Segments

6 Months Ended

Jun. 30, 2011

Segments

Segments

8. Segments:  The tables on pages 25 and 26 reflect the results of operations of the company’s segments consistent with the management and measurement system utilized within the company. These results are not necessarily a depiction that is in conformity with GAAP. Performance measurement is based on pre-tax income. These results are used, in part, by senior management, both in evaluating the performance of, and in allocating resources to, each of the segments.

Effective January 1, 2011, the company transitioned its management and measurement system to reflect operating earnings in an effort to provide better transparency into the operational results of the business. As a result, certain acquisition-related charges and non-operating retirement-related costs are not reflected in the segment results. See the “Snapshot” section beginning on page 37 for additional information regarding this change. Prior year segment pre-tax income and pre-tax margin have been reclassified to conform to the new management and measurement system.

SEGMENT INFORMATION

(UNAUDITED)

	Global Services
	Global Technology			Global Business						Systems and			Global			Total
(Dollars in millions)	Services			Services			Software			Technology			Financing			Segments
For the three months ended June 30, 2011:
External revenue	$	10,241		$	4,866		$	6,169		$	4,681		$	519		$	26,476
Internal revenue	320			205			792			218			547			2,082
Total revenue	$	10,561		$	5,071		$	6,961		$	4,899		$	1,066		$	28,558
Pre-tax income	$	1,420		$	750		$	2,310		$	393		$	496		$	5,370
Revenue year-to-year change	10.4		%	8.3		%	16.7		%	17.0		%	9.3		%	12.5		%
Pre-tax income year-to-year change	1.5		%	10.7		%	12.0		%	112.1		%	7.4		%	12.2		%
Pre-tax income margin	13.4		%	14.8		%	33.2		%	8.0		%	46.5		%	18.8		%
For the three months ended June 30, 2010:
External revenue	$	9,234		$	4,483		$	5,277		$	3,985		$	544		$	23,523
Internal revenue	332			197			690			202			431			1,852
Total revenue	$	9,566		$	4,680		$	5,967		$	4,187		$	975		$	25,376
Pre-tax income*	$	1,399		$	678		$	2,062		$	185		$	462		$	4,786
Pre-tax income margin*	14.6		%	14.5		%	34.5		%	4.4		%	47.3		%	18.9		%

* Reclassified to conform with 2011 presentation.

Reconciliations to IBM as Reported:

(Dollars in millions)
For the three months ended June 30:	2011			2010*
Revenue:
Total reportable segments	$	28,558		$	25,376
Eliminations/other	(1,891		)	(1,652		)
Total IBM Consolidated	$	26,666		$	23,724
Pre-tax income:
Total reportable segments	$	5,370		$	4,786
Amortization of acquired intangible assets	(159		)	(114		)
Acquisition related charges	(4		)	(9		)
Non-operating retirement-related costs	12			113
Eliminations/other	(334		)	(202		)
Total IBM Consolidated	$	4,885		$	4,575

* Reclassified to conform with 2011 presentation.

SEGMENT INFORMATION

(UNAUDITED)

	Global Services
	Global Technology			Global Business						Systems and			Global			Total
(Dollars in millions)	Services			Services			Software			Technology			Financing			Segments
For the six months ended June 30, 2011:
External revenue	$	20,104		$	9,575		$	11,478		$	8,700		$	1,035		$	50,892
Internal revenue	627			405			1,621			462			1,044			4,160
Total revenue	$	20,732		$	9,980		$	13,099		$	9,162		$	2,079		$	55,052
Pre-tax income	$	2,658		$	1,390		$	4,045		$	525		$	1,015		$	9,634
Revenue year-to-year change	8.0		%	7.4		%	11.5		%	18.3		%	8.5		%	10.3		%
Pre-tax income year-to-year change	12.8		%	23.7		%	(3.4		)%	nm			14.2		%	12.7		%
Pre-tax income margin	12.8		%	13.9		%	30.9		%	5.7		%	48.8		%	17.5		%
For the six months ended June 30, 2010:
External revenue	$	18,540		$	8,893		$	10,296		$	7,370		$	1,081		$	46,181
Internal revenue	652			400			1,448			376			834			3,710
Total revenue	$	19,192		$	9,293		$	11,743		$	7,746		$	1,916		$	49,891
Pre-tax income*	$	2,357		$	1,124		$	4,189		$	(12	)	$	889		$	8,546
Pre-tax income margin*	12.3		%	12.1		%	35.7		%	(0.2		)%	46.4		%	17.1		%

* Reclassified to conform with 2011 presentation.

nm — not meaningful

Reconciliations to IBM as Reported:

(Dollars in millions)
For the six months ended June 30:	2011			2010*
Revenue:
Total reportable segments	$	55,052		$	49,891
Eliminations/other	(3,779		)	(3,310		)
Total IBM Consolidated	$	51,273		$	46,581
Pre-tax income:
Total reportable segments	$	9,634		$	8,546
Amortization of acquired intangible assets	(318		)	(229		)
Acquisition related charges	(11		)	(10		)
Non-operating retirement-related costs	8			189
Eliminations/other	(612		)	(406		)
Total IBM Consolidated	$	8,702		$	8,090

* Reclassified to conform with 2011 presentation.