Acquisitions/Divestitures:

6 Months Ended

Jun. 30, 2012

Acquisitions/Divestitures:

Acquisitions/Divestitures:

9. Acquisitions/Divestitures:

Acquisitions: During the six months ended June 30, 2012, the company completed eight acquisitions at an aggregate cost of $2,205 million.

The Software segment completed seven acquisitions: in the first quarter, Green Hat Software Limited (Green Hat), Emptoris Inc. (Emptoris) and Worklight, Inc. (Worklight), all privately held companies, and DemandTec, Inc. (DemandTec), a publicly held company; and in the second quarter, Varicent Software Inc. (Varicent), Vivisimo Inc. (Vivisimo) and Tealeaf Technology Inc. (Tealeaf), all privately held companies.  Systems and Technology (STG) completed the acquisition of Platform Computing Corporation (Platform Computing), a privately held company, in the first quarter. All acquisitions were for 100 percent of the acquired companies.

The table below reflects the purchase price related to these acquisitions and the resulting purchase price allocations as of June 30, 2012:

	Amortization	Total
(Dollars in millions)	Life (in yrs.)	Acquisitions
Current assets		$	261
Fixed assets/noncurrent assets		165
Intangible assets:
Goodwill	N/A	1,596
Completed technology	7	344
Client relationships	7	186
In-process R&D	N/A	9
Patents/trademarks	1-7	36
Total assets acquired		2,598
Current liabilities		(133		)
Noncurrent liabilities		(260		)
Total liabilities assumed		(393		)
Total purchase price		$	2,205

N/A - Not applicable

Each acquisition further complemented and enhanced the company’s portfolio of product and services offerings. Green Hat helps customers improve the quality of software applications by enabling developers to use cloud computing technologies to conduct testing of a software application prior to its delivery. Emptoris expands the company’s cloud-based analytics offerings that provide supply chain intelligence leading to better inventory management and cost efficiencies. Worklight delivers mobile application management capabilities to clients across a wide range of industries. The acquisition enhances the company’s comprehensive mobile portfolio, which is designed to help global corporations leverage the proliferation of all mobile devices — from laptops and smartphones to tablets. DemandTec delivers cloud-based analytics software to help organizations improve their price, promotion and product mix within the broad context of enterprise commerce. Varicent’s software automates and analyzes data across sales, finance, human resources and IT departments to uncover trends and optimize sales performance and operations. Vivisimo software automates the discovery of big data, regardless of its format or where it resides, providing decision makers with a view of key business information necessary to drive new initiatives. Tealeaf provides a full suite of customer experience management software, which analyzes interactions on websites and mobile devices. Platform Computing’s focused technical and distributed computing management software helps clients create, integrate and manage shared computing environments that are used in compute-and-data intensive applications such as simulations, computer modeling and analytics. Purchase price consideration for all acquisitions as reflected in the table above, is paid primarily in cash.  All acquisitions are reported in the Consolidated Statement of Cash Flows net of acquired cash and cash equivalents.

The acquisitions were accounted for as business combinations using the acquisition method, and accordingly, the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquired entity were recorded at their estimated fair values at the date of acquisition. The primary items that generated the goodwill are the value of the synergies between the acquired companies and IBM and the acquired assembled work-force, neither of which qualify as an amortizable intangible asset.  The overall weighted-average life of the identified amortizable intangible assets acquired is 6.9 years. These identified intangible assets will be amortized on a straight-line basis over their useful lives. Goodwill of $1,596 million has been assigned to the Software ($1,370 million), Global Business Services ($5 million) and Systems and Technology ($222 million) segments. It is expected that approximately 10 percent of the goodwill will be deductible for tax purposes.

Divestitures: On April 17, 2012, the company announced that it had signed a definitive agreement with Toshiba Tec for the sale of its Retail Store Solutions business to Toshiba Tec. As part of the transaction, Toshiba Tec and the company will sign a multi-year business partner agreement to integrate retail store solutions for Smarter Commerce. The transaction price is $850 million, and the company will receive approximately $800 million in cash, net of closing date working capital adjustments. The company will acquire a 19.9 percent ownership for three years in the new holding company that Toshiba Tec will establish for the business. This transaction is subject to regulatory requirements and customary closing conditions and will close in phases, with the initial closing expected in the third quarter of 2012, and subsequent closings expected by the end of the year. The company expects to recognize a total pre-tax gain on the sale between $450 million and $550 million. The gain will be recognized consistent with the closing schedule for the transaction.