REG-Intnl Bus. Mach IBM Reports 2012 Fourth-Quarter and Full-Year Results

Wed Jan 23, 2013 2:00am EST

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ARMONK, N.Y.--(Business Wire)--


IBM (NYSE: IBM) 

Fourth-Quarter 2012:

* Diluted EPS:

* GAAP: $5.13, up 11 percent; 
* Operating (non-GAAP): $5.39, up 14 percent;

* Net income:

* GAAP: $5.8 billion, up 6 percent; 
* Operating (non-GAAP): $6.1 billion, up 10 percent;

* Gross profit margin:

* GAAP: 51.8 percent, up 1.8 points; 
* Operating (non-GAAP): 52.3 percent, up 2.1 points;

* Revenue of $29.3 billion, down 1 percent, flat adjusting for currency:

* Up 1 percent excluding divested RSS business adjusting for currency;

* Free cash flow of $9.5 billion, up $0.6 billion; 
* Software revenue up 3 percent, up 4 percent adjusting for currency; 
* Services revenue down 2 percent, down 1 percent adjusting for currency; 
* Services backlog of $140 billion, flat, up $1 billion adjusting for currency; 
* Systems and Technology revenue down 1 percent, up 4 percent excluding RSS:

* System z mainframe up 56 percent.

Full-Year 2012:

* Diluted EPS, up double-digits for 10th consecutive year:

* GAAP: $14.37, up 10 percent; 
* Operating (non-GAAP): $15.25, up 13 percent;

* Net income:

* GAAP: $16.6 billion, up 5 percent; 
* Operating (non-GAAP): $17.6 billion, up 8 percent;

* Revenue of $104.5 billion, down 2 percent, flat adjusting for currency; 
* Free cash flow of $18.2 billion, up $1.6 billion; 
* Growth markets revenue up 4 percent, up 7 percent adjusting for currency:

* BRIC countries up 7 percent, up 12 percent adjusting for currency;

* Business analytics revenue up 13 percent; 
* Smarter Planet revenue up more than 25 percent; 
* Cloud revenue up 80 percent.

Full-Year 2013 Expectation:

* GAAP EPS of at least $15.53 and operating (non-GAAP) EPS of at least $16.70.

IBM (NYSE: IBM) today announced fourth-quarter 2012 diluted earnings of $5.13
per share, compared with diluted earnings of $4.62 per share in the fourth
quarter of 2011, an increase of 11 percent. Operating (non-GAAP) diluted
earnings were $5.39 per share, compared with operating diluted earnings of $4.71
per share in the fourth quarter of 2011, an increase of 14 percent. 

Fourth-quarter net income was $5.8 billion compared with $5.5 billion in the
fourth quarter of 2011, an increase of 6 percent. Operating (non-GAAP) net
income was $6.1 billion compared with $5.6 billion in the fourth quarter of
2011, an increase of 10 percent. 

Total revenues for the fourth quarter of 2012 of $29.3 billion decreased 1
percent (flat adjusting for currency) from the fourth quarter of 2011. Without
the impact of the divested Retail Store Solutions (RSS) business, revenue
increased 1 percent, adjusting for currency. 

"We achieved record profit, earnings per share and free cash flow in 2012. Our
performance in the fourth quarter and for the full year was driven by our
strategic growth initiatives -- growth markets, analytics, cloud computing,
Smarter Planet solutions -- which support our continued shift to higher-value
businesses," said Ginni Rometty, IBM chairman, president and chief executive
officer. 

"Looking ahead, we continue to invest to deliver innovations for the enterprise
in key areas such as big data, mobile solutions, social business and security,
while expanding into new markets and reaching new clients. We are well on track
toward our long-term roadmap for operating EPS of at least $20 in 2015." 

Fourth-Quarter GAAP - Operating (non-GAAP) Reconciliation

Fourth-quarter operating (non-GAAP) diluted earnings exclude $0.26 per share of
net charges: $0.21 per share for the amortization of purchased intangible assets
and other acquisition-related charges, and $0.05 per share for
retirement-related items driven by changes to plan assets and liabilities
primarily related to market performance. 

Full-Year 2013 Expectation

IBM said that it expects to deliver full-year 2013 GAAP earnings per share of at
least $15.53; and operating (non-GAAP) earnings per share of at least $16.70.
The 2013 operating (non-GAAP) earnings exclude $1.17 per share of charges for
amortization of purchased intangible assets, other acquisition-related charges,
and retirement-related items driven by changes to plan assets and liabilities
primarily related to market performance. 

Geographic Regions

The Americas` fourth-quarter revenues were $12.5 billion, flat (up 1 percent,
adjusting for currency) from the 2011 period. Revenues from Europe/Middle
East/Africa were $9.1 billion, down 5 percent (down 3 percent, adjusting for
currency). Asia-Pacific revenues increased 4 percent (up 5 percent, adjusting
for currency) to $7.0 billion. OEM revenues were $679 million, down 5 percent
compared with the 2011 fourth quarter. 

Growth Markets

Revenues from the company`s growth markets increased 7 percent. Revenues in the
BRIC countries - Brazil, Russia, India and China - increased 11 percent (up 14
percent, adjusting for currency). 

