Q4

Quarterly earnings



IBM REPORTS 2012 FOURTH-QUARTER AND FULL-YEAR RESULTS

Fourth-Quarter 2012

Full Year 2012

Full-Year 2013 Expectation:

ARMONK, N.Y., January 22, 2013 . . . IBM (NYSE: IBM) today announced fourth-quarter 2012 diluted earnings of $5.13 per share, compared with diluted earnings of $4.62 per share in the fourth quarter of 2011, an increase of 11 percent. Operating (non-GAAP) diluted earnings were $5.39 per share, compared with operating diluted earnings of $4.71 per share in the fourth quarter of 2011, an increase of 14 percent.

Fourth-quarter net income was $5.8 billion compared with $5.5 billion in the fourth quarter of 2011, an increase of 6 percent. Operating (non-GAAP) net income was $6.1 billion compared with $5.6 billion in the fourth quarter of 2011, an increase of 10 percent.

Total revenues for the fourth quarter of 2012 of $29.3 billion decreased 1 percent (flat adjusting for currency) from the fourth quarter of 2011. Without the impact of the divested Retail Store Solutions (RSS) business, revenue increased 1 percent, adjusting for currency.

"We achieved record profit, earnings per share and free cash flow in 2012. Our performance in the fourth quarter and for the full year was driven by our strategic growth initiatives -- growth markets, analytics, cloud computing, Smarter Planet solutions -- which support our continued shift to higher-value businesses," said Ginni Rometty, IBM chairman, president and chief executive officer.

"Looking ahead, we continue to invest to deliver innovations for the enterprise in key areas such as big data, mobile solutions, social business and security, while expanding into new markets and reaching new clients. We are well on track toward our long-term roadmap for operating EPS of at least $20 in 2015."

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

Fourth-quarter operating (non-GAAP) diluted earnings exclude $0.26 per share of net charges: $0.21 per share for the amortization of purchased intangible assets and other acquisition-related charges, and $0.05 per share for retirement-related items driven by changes to plan assets and liabilities primarily related to market performance.

Full-Year 2013 Expectation

IBM said that it expects to deliver full-year 2013 GAAP earnings per share of at least $15.53; and operating (non-GAAP) earnings per share of at least $16.70. The 2013 operating (non-GAAP) earnings exclude $1.17 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, flat (up 1 percent, adjusting for currency) from the 2011 period. Revenues from Europe/Middle East/Africa were $9.1 billion, down 5 percent (down 3 percent, adjusting for currency). Asia-Pacific revenues increased 4 percent (up 5 percent, adjusting for currency) to $7.0 billion. OEM revenues were $679 million, down 5 percent compared with the 2011 fourth quarter.

Growth Markets

Revenues from the company's growth markets increased 7 percent. Revenues in the BRIC countries - Brazil, Russia, India and China - increased 11 percent (up 14 percent, adjusting for currency).

Services

Global Technology Services segment revenues decreased 2 percent (flat adjusting for currency) to $10.3 billion. Global Business Services segment revenues were down 3 percent (down 2 percent, adjusting for currency) at $4.7 billion.

Pre-tax income from Global Technology Services increased 5 percent; pre-tax margin increased to 19.2 percent. Global Business Services pre-tax income was flat; pre-tax margin increased to 17.2 percent.

The estimated services backlog at December 31 was $140 billion, flat (up $1 billion, adjusting for currency).

Software

Revenues from the Software segment were $7.9 billion, an increase of 3 percent (up 4 percent, adjusting for currency) from the fourth quarter of 2011. Software pre-tax income of $4.0 billion increased 8 percent year over year.

Revenues from IBM's key middleware products, which include WebSphere, Information Management, Tivoli, Lotus and Rational products, were $5.5 billion, an increase of 5 percent (up 6 percent, adjusting for currency) versus the fourth quarter of 2011. Operating systems revenues of $709 million were flat (up 1 percent, adjusting for currency) compared with the prior-year quarter.

Revenues from the WebSphere family of software products increased 11 percent year over year. Information Management software revenues increased 2 percent. Revenues from Tivoli software increased 4 percent. Revenues from Lotus software increased 9 percent, and Rational software increased 12 percent.

Hardware

Revenues from the Systems and Technology segment totaled $5.8 billion for the quarter, down 1 percent from the fourth quarter of 2011. Excluding Retail Store Solutions (RSS), revenues were up 4 percent. Systems and Technology pre-tax income was $1.0 billion, an increase of 23 percent.

