Segments

3 Months Ended

Mar. 31, 2016

Segments:

Segments:

6.Segments:The table on page27 reflects the results of continuing operations of the company’s segments consistent with the management and measurement system utilized within the company. Performance measurement is based on operating pre-tax income from continuing operations. These results are used, in part, by the chief operating decision maker, both in evaluating the performance of, and in allocating resources to, each of the segments.

In January 2016, the company made a number of changes to its organizational structure and management system consistent with its ongoing transformation to a cognitive solutions and cloud platform business. With these changes, the company has revised its reportable segments. The company continues to have five reportable segments as follows:

The Cognitive Solutions segment includes solutions units that address many of the company’s strategic areas, including analytics, commerce and security, several of the new initiatives around Watson, Watson Health, Watson Internet of Things and Transaction Processing software. The Technology Services & Cloud Platforms segment includes the company’s cloud infrastructure and platform capabilities, the Global Technology Services business and Integration software. Operating systems software has been aligned with the underlying hardware platforms in the Systems segment. The Global Business Services and Global Financing segments remain unchanged.

The company also realigned a portion of its software support revenue, which was previously managed and reported in Integrated Technology Services within Global Technology Services, to the underlying software product areas.

The following tables reflect these reclassifications for the prior-year period.

SEGMENT INFORMATION
		Cognitive Solutions &
		Industry Services
								Technology
					Global			Services &
		Cognitive			Business			Cloud						Global			Total
(Dollars in millions)		Solutions			Services			Platforms			Systems			Financing			Segments
For the three months
	ended March 31, 2016:
External revenue		$	3,979		$	4,131		$	8,424		$	1,675		$	410		$	18,619
Internal revenue			668			113			165			212			486			1,645
Total revenue		$	4,647		$	4,245		$	8,589		$	1,888		$	896		$	20,264
Pre-tax income/(loss) from
	continuing operations	$	1,013		$	190		$	258		$	(10)		$	386		$	1,837
Revenue year-to-year change			(0.8)	%		(4.6)	%		(1.5)	%		(18.4)	%		(14.5)	%		(4.5)	%
Pre-tax income year-to-year
	change		(33.7)	%		(67.7)	%		(77.2)	%		nm			(25.0)	%		(54.3)	%
Pre-tax income margin			21.8	%		4.5	%		3.0	%		(0.5)	%		43.1	%		9.1	%
For the three months
	ended March 31, 2015*:
External revenue		$	4,047		$	4,318		$	8,554		$	2,142		$	461		$	19,523
Internal revenue			635			131			166			173			586			1,690
Total revenue		$	4,682		$	4,449		$	8,720		$	2,314		$	1,048		$	21,213
Pre-tax income from
	continuing operations	$	1,528		$	588		$	1,131		$	261		$	515		$	4,023
Pre-tax income margin			32.6	%		13.2	%		13.0	%		11.3	%		49.2	%		19.0	%
* Reclassified to conform with 2016 presentation.
nm - not meaningful

Reconciliations to IBM as Reported:
(Dollars in millions)
For the three months ended March 31:		2016		2015*
Revenue:
Total reportable segments		$	20,264	$	21,213
Eliminations of internal transactions			(1,645)		(1,690)
Other revenue			66		67
	Total consolidated revenue	$	18,684	$	19,590
Pre-tax income from continuing operations:
Total reportable segments		$	1,837	$	4,023
Amortization of acquired intangible assets			(211)		(170)
Acquisition-related (charges)/income			27		0
Non-operating retirement-related (costs)/income			(142)		(442)
Eliminations of internal transactions			(355)		(363)
Unallocated corporate amounts			(122)		(48)
	Total pre-tax income from continuing operations	$	1,034	$	3,001
* Reclassified to conform with 2016 presentation.