In the first quarter of 2019, the company made a number of changes to its organizational structure and management system that brought cloud and cognitive software under one organization to more effectively address evolving client needs and to prepare for the acquisition of Red Hat, Inc. (Red Hat). With these changes, the company has revised its reportable segments, but did not impact its Consolidated Financial Statements. In addition, the company is presenting the results of its announced divestitures in an “Other” segment, as the realignment of these businesses allows for a better representation of management’s view of the company, as well as the ongoing operational performance of the reportable segments. The company’s segments are as follows:

* IBM completed the sales of select software products and marketing and platform commerce offerings (in the U.S.) on June 30, 2019. Refer to

note 11, “Acquisitions/Divestitures,” for additional information.

** IBM completed the sale of the mortgage servicing business on February 28, 2019.

The tables below reflect the continuing operations results 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. The segments represent components of the company for which separate financial information is available that is utilized on a regular basis by the chief operating decision maker (the chief executive officer) in determining how to allocate resources and evaluate performance. The tables reflect the segment recast for the prior-year period.

SEGMENT INFORMATION


	Cloud &			Global			Global
	Cognitive			Business			Technology						Global			Total
(Dollars in millions)	Software			Services			Services			Systems			Financing			Segments
For the three months ended June 30, 2019:
External revenue	$	5,645		$	4,155		$	6,837		$	1,753		$	351		$	18,741
Internal revenue		607			69			302			171			281			1,430
Total revenue	$	6,252		$	4,224		$	7,139		$	1,924		$	632		$	20,170
Pre-tax income/(loss) from continuing operations	$	2,001		$	300		$	235		$	61		$	239		$	2,836
Revenue year-to-year change		(0.5)	%		0.1	%		(4.7)	%		(20.5)	%		(27.1)	%		(5.2)	%
Pre-tax income year-to-year change		(1.4)	%		(19.4)	%		(47.9)	%		(82.3)	%		(33.1)	%		(20.2)	%
Pre-tax income/(loss) margin		32.0	%		7.1	%		3.3	%		3.2	%		37.8	%		14.1	%

For the three months ended June 30, 2018:
External revenue	$	5,470	*	$	4,135	*	$	7,325	*	$	2,177		$	394		$	19,500	*
Internal revenue		811	*		83			169			242			473			1,778	*
Total revenue	$	6,280	*	$	4,218	*	$	7,494	*	$	2,419		$	867		$	21,278	*
Pre-tax income/(loss) from continuing operations	$	2,029	*	$	372	*	$	451	*	$	346		$	357		$	3,556	*
Pre-tax income/(loss) margin		32.3	%*		8.8	%*		6.0	%*		14.3	%		41.2	%		16.7	%*

* Recast to conform to 2019 presentation.

Reconciliations to IBM as Reported:


(Dollars in millions)
For the three months ended June 30:	2019		2018
Revenue:
Total reportable segments	$	20,170	$	21,278	*
Other — divested businesses		363		457	*
Other revenue		57		45
Eliminations of internal transactions		(1,430)		(1,778)	*
Total consolidated revenue	$	19,161	$	20,003

Pre-tax income from continuing operations:
Total reportable segments	$	2,836	$	3,556	*
Amortization of acquired intangible assets		(169)		(203)
Acquisition-related (charges)/income		(102)		(1)
Non-operating retirement-related (costs)/income		(136)		(394)
Eliminations of internal transactions		(60)		(308)	*
Other — divested businesses		557		188	*
Unallocated corporate amounts		(156)		(62)
Total pre-tax income from continuing operations	$	2,768	$	2,776

* Recast to conform to 2019 presentation.

SEGMENT INFORMATION


	Cloud &			Global			Global
	Cognitive			Business			Technology						Global			Total
(Dollars in millions)	Software			Services			Services			Systems			Financing			Segments
For the six months ended June 30, 2019:
External revenue	$	10,682		$	8,274		$	13,711		$	3,081		$	757		$	36,506
Internal revenue		1,448			143			591			334			581			3,097
Total revenue	$	12,131		$	8,417		$	14,303		$	3,415		$	1,338		$	39,603
Pre-tax income/(loss) from continuing operations	$	3,768		$	615		$	510		$	(141)		$	527		$	5,280
Revenue year-to-year change		(1.6)	%		(0.1)	%		(5.0)	%		(16.1)	%		(21.3)	%		(4.7)	%
Pre-tax income year-to-year change		1.6	%		23.7	%		(1.4)	%		(198.1)	%		(28.1)	%		(5.7)	%
Pre-tax income/(loss) margin		31.1	%		7.3	%		3.6	%		(4.1)	%		39.4	%		13.3	%

For the six months ended June 30, 2018:
External revenue	$	10,586	*	$	8,250	*	$	14,746	*	$	3,676		$	799		$	38,057	*
Internal revenue		1,741	*		172			310			395			902			3,521	*
Total revenue	$	12,327	*	$	8,422	*	$	15,055	*	$	4,072		$	1,701		$	41,578	*
Pre-tax income/(loss) from continuing operations	$	3,709	*	$	497	*	$	517	*	$	143		$	734		$	5,601	*
Pre-tax income/(loss) margin		30.1	%*		5.9	%*		3.4	%*		3.5	%		43.1	%		13.5	%*

* Recast to conform to 2019 presentation.

Reconciliations to IBM as Reported:


(Dollars in millions)
For the six months ended June 30:	2019		2018
Revenue:
Total reportable segments	$	39,603	$	41,578	*
Other — divested businesses		706		903	*
Other revenue		131		114
Eliminations of internal transactions		(3,097)		(3,521)	*
Total consolidated revenue	$	37,342	$	39,075

Pre-tax income from continuing operations:
Total reportable segments	$	5,280	$	5,601	*
Amortization of acquired intangible assets		(343)		(406)
Acquisition-related (charges)/income		(141)		(1)
Non-operating retirement-related (costs)/income		(274)		(796)
Eliminations of internal transactions		(149)		(497)	*
Other — divested businesses		502		202	*
Unallocated corporate amounts		(224)		(192)
Total pre-tax income from continuing operations	$	4,651	$	3,911

* Recast to conform to 2019 presentation.