Total systems revenues, excluding RSS, increased 4 percent. Revenues from System z mainframe server products increased 56 percent compared with the year-ago period; revenue in the growth markets increased 68 percent. Total delivery of System z computing power, as measured in MIPS (millions of instructions per second), increased 66 percent versus the prior year and represented the largest MIPS shipment quarter in the company's history. New workload specialty engines, including Linux, represented one-half of the MIPS shipped. Revenues from Power Systems decreased 19 percent compared with the 2011 period. Revenues from System x decreased 2 percent. Revenues from System Storage decreased 5 percent. Revenues from Retail Store Solutions decreased $239 million year over year as a result of the divestiture in the third quarter. Revenues from Microelectronics OEM increased 4 percent.

Financing

Global Financing segment revenues were down 2 percent (down 1 percent, adjusting for currency) in the fourth quarter to $535 million. Pre-tax income for the segment increased 1 percent to $518 million.

Gross Profit

The company's total gross profit margin was 51.8 percent in the 2012 fourth quarter compared with 49.9 percent in the 2011 fourth-quarter period. Total operating (non-GAAP) gross profit margin was 52.3 percent in the 2012 fourth quarter compared with 50.2 percent in the 2011 fourth-quarter period, with increases in Services, Software and Hardware.

Expense

Total expense and other income decreased 2 percent to $7.3 billion compared with the prior-year period. S,G&A expense of $5.9 billion decreased 3 percent year over year compared with prior-year expense. R,D&E expense of $1.6 billion increased 2 percent compared with the year-ago period. Intellectual property and custom development income decreased to $227 million compared with $253 million a year ago. Other (income) and expense was income of $47 million compared with prior-year income of $44 million. Interest expense decreased to $109 million compared with $113 million in the prior year.

Total operating (non-GAAP) expense and other income decreased 2 percent to $7.2 billion compared with the prior-year period. Operating (non-GAAP) S,G&A expense of $5.8 billion decreased 3 percent year over year compared with prior-year expense. Operating (non-GAAP) R,D&E expense of $1.6 billion increased 1 percent compared with the year-ago period.

***

Pre-tax income increased 8 percent to $7.8 billion; total operating (non-GAAP) pre-tax income increased 10 percent to $8.1 billion. Pre-tax margin was 26.7 percent, up 2.1 points; total operating (non-GAAP) pre-tax margin was 27.7 percent, up 2.6 points.

IBM's tax rate was 25.5 percent, up 1.0 points year over year; total operating (non-GAAP) tax rate was 24.4 percent, flat compared to the year-ago period.

Net income margin increased 1.3 points to 19.9 percent; total operating (non-GAAP) net income margin was 20.9 percent, an increase of 1.9 points.

The weighted-average number of diluted common shares outstanding in the fourth-quarter 2012 was 1.14 billion compared with 1.19 billion shares in the same period of 2011.

In the quarter, IBM generated free cash flow of $9.5 billion excluding Global Financing receivables, up $0.6 billion year over year.

Full-Year 2012 Results

Net income for the year ended December 31, 2012 was $16.6 billion compared with $15.9 billion in the prior year, an increase of 5 percent. Operating (non-GAAP) net income was $17.6 billion compared with $16.3 billion in 2011, an increase of 8 percent.

Diluted earnings were $14.37 per share compared with $13.06 per diluted share in 2011, an increase of 10 percent. Operating (non-GAAP) diluted earnings were $15.25 per share, compared with operating diluted earnings of $13.44 per share in 2011, an increase of 13 percent. This was the company's 10th consecutive year of double-digit EPS growth.

Revenues for 2012 totaled $104.5 billion, a decrease of 2 percent (flat adjusting for currency), compared with $106.9 billion in 2011.

GAAP - Operating (non-GAAP) Reconciliation

Operating (non-GAAP) diluted earnings for the year exclude $0.88 per share of net charges: $0.55 per share for the amortization of purchased intangible assets and other acquisition-related charges, and $0.33 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 $44.6 billion, a decrease of 1 percent (flat adjusting for currency) from the 2011 period. Revenues from Europe/Middle East/Africa were $31.8 billion, a decrease of 6 percent (down 1 percent, adjusting for currency). Asia-Pacific revenues increased 3 percent to $25.9 billion. OEM revenues were $2.2 billion, down 18 percent compared with 2011.