Services

Global Technology Services segment revenues decreased 2 percent (flat adjusting
for currency) to $10.3 billion. Global Business Services segment revenues were
down 3 percent (down 2 percent, adjusting for currency) at $4.7 billion. 

Pre-tax income from Global Technology Services increased 5 percent; pre-tax
margin increased to 19.2 percent. Global Business Services pre-tax income was
flat; pre-tax margin increased to 17.2 percent. 

The estimated services backlog at December 31 was $140 billion, flat (up $1
billion, adjusting for currency). 

Software

Revenues from the Software segment were $7.9 billion, an increase of 3 percent
(up 4 percent, adjusting for currency) from the fourth quarter of 2011. Software
pre-tax income of $4.0 billion increased 8 percent year over year. 

Revenues from IBM`s key middleware products, which include WebSphere,
Information Management, Tivoli, Lotus and Rational products, were $5.5 billion,
an increase of 5 percent (up 6 percent, adjusting for currency) versus the
fourth quarter of 2011. Operating systems revenues of $709 million were flat (up
1 percent, adjusting for currency) compared with the prior-year quarter. 

Revenues from the WebSphere family of software products increased 11 percent
year over year. Information Management software revenues increased 2 percent.
Revenues from Tivoli software increased 4 percent. Revenues from Lotus software
increased 9 percent, and Rational software increased 12 percent. 

Hardware

Revenues from the Systems and Technology segment totaled $5.8 billion for the
quarter, down 1 percent from the fourth quarter of 2011. Excluding Retail Store
Solutions (RSS), revenues were up 4 percent. Systems and Technology pre-tax
income was $1.0 billion, an increase of 23 percent. 

Total systems revenues, excluding RSS, increased 4 percent. Revenues from System
z mainframe server products increased 56 percent compared with the year-ago
period; revenue in the growth markets increased 68 percent. Total delivery of
System z computing power, as measured in MIPS (millions of instructions per
second), increased 66 percent versus the prior year and represented the largest
MIPS shipment quarter in the company`s history. New workload specialty engines,
including Linux, represented one-half of the MIPS shipped. Revenues from Power
Systems decreased 19 percent compared with the 2011 period. Revenues from System
x decreased 2 percent. Revenues from System Storage decreased 5 percent.
Revenues from Retail Store Solutions decreased $239 million year over year as a
result of the divestiture in the third quarter. Revenues from Microelectronics
OEM increased 4 percent. 

Financing

Global Financing segment revenues were down 2 percent (down 1 percent, adjusting
for currency) in the fourth quarter to $535 million. Pre-tax income for the
segment increased 1 percent to $518 million. 

Gross Profit

The company`s total gross profit margin was 51.8 percent in the 2012 fourth
quarter compared with 49.9 percent in the 2011 fourth-quarter period. Total
operating (non-GAAP) gross profit margin was 52.3 percent in the 2012 fourth
quarter compared with 50.2 percent in the 2011 fourth-quarter period, with
increases in Services, Software and Hardware. 

Expense

Total expense and other income decreased 2 percent to $7.3 billion compared with
the prior-year period. S,G&A expense of $5.9 billion decreased 3 percent year
over year compared with prior-year expense. R,D&E expense of $1.6 billion
increased 2 percent compared with the year-ago period. Intellectual property and
custom development income decreased to $227 million compared with $253 million a
year ago. Other (income) and expense was income of $47 million compared with
prior-year income of $44 million. Interest expense decreased to $109 million
compared with $113 million in the prior year. 

Total operating (non-GAAP) expense and other income decreased 2 percent to $7.2
billion compared with the prior-year period. Operating (non-GAAP) S,G&A expense
of $5.8 billion decreased 3 percent year over year compared with prior-year
expense. Operating (non-GAAP) R,D&E expense of $1.6 billion increased 1 percent
compared with the year-ago period. 

*** 

Pre-tax income increased 8 percent to $7.8 billion; total operating (non-GAAP)
pre-tax income increased 10 percent to $8.1 billion. Pre-tax margin was 26.7
percent, up 2.1 points; total operating (non-GAAP) pre-tax margin was 27.7
percent, up 2.6 points. 

IBM`s tax rate was 25.5 percent, up 1.0 points year over year; total operating
(non-GAAP) tax rate was 24.4 percent, flat compared to the year-ago period. 

Net income margin increased 1.3 points to 19.9 percent; total operating
(non-GAAP) net income margin was 20.9 percent, an increase of 1.9 points. 

The weighted-average number of diluted common shares outstanding in the
fourth-quarter 2012 was 1.14 billion compared with 1.19 billion shares in the
same period of 2011. 

In the quarter, IBM generated free cash flow of $9.5 billion excluding Global
Financing receivables, up $0.6 billion year over year. 

Full-Year 2012 Results

Net income for the year ended December 31, 2012 was $16.6 billion compared with
$15.9 billion in the prior year, an increase of 5 percent. Operating (non-GAAP)
net income was $17.6 billion compared with $16.3 billion in 2011, an increase of
8 percent. 

Diluted earnings were $14.37 per share compared with $13.06 per diluted share in
2011, an increase of 10 percent. Operating (non-GAAP) diluted earnings were
$15.25 per share, compared with operating diluted earnings of $13.44 per share
in 2011, an increase of 13 percent. This was the company`s 10th consecutive year
of double-digit EPS growth. 

