       -0.0Pts        19.0%
 
Diluted Earnings Per Share         $4.62        $0.10        ($0.01)      $4.71
 

                                               FOURTH-QUARTER 2010
                                -----------------------------------------------
                                          Acquisition-  Retirement-
                                            Related       Related      Operating
                                  GAAP    Adjustments*  Adjustments** (Non-GAAP)
                                -------- ------------  ------------   ----------
Gross Profit                     $14,227          $82         ($60)     $14,249
 
Gross Profit Margin                 49.0%      0.3Pts      -0.2Pts         49.1%
 
S,G&A                              5,951          (95)          28        5,884
 
R,D&E                              1,578            0           33        1,611
 
Other (Income) & Expense             (42)          (2)           0          (44)

Total Expense & Other (Income)     7,271          (98)          61        7,235
 
Pre-Tax Income                     6,956          180         (121)       7,015
 
Pre-Tax Income Margin               24.0%      0.6Pts      -0.4Pts         24.2%
  
Provision for Income Taxes***      1,698           10          (47)       1,661
 
Effective Tax Rate                  24.4%     -0.5Pts      -0.3Pts         23.7%
 
Net Income                         5,257          170          (74)       5,354
 
Net Income Margin                   18.1%      0.6Pts      -0.3Pts         18.5%
 
Diluted Earnings Per Share         $4.18        $0.14       ($0.06)       $4.25


*  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
                 (Dollars in millions except per share amounts)
 
 
                                               TWELVE-MONTHS 2011
                                -----------------------------------------------
                                          Acquisition-  Retirement-
                                            Related       Related      Operating
                                  GAAP    Adjustments*  Adjustments** (Non-GAAP)
                                -------- ------------  ------------   ----------
Gross Profit                     $50,138         $341            $2     $50,481
 
Gross Profit Margin                 46.9%      0.3Pts        0.0Pts        47.2%
 
S,G&A                             23,594         (309)          (13)     23,272
 
R,D&E                              6,258            0            88       6,345
 
Other (Income) & Expense             (20)         (25)            0         (45) 

Total Expense & Other (Income)    29,135         (334)           74      28,875
 
Pre-Tax Income                    21,003          675           (72)     21,605
 
Pre-Tax Income Margin               19.6%      0.6Pts       -0.1Pts        20.2%
 
Provision for Income Taxes***      5,148          179           (40)      5,287
 
Effective Tax Rate                  24.5%      0.1Pts       -0.1Pts        24.5%
 
Net Income                        15,855          495           (32)     16,318
 
Net Income Margin                   14.8%      0.5Pts       -0.0Pts        15.3%
 
Diluted Earnings Per Share        $13.06        $0.41        ($0.03)     $13.44
 

                                               TWELVE-MONTHS 2010
                                -----------------------------------------------
                                          Acquisition-  Retirement-
                                            Related       Related      Operating
                                  GAAP    Adjustments*  Adjustments** (Non-GAAP)
                                -------- ------------  ------------   ----------
Gross Profit                     $46,014         $260         ($204)    $46,070
 
Gross Profit Margin                 46.1%      0.3Pts       -0.2Pts        46.1%
 
S,G&A                             21,837         (294)           84      21,628
 
R,D&E                              6,026            0           126       6,152
 
Other (Income) & Expense            (787)          (4)            0        (791) 

Total Expense & Other (Income)    26,291         (298)          210      26,202
 
Pre-Tax Income                    19,723          558          (414)     19,867
 
Pre-Tax Income Margin               19.7%      0.6Pts       -0.4Pts        19.9%
  
Provision for Income Taxes***      4,890          116          (162)      4,844
 
Effective Tax Rate                  24.8%     -0.1Pts       -0.3Pts        24.4%
 
Net Income                        14,833          443          (253)     15,023
 
Net Income Margin                   14.9%      0.4Pts       -0.3Pts        15.0%
 
Diluted Earnings Per Share        $11.52        $0.34        ($0.20)     $11.67

*  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.