Growth Markets

Revenues from the company's growth markets increased 4 percent (up 7 percent, adjusting for currency), and represents 24 percent of IBM's total geographic revenue. Revenues in the BRIC countries - Brazil, Russia, India and China - increased 7 percent (up 12 percent, adjusting for currency).

Segments

Total Global Services revenues decreased 2 percent (flat adjusting for currency). Revenues from the Global Technology Services segment totaled $40.2 billion, a decrease of 2 percent (up 1 percent, adjusting for currency) compared with 2011. Revenues from the Global Business Services segment were $18.6 billion, down 4 percent (down 2 percent, adjusting for currency). Software segment revenues in 2012 totaled $25.4 billion, an increase of 2 percent (up 4 percent, adjusting for currency). Systems and Technology segment revenues were $17.7 billion, a decrease of 7 percent (down 6 percent, adjusting for currency); excluding Retail Store Solutions, revenues were down 5 percent (down 4 percent adjusting for currency). Global Financing segment revenues totaled $2.0 billion, a decrease of 4 percent (down 1 percent, adjusting for currency).

***

The company's total gross profit margin was 48.1 percent in 2012 compared with 46.9 percent in 2011. Overall gross profit margins improved year over year for the 9th consecutive year. Total operating (non-GAAP) gross profit margin was 48.7 percent in the 2012 period compared with 47.2 percent in the 2011 period, with increases in Services and Software.

The weighted-average number of diluted common shares outstanding in 2012 was 1.16 billion compared with 1.21 billion shares in 2011. As of December 31, 2012, there were 1.12 billion basic common shares outstanding.

Debt, including Global Financing, totaled $33.3 billion, compared with $31.3 billion at year-end 2011. From a management segment view, Global Financing debt totaled $24.5 billion versus $23.3 billion at year-end 2011, resulting in a debt-to-equity ratio of 7.0 to 1. Non-global financing debt totaled $8.8 billion, an increase of $0.8 billion since year-end 2011, resulting in a debt-to-capitalization ratio of 36.1 percent from 32.0 percent.

IBM ended 2012 with $11.1 billion of cash on hand and generated free cash flow of $18.2 billion excluding Global Financing receivables, up approximately $1.6 billion year over year. The company returned $15.8 billion to shareholders through $3.8 billion in dividends and $12.0 billion of share repurchases. The company's balance sheet remains strong and 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; 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 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. EDT, today. The Webcast may be viewed at www.ibm.com/investor/4q12. 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
                               2012     2011  Change      2012     2011  Change
                            -------  -------  -------  -------  -------  -------
REVENUE
 
Global Technology Services  $10,284  $10,452    -1.6%  $40,236  $40,879    -1.6%
 Gross profit margin          37.6%    36.6%             36.6%    35.0%
 
Global Business Services      4,720    4,877    -3.2%   18,566   19,284    -3.7%
 Gross profit margin          29.9%    29.3%             30.0%    28.8%
 
Software                      7,915    7,648     3.5%   25,448   24,944     2.0%
 Gross profit margin          90.6%    89.8%             88.7%    88.5%
 
System and Technology         5,763    5,803    -0.7%   17,667   18,985    -6.9%
 Gross profit margin          44.1%    40.5%             39.1%    39.8% 
 
Global Financing                535      548    -2.3%    2,013    2,102    -4.2%
 Gross profit margin          43.8%    49.7%             46.5%    49.8%
 
Other                            87      159   -45.3%      577      722   -20.1%
 Gross profit margin         -73.2%   -11.0%            -71.6%   -54.5%
 
TOTAL REVENUE                29,304   29,486    -0.6%  104,507  106,916    -2.3%
 
   
GROSS PROFIT                 15,167   14,722     3.0%   50,298   50,138     0.3%
 Gross profit margin          51.8%    49.9%             48.1%    46.9%
 
 
EXPENSE AND OTHER INCOME
 
S,G&A                         5,921    6,076    -2.6%   23,553   23,594    -0.2%
 Expense to revenue           20.2%    20.6%             22.5%    22.1%
 
R,D&E                         1,580    1,555     1.6%    6,302    6,258     0.7%
 Expense to revenue            5.4%     5.3%              6.0%     5.9%
 
Intellectual property
 and custom development
 income                       (227)    (253)   -10.1%  (1,074)  (1,108)    -3.0%