Revenues for 2012 totaled $104.5 billion, a decrease of 2 percent (flat
adjusting for currency), compared with $106.9 billion in 2011. 

GAAP - Operating (non-GAAP) Reconciliation

Operating (non-GAAP) diluted earnings for the year exclude $0.88 per share of
net charges: $0.55 per share for the amortization of purchased intangible assets
and other acquisition-related charges, and $0.33 per share for
retirement-related items driven by changes to plan assets and liabilities
primarily related to market performance. 

Geographic Regions

From a geographic perspective, the Americas` full-year revenues were $44.6
billion, a decrease of 1 percent (flat adjusting for currency) from the 2011
period. Revenues from Europe/Middle East/Africa were $31.8 billion, a decrease
of 6 percent (down 1 percent, adjusting for currency). Asia-Pacific revenues
increased 3 percent to $25.9 billion. OEM revenues were $2.2 billion, down 18
percent compared with 2011. 

Growth Markets

Revenues from the company`s growth markets increased 4 percent (up 7 percent,
adjusting for currency), and represents 24 percent of IBM`s total geographic
revenue. Revenues in the BRIC countries - Brazil, Russia, India and China -
increased 7 percent (up 12 percent, adjusting for currency). 

Segments

Total Global Services revenues decreased 2 percent (flat adjusting for
currency). Revenues from the Global Technology Services segment totaled $40.2
billion, a decrease of 2 percent (up 1 percent, adjusting for currency) compared
with 2011. Revenues from the Global Business Services segment were $18.6
billion, down 4 percent (down 2 percent, adjusting for currency). Software
segment revenues in 2012 totaled $25.4 billion, an increase of 2 percent (up 4
percent, adjusting for currency). Systems and Technology segment revenues were
$17.7 billion, a decrease of 7 percent (down 6 percent, adjusting for currency);
excluding Retail Store Solutions, revenues were down 5 percent (down 4 percent
adjusting for currency). Global Financing segment revenues totaled $2.0 billion,
a decrease of 4 percent (down 1 percent, adjusting for currency). 

*** 

The company`s total gross profit margin was 48.1 percent in 2012 compared with
46.9 percent in 2011. Overall gross profit margins improved year over year for
the 9th consecutive year. Total operating (non-GAAP) gross profit margin was
48.7 percent in the 2012 period compared with 47.2 percent in the 2011 period,
with increases in Services and Software. 

The weighted-average number of diluted common shares outstanding in 2012 was
1.16 billion compared with 1.21 billion shares in 2011. As of December 31, 2012,
there were 1.12 billion basic common shares outstanding. 

Debt, including Global Financing, totaled $33.3 billion, compared with $31.3
billion at year-end 2011. From a management segment view, Global Financing debt
totaled $24.5 billion versus $23.3 billion at year-end 2011, resulting in a
debt-to-equity ratio of 7.0 to 1. Non-global financing debt totaled $8.8
billion, an increase of $0.8 billion since year-end 2011, resulting in a
debt-to-capitalization ratio of 36.1 percent from 32.0 percent. 

IBM ended 2012 with $11.1 billion of cash on hand and generated free cash flow
of $18.2 billion excluding Global Financing receivables, up approximately $1.6
billion year over year. The company returned $15.8 billion to shareholders
through $3.8 billion in dividends and $12.0 billion of share repurchases. The
company`s balance sheet remains strong and is well positioned to support the
business over the long term. 

Forward-Looking and Cautionary Statements

Except for the historical information and discussions contained herein,
statements contained in this release may constitute forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements are based on the company`s current assumptions
regarding future business and financial performance. These statements involve a
number of risks, uncertainties and other factors that could cause actual results
to differ materially, including the following: a downturn in economic
environment and corporate IT spending budgets; the company`s failure to meet
growth and productivity objectives, a failure of the company`s innovation
initiatives; risks from investing in growth opportunities; failure of the
company`s intellectual property portfolio to prevent competitive offerings and
the failure of the company to obtain necessary licenses; cybersecurity and data
privacy considerations; fluctuations in financial results and purchases, impact
of local legal, economic, political and health conditions; adverse effects from
environmental matters, tax matters and the company`s pension plans; ineffective
internal controls; the company`s use of accounting estimates; the company`s
ability to attract and retain key personnel and its reliance on critical skills;
impacts of relationships with critical suppliers and business with government
clients; currency fluctuations and customer financing risks; impact of changes
in market liquidity conditions and customer credit risk on receivables; reliance
on third party distribution channels; the company`s ability to successfully
manage acquisitions and alliances; risk factors related to IBM securities; and
other risks, uncertainties and factors discussed in the company`s Form 10-Q,
Form 10-K and in the company`s other filings with the U.S. Securities and
Exchange Commission (SEC) or in materials incorporated therein by reference. Any
forward-looking statement in this release speaks only as of the date on which it
is made. The company assumes no obligation to update or revise any
forward-looking statements. 

