Segments

6 Months Ended

Jun. 30, 2020

Segments

Segments

4. Segments:

During the first quarter of 2020, the company realigned offerings and the related management system to reflect divestitures completed in the second half of 2019 and tighter integration of certain industry-related consulting services. Accordingly, the company updated its Cloud & Cognitive Software segment, Global Business Services segment and the Other – divested businesses category in the first quarter of 2020 and recast the related historical information for consistency with the go-forward performance. Total recast revenue for full-year 2019 was approximately $0.3 billion of IBM’s total $77 billion. There was no change to the Global Technology Services, Systems or Global Financing segments, and there was no impact to IBM’s consolidated results. The following table displays the segment updates:

Management System Change	Resulting Segment Implications
Divestitures of IBM's Risk Analytics and Regulatory Offerings and Sales Performance Management Offerings	- Cloud & Cognitive Software (Cognitive Applications)
	+ Other Divested Business
Realignment of certain industry-related consulting offerings to the Global Business Services segment	- Cloud & Cognitive Software (Cognitive Applications)
	+ Global Business Services (Consulting)

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, 2020:
External revenue	$	5,748		$	3,890		$	6,316		$	1,852		$	265		$	18,072
Internal revenue		743			55			304			240			241			1,582
Total revenue	$	6,491		$	3,945		$	6,621		$	2,092		$	506		$	19,655
Pre-tax income from continuing operations	$	1,708		$	362		$	250		$	248		$	176		$	2,744
Revenue year-to-year change		5.2	%		(7.5)	%		(7.3)	%		8.7	%		(20.0)	%		(2.4)	%
Pre-tax income year-to-year change		(14.9)	%		25.1	%		6.4	%		304.8	%		(26.2)	%		(3.1)	%
Pre-tax income margin		26.3	%		9.2	%		3.8	%		11.8	%		34.9	%		14.0	%
For the three months ended June 30, 2019:
External revenue	$	5,563	*	$	4,197	*	$	6,837		$	1,753		$	351		$	18,701	*
Internal revenue		607			69			302			171			281			1,430
Total revenue	$	6,170	*	$	4,266	*	$	7,139		$	1,924		$	632		$	20,131	*
Pre-tax income from continuing operations	$	2,007	*	$	290	*	$	235		$	61		$	239		$	2,832	*
Pre-tax income margin		32.5	%*		6.8	%*		3.3	%		3.2	%		37.8	%		14.1	%*

Reconciliations to IBM as Reported:

(Dollars in millions)
For the three months ended June 30:	2020		2019
Revenue:
Total reportable segments	$	19,655	$	20,131	*
Other—divested businesses		13		403	*
Other revenue		37		57
Eliminations of internal transactions		(1,582)		(1,430)
Total consolidated revenue	$	18,123	$	19,161
Pre-tax income from continuing operations:
Total reportable segments	$	2,744	$	2,832	*
Amortization of acquired intangible assets		(472)		(169)
Acquisition-related (charges)/income		(1)		(102)
Non-operating retirement-related (costs)/income		(273)		(136)
Eliminations of internal transactions		(121)		(60)
Other—divested businesses		(22)		561	*
Unallocated corporate amounts		(283)		(156)
Total pre-tax income from continuing operations	$	1,571	$	2,768

* Recast to conform to current period 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, 2020:
External revenue	$	10,987		$	8,027		$	12,783		$	3,220		$	564		$	35,581
Internal revenue		1,556			101			599			388			453			3,096
Total revenue	$	12,543		$	8,128		$	13,382		$	3,608		$	1,017		$	38,677
Pre-tax income from continuing operations	$	2,641		$	633		$	72		$	31		$	370		$	3,747
Revenue year-to-year change		4.7	%		(4.3)	%		(6.4)	%		5.7	%		(24.0)	%		(2.2)	%
Pre-tax income year-to-year change		(30.4)	%		7.8	%		(85.9)	%		nm			(29.8)	%		(29.0)	%
Pre-tax income margin		21.1	%		7.8	%		0.5	%		0.9	%		36.4	%		9.7	%
For the six months ended June 30, 2019:
External revenue	$	10,530	*	$	8,353	*	$	13,711		$	3,081		$	757		$	36,432	*
Internal revenue		1,448			143			591			334			581			3,097
Total revenue	$	11,978	*	$	8,495	*	$	14,303		$	3,415		$	1,338		$	39,529	*
Pre-tax income/(loss) from continuing operations	$	3,792	*	$	587	*	$	510		$	(141)		$	527		$	5,276	*
Pre-tax income/(loss) margin		31.7	%*		6.9	%*		3.6	%		(4.1)	%		39.4	%		13.3	%*

Reconciliations to IBM as Reported:

(Dollars in millions)
For the six months ended June 30:	2020		2019
Revenue:
Total reportable segments	$	38,677	$	39,529	*
Other—divested businesses		32		780	*
Other revenue		81		131
Eliminations of internal transactions		(3,096)		(3,097)
Total consolidated revenue	$	35,694	$	37,342
Pre-tax income from continuing operations:
Total reportable segments	$	3,747	$	5,276	*
Amortization of acquired intangible assets		(945)		(343)
Acquisition-related (charges)/income		(2)		(141)
Non-operating retirement-related (costs)/income		(538)		(274)
Eliminations of internal transactions		(176)		(149)
Other—divested businesses		3		505	*
Unallocated corporate amounts		(568)		(224)
Total pre-tax income from continuing operations	$	1,522	$	4,651

* Recast to conform to current period presentation.

nm - not meaningful