Other (income)and expense      (47)     (44)     7.3%    (843)     (20)       NM

Interest expense                109      113    -3.8%      459      411    11.8%
 
TOTAL EXPENSE AND
 OTHER INCOME                 7,336    7,448    -1.5%   28,396   29,135    -2.5%
  Expense to revenue          25.0%    25.3%             27.2%    27.3%
 
INCOME BEFORE
 INCOME TAXES                 7,831    7,274     7.7%   21,902   21,003     4.3%
 Pre-tax margin               26.7%    24.7%             21.0%    19.6%
 
Provision for income taxes    1,998    1,784    12.0%    5,298    5,148     2.9%
 Effective tax rate           25.5%    24.5%             24.2%    24.5%
 
NET INCOME                   $5,833   $5,490     6.3%  $16,604  $15,855     4.7%
                             ======   ======           =======  =======
 Net income margin            19.9%    18.6%             15.9%    14.8%
 
 
EARNINGS PER SHARE
OF COMMON STOCK:
 ASSUMING DILUTION            $5.13    $4.62    11.0%   $14.37   $13.06    10.0%
 BASIC                        $5.19    $4.68    10.9%   $14.53   $13.25     9.7%
 
WEIGHTED-AVERAGE NUMBER
OF COMMON SHARES OUT-
STANDING (M's):
 ASSUMING DILUTION          1,136.4  1,188.7           1,155.4  1,213.8
 BASIC                      1,124.7  1,172.2           1,142.5  1,197.0

NM - - Not Meaningful



                       INTERNATIONAL BUSINESS MACHINES CORPORATION
                      CONSOLIDATED STATEMENT OF FINANCIAL POSITION

                                                            At	          At
(Dollars in Millions)                                  December 31,    December 31,
                                                           2012            2011
                                                       ------------    ------------
ASSETS:

Current Assets:
Cash and cash equivalents                                   $10,412         $11,922
Marketable securities                                           717             -- 
Notes and accounts receivable - trade
  (net of allowances of $255 in 2012 and $256 in 2011)       10,667          11,179
Short-term financing receivables
  (net of allowances of $288 in 2012 and $311 in 2011)       18,038          16,901
Other accounts receivable
  (net of allowances of $17 in 2012 and $11 in 2011)          1,873           1,481
Inventories, at lower of average cost or market:
  Finished goods                                                475             589
  Work in process and raw materials                           1,812           2,007
                                                           --------        --------
Total inventories                                             2,287           2,595
Deferred taxes                                                1,415           1,601
Prepaid expenses and other current assets                     4,024           5,249
                                                           --------        --------
Total Current Assets                                         49,433          50,928
 
Property, plant and equipment                                40,501          40,124
  Less: Accumulated depreciation                             26,505          26,241
                                                           --------        --------
Property, plant and equipment - net                          13,996          13,883
Long-term financing receivables
  (net of allowances of $66 in 2012 and $38 in 2011)         12,812          10,776
Prepaid pension assets                                          945           2,843
Deferred taxes                                                3,973           3,503
Goodwill                                                     29,247          26,213
Intangible assets - net                                       3,787           3,392
Investments and sundry assets                                 5,021           4,895
                                                           --------        --------
Total Assets                                               $119,213        $116,433
                                                           ========        ========
LIABILITIES:
 
Current Liabilities:
Taxes                                                        $4,948          $3,313
Short-term debt                                               9,181           8,463	
Accounts payable                                              7,952           8,517
Compensation and benefits                                     4,745           5,099
Deferred income                                              11,952          12,197
Other accrued expenses and liabilities                        4,847           4,535
                                                           --------        --------
Total Current Liabilities                                    43,625          42,123
 
Long-term debt                                               24,088          22,857
Retirement and nonpension postretirement
  benefit obligations                                        20,418          18,374
Deferred income                                               4,491           3,847
Other liabilities                                             7,607           8,996
                                                           --------        --------
Total Liabilities                                           100,229          96,197

EQUITY:
IBM Stockholders' Equity:
  Common stock                                               50,110          48,129
  Retained earnings                                         117,641         104,857
  Treasury stock -- at cost                               (123,131)       (110,963)
  Accumulated other comprehensive income/(loss)            (25,759)        (21,885)
                                                           --------        --------
  Total IBM stockholders' equity                             18,860          20,138
 