Presentation of Information in this Press Release

In an effort to provide investors with additional information regarding the
company`s results as determined by generally accepted accounting principles
(GAAP), the company has also disclosed in this press release the following
non-GAAP information which management believes provides useful information to
investors: 

IBM results and expectations -

* presenting operating (non-GAAP) earnings per share amounts and related income
statement items; 
* presenting non-global financing debt-to-capitalization ratio; 
* adjusting for free cash flow; 
* adjusting for currency (i.e., at constant currency); 
* adjusting for the divestiture of RSS.

The rationale for management`s use of non-GAAP measures is included as part of
the supplementary materials presented within the fourth-quarter earnings
materials. These materials are available on the IBM investor relations Web site
at www.ibm.com/investor and are being included in Attachment II ("Non-GAAP
Supplementary Materials") to the Form 8-K that includes this press release and
is being submitted today to the SEC. 

Conference Call and Webcast

IBM`s regular quarterly earnings conference call is scheduled to begin at 4:30
p.m. EST, today. The Webcast may be viewed at www.ibm.com/investor/4q12.
Presentation charts will be available on the Web site shortly before the
Webcast. 

Financial Results Below (certain amounts may not add due to use of rounded
numbers; percentages presented are calculated from the underlying whole-dollar
amounts).

 INTERNATIONAL BUSINESS MACHINES CORPORATION                                                                                                   
 COMPARATIVE FINANCIAL RESULTS                                                                                                                 
 (Dollars in millions except per share amounts)                                                                                                
                                                                                                                                               
                               Three Months Ended                                       Twelve Months Ended                                    
                               December 31,                                             December 31,                                           
                                                                         Percent                                                  Percent      
                               2012                 2011                 Change         2012                 2011                 Change       
 REVENUE                                                                                                                                       
                                                                                                                                               
 Global Technology Services    $   10,284           $   10,452           -1.6   %       $   40,236           $   40,879           -1.6   %     
 Gross profit margin               37.6     %           36.6     %                          36.6     %           35.0     %                    
                                                                                                                                               
 Global Business Services          4,720                4,877            -3.2   %           18,566               19,284           -3.7   %     
 Gross profit margin               29.9     %           29.3     %                          30.0     %           28.8     %                    
                                                                                                                                               
 Software                          7,915                7,648            3.5    %           25,448               24,944           2.0    %     
 Gross profit margin               90.6     %           89.8     %                          88.7     %           88.5     %                    
                                                                                                                                               
 System and Technology             5,763                5,803            -0.7   %           17,667               18,985           -6.9   %     
 Gross profit margin               44.1     %           40.5     %                          39.1     %           39.8     %                    
                                                                                                                                               
 Global Financing                  535                  548              -2.3   %           2,013                2,102            -4.2   %     
 Gross profit margin               43.8     %           49.7     %                          46.5     %           49.8     %                    
                                                                                                                                               
 Other                             87                   159              -45.3  %           577                  722              -20.1  %     
 Gross profit margin               -73.2    %           -11.0    %                          -71.6    %           -54.5    %                    
                                                                                                                                               
 TOTAL REVENUE                     29,304               29,486           -0.6   %           104,507              106,916          -2.3   %     
                                                                                                                                               
                                                                                                                                               
 GROSS PROFIT                      15,167               14,722           3.0    %           50,298               50,138           0.3    %     
 Gross profit margin               51.8     %           49.9     %                          48.1     %           46.9     %                    
                                                                                                                                               
                                                                                                                                               
 EXPENSE AND OTHER INCOME                                                                                                                      
                                                                                                                                               
 S,G&A                             5,921                6,076            -2.6   %           23,553               23,594           -0.2   %     
 Expense to revenue                20.2     %           20.6     %                          22.5     %           22.1     %                    
                                                                                                                                               
 R,D&E                             1,580                1,555            1.6    %           6,302                6,258            0.7    %     
 Expense to revenue                5.4      %           5.3      %                          6.0      %           5.9      %                    
                                                                                                                                               
 Intellectual property                                                                                                                         
 and custom development                                                                                                                        
 income                            (227     )           (253     )       -10.1  %           (1,074   )           (1,108   )       -3.0   %     
                                                                                                                                               
 Other (income)and expense         (47      )           (44      )       7.3    %           (843     )           (20      )       NM           
                                                                                                                                               
 Interest expense                  109                  113              -3.8   %           459                  411              11.8   %     
                                                                                                                                               
 TOTAL EXPENSE AND                                                                                                                             
 OTHER INCOME                      7,336                7,448            -1.5   %           28,396               29,135           -2.5   %     
 Expense to revenue                25.0     %           25.3     %                          27.2     %           27.3     %                    
                                                                                                                                               
 INCOME BEFORE                                                                                                                                 
 INCOME TAXES                      7,831                7,274            7.7    %           21,902               21,003           4.3    %     
 Pre-tax margin                    26.7     %           24.7     %                          21.0     %           19.6     %                    
                                                                                                                                               
 Provision for income taxes        1,998                1,784            12.0   %           5,298                5,148            2.9    %     
 Effective tax rate                25.5     %           24.5     %                          24.2     %           24.5     %                    
                                                                                                                                               
 NET INCOME                    $   5,833            $   5,490            6.3    %       $   16,604           $   15,855           4.7    %     
 Net income margin                 19.9     %           18.6     %                          15.9     %           14.8     %                    
                                                                                                                                               
                                                                                                                                               
 EARNINGS PER SHARE                                                                                                                            
 OF COMMON STOCK:                                                                                                                              
 ASSUMING DILUTION             $   5.13             $   4.62             11.0   %       $   14.37            $   13.06            10.0   %     
 BASIC                         $   5.19             $   4.68             10.9   %       $   14.53            $   13.25            9.7    %     
                                                                                                                                               
 WEIGHTED-AVERAGE NUMBER                                                                                                                       
 OF COMMON SHARES OUT-                                                                                                                         
 STANDING (M's):                                                                                                                               
 ASSUMING DILUTION                 1,136.4              1,188.7                             1,155.4              1,213.8                       
 BASIC                             1,124.7              1,172.2                             1,142.5              1,197.0                       
                                                                                                                                               
 NM - - Not Meaningful                                                                                                                         
                                                                                                                                               


 INTERNATIONAL BUSINESS MACHINES CORPORATION                                                               
 CONSOLIDATED STATEMENT OF FINANCIAL POSITION                                                              
                                                                                                           
                                                         At                        At                      
 (Dollars in Millions)                                   December 31,              December 31,            
                                                         2012                      2011                    
 ASSETS:                                                                                                   
                                                                                                           
 Current Assets:                                                                                           
 Cash and cash equivalents                               $      10,412             $      11,922           
 Marketable securities                                          717                       --               
 Notes and accounts receivable - trade                                                                     
 (net of allowances of $255 in 2012 and $256 in 2011)           10,667                    11,179           
 Short-term financing receivables                                                                          
 (net of allowances of $288 in 2012 and $311 in 2011)           18,038                    16,901           
 Other accounts receivable                                                                                 
 (net of allowances of $17 in 2012 and $11 in 2011)             1,873                     1,481            
 Inventories, at lower of average cost or market:                                                          
 Finished goods                                                 475                       589              
 Work in process and raw materials                              1,812                     2,007            
 Total inventories                                              2,287                     2,595            
 Deferred taxes                                                 1,415                     1,601            
 Prepaid expenses and other current assets                      4,024                     5,249            
 Total Current Assets                                           49,433                    50,928           
                                                                                                           
 Property, plant and equipment                                  40,501                    40,124           
 Less: Accumulated depreciation                                 26,505                    26,241           
 Property, plant and equipment - net                            13,996                    13,883           
 Long-term financing receivables                                                                           
 (net of allowances of $66 in 2012 and $38 in 2011)             12,812                    10,776           
 Prepaid pension assets                                         945                       2,843            
 Deferred taxes                                                 3,973                     3,503            
 Goodwill                                                       29,247                    26,213           
 Intangible assets - net                                        3,787                     3,392            
 Investments and sundry assets                                  5,021                     4,895            
 Total Assets                                            $      119,213            $      116,433          
                                                                                                           
 LIABILITIES:                                                                                              
                                                                                                           
 Current Liabilities:                                                                                      
 Taxes                                                   $      4,948              $      3,313            
 Short-term debt                                                9,181                     8,463            
 Accounts payable                                               7,952                     8,517            
 Compensation and benefits                                      4,745                     5,099            
 Deferred income                                                11,952                    12,197           
 Other accrued expenses and liabilities                         4,847                     4,535            
 Total Current Liabilities                                      43,625                    42,123           
                                                                                                           
 Long-term debt                                                 24,088                    22,857           
 Retirement and nonpension postretirement                                                                  
 benefit obligations                                            20,418                    18,374           
 Deferred income                                                4,491                     3,847            
 Other liabilities                                              7,607                     8,996            
 Total Liabilities                                              100,229                   96,197           
                                                                                                           
 EQUITY:                                                                                                   
 IBM Stockholders' Equity:                                                                                 
 Common stock                                                   50,110                    48,129           
 Retained earnings                                              117,641                   104,857          
 Treasury stock -- at cost                                      (123,131  )               (110,963  )      
 Accumulated other comprehensive income/(loss)                  (25,759   )               (21,885   )      
 Total IBM stockholders' equity                                 18,860                    20,138           
                                                                                                           
 Noncontrolling interests                                       124                       97               
 Total Equity                                                   18,984                    20,236           
 Total Liabilities and Equity                            $      119,213            $      116,433          
                                                                                                           


 INTERNATIONAL BUSINESS MACHINES CORPORATION                                                                                            
 CASH FLOW ANALYSIS                                                                                                                     
                                                                                                                                        
                                                 Three Months Ended                          Twelve Months Ended                        
 (Dollars in Millions)                           December 31,                                December 31,                               
                                                 2012                    2011                2012                    2011               
                                                                                                                                        
 Net Cash from Operating Activities per GAAP:    $    6,346              $    7,097          $    19,586             $    19,846        
                                                                                                                                        
 Less: the change in Global Financing (GF)                                                                                              
 Receivables                                          (4,151   )              (2,927  )           (2,906   )              (817     )    
 Net Cash from Operating Activities                                                                                                     
 (Excluding GF Receivables)                           10,497                  10,024              22,492                  20,663        
                                                                                                                                        
 Capital Expenditures, Net                            (981     )              (1,059  )           (4,307   )              (4,059   )    
                                                                                                                                        