Noncontrolling interests                                        124              97
                                                           --------        --------
Total Equity                                                 18,984          20,236
                                                           --------        --------
Total Liabilities and Equity                               $119,213        $116,433   
                                                           ========        ========



                                     INTERNATIONAL BUSINESS MACHINES CORPORATION
						  CASH FLOW ANALYSIS
                                      							
                                             Three Months Ended  Twelve Months Ended
 (Dollars in Millions)                           December 31,        December 31,
                                                 2012      2011      2012      2011
					       ------    ------   -------   -------

Net Cash from Operating Activities per GAAP:   $6,346    $7,097   $19,586   $19,846
 
     Less: the change in Global Financing (GF) 
	     Receivables                      (4,151)   (2,927)   (2,906)     (817)
                                              -------   -------   -------   -------
Net Cash from Operating Activities
 (Excluding GF Receivables)                    10,497    10,024    22,492    20,663
 
 Capital Expenditures, Net                      (981)   (1,059)   (4,307)   (4,059)
 
Free Cash Flow
 (Excluding GF Receivables)                     9,515     8,965    18,185    16,604
 
     Acquisitions                             (1,455)   (1,588)   (3,722)   (1,811)
     Divestitures                                  13        10       599        14
     Dividends                                  (957)     (880)   (3,773)   (3,473)
     Share Repurchase                         (3,006)   (3,581)  (11,995)  (15,046)
     Non-GF Debt                              (1,571)       599       713     1,692
     Other (includes GF Receivables, and
	      GF Debt)			      (3,664)   (2,906)     (802)     2,291 
 
Change in Cash, Cash Equivalents and
Short-term Marketable Securities             ($1,125)      $619    ($794)      $271 
                                             ========   =======   =======   =======
 


                        INTERNATIONAL BUSINESS MACHINES CORPORATION
                                       SEGMENT DATA

 
                                         FOURTH-QUARTER 2012
                            -----------------------------------------------  
 (Dollars in Millions)                                    Pre-tax
                            --------- Revenue ---------   Income/   Pre-tax
                            External Internal     Total    (Loss)    Margin
                            -------- --------  --------   -------   -------
SEGMENTS
 
Global Technology Services   $10,284     $297   $10,581    $2,027     19.2%
  Y-T-Y change                 -1.6%    -0.6%     -1.6%      5.0%
 
Global Business Services       4,720      181     4,901       841     17.2%
  Y-T-Y change                 -3.2%    -5.9%     -3.3%      0.1%
 
Software                       7,915      815     8,730     4,017     46.0%
  Y-T-Y change                  3.5%    -4.2%      2.7%      8.3%
 
Systems and Technology         5,763      186     5,949       974     16.4%
  Y-T-Y change                 -0.7%     0.0%     -0.7%     23.2%
 
Global Financing                 535      568     1,103       518     46.9%
  Y-T-Y change                 -2.3%    -0.1%     -1.2%      0.7%
 
TOTAL REPORTABLE SEGMENTS    $29,217   $2,048   $31,265    $8,377     26.8%
  Y-T-Y change                 -0.4%    -2.4%     -0.5%      7.6%
 
Eliminations / Other              87  (2,048)   (1,961)     (546)
 
TOTAL IBM CONSOLIDATED       $29,304       $0   $29,304    $7,831    26.7%
  Y-T-Y change                 -0.6%              -0.6%      7.7%


                                         
                                         FOURTH-QUARTER 2011
                            -----------------------------------------------  
  (Dollars in Millions)                                   Pre-tax
                            --------- Revenue ---------   Income/   Pre-tax
                            External Internal     Total    (Loss)    Margin
                            -------- --------  --------   -------   -------
SEGMENTS
 
Global Technology Services   $10,452     $299   $10,751    $1,930     18.0%
   
Global Business Services       4,877      193     5,069       841     16.6%
   
Software                       7,648      851     8,499     3,710     43.7%
   
Systems and Technology         5,803      186     5,989       790     13.2%
   
Global Financing                 548      569     1,116       514     46.1%
   
TOTAL REPORTABLE SEGMENTS    $29,328   $2,098   $31,425    $7,786     24.8%
   
Eliminations / Other             159  (2,098)   (1,939)     (512)
 