 Free Cash Flow                                                                                                                         
 (Excluding GF Receivables)                           9,515                   8,965               18,185                  16,604        
                                                                                                                                        
 Acquisitions                                         (1,455   )              (1,588  )           (3,722   )              (1,811   )    
 Divestitures                                         13                      10                  599                     14            
 Dividends                                            (957     )              (880    )           (3,773   )              (3,473   )    
 Share Repurchase                                     (3,006   )              (3,581  )           (11,995  )              (15,046  )    
 Non-GF Debt                                          (1,571   )              599                 713                     1,692         
 Other (includes GF Receivables, and                                                                                                    
 GF Debt)                                             (3,664   )              (2,906  )           (802     )              2,291         
                                                                                                                                        
 Change in Cash, Cash Equivalents and                                                                                                   
 Short-term Marketable Securities                     ($1,125  )         $    619                 ($794    )         $    271           
                                                                                                                                        


 INTERNATIONAL BUSINESS MACHINES CORPORATION                                                                                    
 SEGMENT DATA                                                                                                                   
                                                                                                                                
                               FOURTH-QUARTER 2012                                                                              
 (Dollars in Millions)                                                                         Pre-tax                          
                               Revenue                                                         Income/              Pre-tax     
                               External              Internal              Total               (Loss)               Margin      
 SEGMENTS                                                                                                                       
                                                                                                                                
 Global Technology Services    $    10,284           $    297              $   10,581          $    2,027           19.2  %     
 Y-T-Y change                       -1.6    %             -0.6    %            -1.6    %            5.0    %                    
                                                                                                                                
 Global Business Services           4,720                 181                  4,901                841             17.2  %     
 Y-T-Y change                       -3.2    %             -5.9    %            -3.3    %            0.1    %                    
                                                                                                                                
 Software                           7,915                 815                  8,730                4,017           46.0  %     
 Y-T-Y change                       3.5     %             -4.2    %            2.7     %            8.3    %                    
                                                                                                                                
 Systems and Technology             5,763                 186                  5,949                974             16.4  %     
 Y-T-Y change                       -0.7    %             0.0     %            -0.7    %            23.2   %                    
                                                                                                                                
 Global Financing                   535                   568                  1,103                518             46.9  %     
 Y-T-Y change                       -2.3    %             -0.1    %            -1.2    %            0.7    %                    
                                                                                                                                
 TOTAL REPORTABLE SEGMENTS     $    29,217           $    2,048            $   31,265          $    8,377           26.8  %     
 Y-T-Y change                       -0.4    %             -2.4    %            -0.5    %            7.6    %                    
                                                                                                                                
 Eliminations / Other               87                    (2,048  )            (1,961  )            (546   )                    
                                                                                                                                
 TOTAL IBM CONSOLIDATED        $    29,304           $    0                $   29,304          $    7,831           26.7  %     
 Y-T-Y change                       -0.6    %                                  -0.6    %            7.7    %                    
                                                                                                                                
                                                                                                                                
                               FOURTH-QUARTER 2011                                                                              
 (Dollars in Millions)                                                                         Pre-tax                          
                               Revenue                                                         Income/              Pre-tax     
                               External              Internal              Total               (Loss)               Margin      
 SEGMENTS                                                                                                                       
                                                                                                                                
 Global Technology Services    $    10,452           $    299              $   10,751          $    1,930           18.0  %     
                                                                                                                                
 Global Business Services           4,877                 193                  5,069                841             16.6  %     
                                                                                                                                
 Software                           7,648                 851                  8,499                3,710           43.7  %     
                                                                                                                                
 Systems and Technology             5,803                 186                  5,989                790             13.2  %     
                                                                                                                                
 Global Financing                   548                   569                  1,116                514             46.1  %     
                                                                                                                                
 TOTAL REPORTABLE SEGMENTS     $    29,328           $    2,098            $   31,425          $    7,786           24.8  %     
                                                                                                                                
 Eliminations / Other               159                   (2,098  )            (1,939  )            (512   )                    
                                                                                                                                
 TOTAL IBM CONSOLIDATED        $    29,486           $    0                $   29,486          $    7,274           24.7  %     
                                                                                                                                


 INTERNATIONAL BUSINESS MACHINES CORPORATION                                                                                       
 SEGMENT DATA                                                                                                                      
                                                                                                                                   
                               TWELVE-MONTHS 2012                                                                                  
 (Dollars in Millions)                                                                           Pre-tax                           
                               Revenue                                                           Income/               Pre-tax     
                               External               Internal              Total                (Loss)                Margin      
 SEGMENTS                                                                                                                          
                                                                                                                                   
 Global Technology Services    $    40,236            $    1,166            $   41,402           $    6,961            16.8  %     
 Y-T-Y change                       -1.6     %             -6.2    %            -1.7     %            10.8    %                    
                                                                                                                                   
 Global Business Services           18,566                 719                  19,286                2,983            15.5  %     
 Y-T-Y change                       -3.7     %             -9.7    %            -4.0     %            -0.8    %                    
                                                                                                                                   
 Software                           25,448                 3,274                28,722                10,810           37.6  %     
 Y-T-Y change                       2.0      %             -0.1    %            1.8      %            8.4     %                    
                                                                                                                                   
 Systems and Technology             17,667                 676                  18,343                1,227            6.7   %     
 Y-T-Y change                       -6.9     %             -19.3   %            -7.5     %            -24.9   %                    
                                                                                                                                   
 Global Financing                   2,013                  2,060                4,073                 2,034            49.9  %     
 Y-T-Y change                       -4.2     %             -1.6    %            -2.9     %            1.1     %                    
                                                                                                                                   
 TOTAL REPORTABLE SEGMENTS     $    103,930           $    7,896            $   111,826          $    24,015           21.5  %     
 Y-T-Y change                       -2.1     %             -4.3    %            -2.3     %            4.8     %                    
                                                                                                                                   
 Eliminations / Other               577                    (7,896  )            (7,319   )            (2,113  )                    
                                                                                                                                   
 TOTAL IBM CONSOLIDATED        $    104,507           $    0                $   104,507          $    21,902           21.0  %     
 Y-T-Y change                       -2.3     %                                  -2.3     %            4.3     %                    
                                                                                                                                   
                                                                                                                                   
                               TWELVE-MONTHS 2011                                                                                  
 (Dollars in Millions)                                                                           Pre-tax                           
                               Revenue                                                           Income/               Pre-tax     
                               External               Internal              Total                (Loss)                Margin      
 SEGMENTS                                                                                                                          
                                                                                                                                   
 Global Technology Services    $    40,879            $    1,242            $   42,121           $    6,284            14.9  %     
                                                                                                                                   
 Global Business Services           19,284                 797                  20,081                3,006            15.0  %     
                                                                                                                                   
 Software                           24,944                 3,276                28,219                9,970            35.3  %     
                                                                                                                                   
 Systems and Technology             18,985                 838                  19,823                1,633            8.2   %     
                                                                                                                                   
 Global Financing                   2,102                  2,092                4,195                 2,011            47.9  %     
                                                                                                                                   
 TOTAL REPORTABLE SEGMENTS     $    106,194           $    8,246            $   114,440          $    22,904           20.0  %     
                                                                                                                                   
 Eliminations / Other               722                    (8,246  )            (7,524   )            (1,901  )                    
                                                                                                                                   
 TOTAL IBM CONSOLIDATED        $    106,916           $    0                $   106,916          $    21,003           19.6  %     
                                                                                                                                   


 INTERNATIONAL BUSINESS MACHINES CORPORATION                                                                                  
 U.S. GAAP TO OPERATING RESULTS RECONCILIATION                                                                                
 (Dollars in millions except per share amounts)                                                                               
                                                                                                                              
                                   FOURTH-QUARTER 2012                                                                        
                                                       Acquisition-             Retirement-                                   
                                                       Related                  Related                   Operating           
                                   GAAP                Adjustments*             Adjustments**             (Non-GAAP)          
 Gross Profit                      $   15,167          $      100               $      60                 $     15,327        
                                                                                                                              
 Gross Profit Margin                   51.8    %       0.3Pts                   0.2Pts                          52.3    %     
                                                                                                                              
 S,G&A                                 5,921                  (91    )                 (29     )                5,801         
                                                                                                                              
 R,D&E                                 1,580                  0                        6                        1,586         
                                                                                                                              
 Other (Income) & Expense              (47     )              (7     )                 0                        (54     )     
                                                                                                                              
 Total Expense & Other (Income)        7,336                  (98    )                 (23     )                7,215         
                                                                                                                              
 Pre-Tax Income                        7,831                  198                      83                       8,112         
                                                                                                                              
 Pre-Tax Income Margin                 26.7    %       0.7Pts                   0.3Pts                          27.7    %     
                                                                                                                              
 Provision for Income Taxes***         1,998                  (45    )                 30                       1,983         
                                                                                                                              
 Effective Tax Rate                    25.5    %       -1.2Pts                  0.1Pts                          24.4    %     
                                                                                                                              
 Net Income                            5,833                  243                      53                       6,129         
                                                                                                                              
 Net Income Margin                     19.9    %       0.8Pts                   0.2Pts                          20.9    %     
                                                                                                                              
 Diluted Earnings Per Share        $   5.13            $      0.21              $      0.05               $     5.39          
                                                                                                                              
                                                                                                                              
                                   FOURTH-QUARTER 2011                                                                        
                                                       Acquisition-             Retirement-                                   
                                                       Related                  Related                   Operating           
                                   GAAP                Adjustments*             Adjustments**             (Non-GAAP)          
 Gross Profit                      $   14,722          $      81                       ($10    )          $     14,793        
                                                                                                                              
 Gross Profit Margin                   49.9    %       0.3Pts                   -0.0Pts                         50.2    %     
                                                                                                                              
 S,G&A                                 6,076                  (82    )                 2                        5,996         
                                                                                                                              
 R,D&E                                 1,555                  0                        23                       1,578         
                                                                                                                              
 Other (Income) & Expense              (44     )              (2     )                 0                        (46     )     
                                                                                                                              
 Total Expense & Other (Income)        7,448                  (85    )                 25                       7,388         
                                                                                                                              
 Pre-Tax Income                        7,274                  166                      (35     )                7,405         
                                                                                                                              