TOTAL IBM CONSOLIDATED       $29,486       $0   $29,486    $7,274     24.7%
  


                     INTERNATIONAL BUSINESS MACHINES CORPORATION
                                    SEGMENT DATA

 
                                          TWELVE-MONTHS 2012
                            -----------------------------------------------                                                          
  (Dollars in Millions)                                   Pre-tax
                            --------- Revenue ---------   Income/   Pre-tax
                            External Internal     Total    (Loss)    Margin
                            -------- --------  --------   -------   -------
SEGMENTS
 
Global Technology Services   $40,236   $1,166   $41,402    $6,961     16.8%
  Y-T-Y change                 -1.6%    -6.2%     -1.7%     10.8%
 
Global Business Services      18,566      719    19,286     2,983     15.5%
  Y-T-Y change                 -3.7%    -9.7%     -4.0%     -0.8%
 
Software                      25,448    3,274    28,722    10,810     37.6%
  Y-T-Y change                  2.0%    -0.1%      1.8%      8.4%
 
Systems and Technology        17,667      676    18,343     1,227      6.7%
  Y-T-Y change                 -6.9%   -19.3%     -7.5%    -24.9%
 
Global Financing               2,013    2,060     4,073     2,034     49.9%
  Y-T-Y change                 -4.2%    -1.6%     -2.9%      1.1%
 
TOTAL REPORTABLE SEGMENTS   $103,930   $7,896  $111,826   $24,015     21.5%
  Y-T-Y change                 -2.1%    -4.3%     -2.3%      4.8%
 
Eliminations / Other             577  (7,896)   (7,319)   (2,113)
 
TOTAL IBM CONSOLIDATED      $104,507       $0  $104,507   $21,902     21.0%
  Y-T-Y change                 -2.3%              -2.3%      4.3%


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


                   INTERNATIONAL BUSINESS MACHINES CORPORATION
                  U.S. GAAP TO OPERATING RESULTS RECONCILIATION
                 (Dollars in millions except per share amounts)
 
 
                                               FOURTH-QUARTER 2012
                                -----------------------------------------------
                                          Acquisition-  Retirement-
                                            Related       Related      Operating
                                  GAAP    Adjustments*  Adjustments** (Non-GAAP)
                                -------- ------------  ------------   ----------
Gross Profit                     $15,167         $100           $60      $15,327
 
Gross Profit Margin                51.8%       0.3Pts        0.2Pts        52.3%
 
S,G&A                              5,921         (91)          (29)        5,801
 
R,D&E                              1,580            0             6        1,586
 
Other (Income) & Expense            (47)          (7)             0         (54)

Total Expense & Other (Income)     7,336         (98)          (23)        7,215
 
Pre-Tax Income                     7,831          198            83        8,112
  
Pre-Tax Income Margin              26.7%       0.7Pts        0.3Pts        27.7%
 
Provision for Income Taxes***      1,998         (45)            30        1,983
 
Effective Tax Rate                 25.5%      -1.2Pts        0.1Pts        24.4% 
 
Net Income                         5,833          243            53        6,129
 
Net Income Margin                  19.9%       0.8Pts        0.2Pts        20.9%
 
Diluted Earnings Per Share         $5.13        $0.21         $0.05        $5.39
 

                                               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



*  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 2012
                                -----------------------------------------------
                                          Acquisition-  Retirement-
                                            Related       Related      Operating
                                  GAAP    Adjustments*  Adjustments** (Non-GAAP)
                                -------- ------------  ------------   ----------
Gross Profit                     $50,298         $376          $264      $50,938
 
Gross Profit Margin                48.1%       0.4Pts        0.3Pts        48.7%
 
S,G&A                             23,553        (349)          (294)      22,910
 
R,D&E                              6,302            0            20        6,322
 
Other (Income) & Expense           (843)         (13)             0        (857) 

Total Expense & Other (Income)    28,396        (363)          (274)      27,760
 
Pre-Tax Income                    21,902          739           538       23,179
 
Pre-Tax Income Margin              21.0%       0.7Pts        0.5Pts        22.2%
 
Provision for Income Taxes***      5,298          98            156        5,552
 
Effective Tax Rate                 24.2%      -0.4Pts        0.1Pts        24.0%
 
Net Income                        16,604          641           381       17,627
 
Net Income Margin                  15.9%       0.6Pts        0.4Pts        16.9%
 
Diluted Earnings Per Share        $14.37        $0.55         $0.33       $15.25
 


                                               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
                                               

*  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, 914-525-8476
          mikefay@us.ibm.com

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