 Pre-Tax Income Margin                 24.7    %       0.6Pts                   -0.1Pts                         25.1    %     
                                                                                                                              
 Provision for Income Taxes***         1,784                  47                       (24     )                1,808         
                                                                                                                              
 Effective Tax Rate                    24.5    %       0.1Pts                   -0.2Pts                         24.4    %     
                                                                                                                              
 Net Income                            5,490                  119                      (12     )                5,597         
                                                                                                                              
 Net Income Margin                     18.6    %       0.4Pts                   -0.0Pts                         19.0    %     
                                                                                                                              
 Diluted Earnings Per Share        $   4.62            $      0.10                     ($0.01  )          $     4.71          


 * Includes amortization of acquired intangible assets and other acquisition-related charges.                                                                                                                   
 ** Includes retirement-related items driven by changes to plan assets and liabilities primarily related to market performance.                                                                                 
 *** Tax impact on operating (non-GAAP) pre-tax income is calculated under the same accounting principles applied to the GAAP pre-tax income which employs an annual effective tax rate method to the results.  
                                                                                                                                                                                                                


 INTERNATIONAL BUSINESS MACHINES CORPORATION                                                                                  
 U.S. GAAP TO OPERATING RESULTS RECONCILIATION                                                                                
 (Dollars in millions except per share amounts)                                                                               
                                                                                                                              
                                   TWELVE-MONTHS 2012                                                                         
                                                       Acquisition-             Retirement-                                   
                                                       Related                  Related                   Operating           
                                   GAAP                Adjustments*             Adjustments**             (Non-GAAP)          
 Gross Profit                      $   50,298          $      376               $      264                $     50,938        
                                                                                                                              
 Gross Profit Margin                   48.1    %       0.4Pts                   0.3Pts                          48.7    %     
                                                                                                                              
 S,G&A                                 23,553                 (349   )                 (294    )                22,910        
                                                                                                                              
 R,D&E                                 6,302                  0                        20                       6,322         
                                                                                                                              
 Other (Income) & Expense              (843    )              (13    )                 0                        (857    )     
                                                                                                                              
 Total Expense & Other (Income)        28,396                 (363   )                 (274    )                27,760        
                                                                                                                              
 Pre-Tax Income                        21,902                 739                      538                      23,179        
                                                                                                                              
 Pre-Tax Income Margin                 21.0    %       0.7Pts                   0.5Pts                          22.2    %     
                                                                                                                              
 Provision for Income Taxes***         5,298                  98                       156                      5,552         
                                                                                                                              
 Effective Tax Rate                    24.2    %       -0.4Pts                  0.1Pts                          24.0    %     
                                                                                                                              
 Net Income                            16,604                 641                      381                      17,627        
                                                                                                                              
 Net Income Margin                     15.9    %       0.6Pts                   0.4Pts                          16.9    %     
                                                                                                                              
 Diluted Earnings Per Share        $   14.37           $      0.55              $      0.33               $     15.25         
                                                                                                                              
                                                                                                                              
                                   TWELVE-MONTHS 2011                                                                         
                                                       Acquisition-             Retirement-                                   
                                                       Related                  Related                   Operating           
                                   GAAP                Adjustments*             Adjustments**             (Non-GAAP)          
 Gross Profit                      $   50,138          $      341               $      2                  $     50,481        
                                                                                                                              
 Gross Profit Margin                   46.9    %       0.3Pts                   0.0Pts                          47.2    %     
                                                                                                                              
 S,G&A                                 23,594                 (309   )                 (13     )                23,272        
                                                                                                                              
 R,D&E                                 6,258                  0                        88                       6,345         
                                                                                                                              
 Other (Income) & Expense              (20     )              (25    )                 0                        (45     )     
                                                                                                                              
 Total Expense & Other (Income)        29,135                 (334   )                 74                       28,875        
                                                                                                                              
 Pre-Tax Income                        21,003                 675                      (72     )                21,605        
                                                                                                                              
 Pre-Tax Income Margin                 19.6    %       0.6Pts                   -0.1Pts                         20.2    %     
                                                                                                                              
 Provision for Income Taxes***         5,148                  179                      (40     )                5,287         
                                                                                                                              
 Effective Tax Rate                    24.5    %       0.1Pts                   -0.1Pts                         24.5    %     
                                                                                                                              
 Net Income                            15,855                 495                      (32     )                16,318        
                                                                                                                              
 Net Income Margin                     14.8    %       0.5Pts                   -0.0Pts                         15.3    %     
                                                                                                                              
 Diluted Earnings Per Share        $   13.06           $      0.41                     ($0.03  )          $     13.44         


* Includes amortization of acquired intangible assets and other
acquisition-related charges.
** Includes retirement-related items driven by changes to plan assets and
liabilities primarily related to market performance.
*** Tax impact on operating (non-GAAP) pre-tax income is calculated under the
same accounting principles applied to the GAAP pre-tax income which employs an
annual effective tax rate method to the results. 

IBM
Mike Fay, 914-525-8476
mikefay@us.ibm.com
or
John Bukovinsky, 732-618-3531
jbuko@us.ibm.com

IBM 

Copyright Business Wire 2013

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