IBM Reports 2011 Fourth-Quarter and Full-Year R...

IBM Reports 2011 Fourth-Quarter and Full-Year Results

IBM

IBM (NYSE: IBM)

Fourth-Quarter 2011:

  • Diluted EPS:
    • GAAP: $4.62, up 11 percent;
    • Operating (non-GAAP): $4.71, up 11 percent;
  • Net income:
    • GAAP: $5.5 billion, up 4 percent;
    • Operating (non-GAAP): $5.6 billion, up 5 percent;
  • Gross profit margin:
    • GAAP: 49.9 percent, up 0.9 points;
    • Operating (non-GAAP): 50.2 percent, up 1.1 points;
  • Revenue of $29.5 billion, up 2 percent as reported, 1 percent adjusting for currency;
  • Software revenue up 9 percent;
  • Global Technology Services revenue up 3 percent;
  • Global Business Services revenue up 3 percent, 2 percent adjusting for currency;
  • Services backlog of $141 billion, up $4 billion as reported, up $5 billion adjusting for currency, quarter to quarter;
  • Systems and Technology revenue down 8 percent.

Full-Year 2011:

  • Diluted EPS, up double-digits for 9th consecutive year;
    • GAAP: $13.06, up 13 percent;
    • Operating (non-GAAP): $13.44, up 15 percent;
  • Net income:
    • GAAP: $15.9 billion, up 7 percent;
    • Operating (non-GAAP): $16.3 billion, up 9 percent;
  • Revenue of $106.9 billion, up 7 percent, up 3 percent adjusting for currency;
  • Free cash flow of $16.6 billion, up $300 million;
  • Growth markets revenue up 16 percent, up 11 percent adjusting for currency;
  • Business analytics revenue up 16 percent;
  • Smarter Planet revenue up 47 percent;
  • Cloud revenue more than tripled 2010 revenue.

Full-Year 2012 Expectation:

  • GAAP EPS of at least $14.16 and operating (non-GAAP) EPS of at least $14.85.

IBM (NYSE: IBM) today announced fourth-quarter 2011 diluted earnings of $4.62 per share, compared with diluted earnings of $4.18 per share in the fourth quarter of 2010, an increase of 11 percent. Operating (non-GAAP) diluted earnings were $4.71 per share, compared with operating diluted earnings of $4.25 per share in the fourth quarter of 2010, an increase of 11 percent.

Fourth-quarter net income was $5.5 billion compared with $5.3 billion in the fourth quarter of 2010, an increase of 4 percent. Operating (non-GAAP) net income was $5.6 billion compared with $5.4 billion in the fourth quarter of 2010, an increase of 5 percent.

Total revenues for the fourth quarter of 2011 of $29.5 billion increased 2 percent (1 percent, adjusting for currency) from the fourth quarter of 2010. While currency provided a benefit to revenue growth of approximately 25 basis points in the quarter, currency movements since the company announced its third-quarter earnings in October impacted fourth-quarter revenue by approximately one point of growth, or $300 million.

"We had a strong fourth-quarter performance, capping a year of record earnings per share, revenue, profit and free cash flow," said Ginni Rometty, IBM president and chief executive officer. "We delivered outstanding results in all four of our strategic initiatives for the quarter and the year, as we continued to realize the benefit of our long-term investments in growth markets, business analytics, Smarter Planet solutions and cloud. We are well on track toward our long-term roadmap for operating earnings per share of at least $20 in 2015.”

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

Fourth-quarter operating (non-GAAP) diluted earnings exclude $0.09 per share of net charges: $0.10 per share for the amortization of purchased intangible assets and other acquisition-related charges, offset by ($0.01) per share for retirement-related items driven by changes to plan assets and liabilities primarily related to market performance.

Full-Year 2012 Expectation

IBM said that it expects to deliver full-year 2012 GAAP earnings per share of at least $14.16; and operating (non-GAAP) earnings per share of at least $14.85. The 2012 operating (non-GAAP) earnings exclude $0.69 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, an increase of 3 percent (3 percent, adjusting for currency) from the 2010 period. Revenues from Europe/Middle East/Africa were $9.6 billion, up 1 percent (1 percent, adjusting for currency). Asia-Pacific revenues increased 2 percent (down 1 percent, adjusting for currency) to $6.7 billion. OEM revenues were $714 million, down 9 percent compared with the 2010 fourth quarter.

Growth Markets

Revenues from the company’s growth markets increased 7 percent (8 percent, adjusting for currency). Revenues in the BRIC countries — Brazil, Russia, India and China — increased 10 percent (11 percent, adjusting for currency).

Services

Global Technology Services segment revenues increased 3 percent (3 percent, adjusting for currency) to $10.5 billion. Global Business Services segment revenues were up 3 percent (2 percent, adjusting for currency) at $4.9 billion.

Pre-tax income from Global Technology Services increased 18 percent; pre-tax margin increased to 18.0 percent. Global Business Services pre-tax income increased 14 percent; pre-tax margin increased to 16.6 percent.

The estimated services backlog at December 31 was $141 billion, up $4 billion as reported ($5 billion, adjusting for currency), quarter to quarter, and down $2 billion as reported (flat, adjusting for currency), year over year. Services backlog at the end of a quarter measures the current value of work under contract expected to be recognized as revenue in future quarters.

Software

Revenues from the Software segment were $7.6 billion, an increase of 9 percent (9 percent, adjusting for currency). Software pre-tax income of $3.7 billion increased 12 percent year over year.

Revenues from IBM’s key middleware products, which include WebSphere, Information Management, Tivoli, Lotus and Rational products, were $5.2 billion, an increase of 11 percent (11 percent, adjusting for currency) versus the fourth quarter of 2010. Operating systems revenues of $710 million increased 3 percent (3 percent, adjusting for currency) compared with the prior-year quarter.

Revenues from the WebSphere family of software products increased 21 percent year over year. Information Management software revenues increased 9 percent. Revenues from Tivoli software increased 14 percent. Revenues from Lotus software decreased 2 percent, and Rational software increased 4 percent.

Hardware

Revenues from the Systems and Technology segment totaled $5.8 billion for the quarter, down 8 percent (8 percent, adjusting for currency) from the fourth quarter of 2010. Systems and Technology pre-tax income was $790 million, a decrease of 33 percent.

Total systems revenues decreased 7 percent (7 percent, adjusting for currency). Revenues from Power Systems increased 6 percent compared with the 2010 period. Revenues from System z mainframe server products decreased 31 percent compared with the year-ago period which was the first full quarter after a new product introduction. Total delivery of System z computing power, as measured in MIPS (millions of instructions per second), decreased 4 percent. Revenues from System x decreased 2 percent. Revenues from System Storage decreased 1 percent, and revenues from Retail Store Solutions increased 9 percent year over year. Revenues from Microelectronics OEM decreased 11 percent.

Financing

Global Financing segment revenues decreased 13 percent (13 percent, adjusting for currency) in the fourth quarter to $548 million. Pre-tax income for the segment decreased 9 percent to $514 million.

***

The company’s total gross profit margin was 49.9 percent in the 2011 fourth quarter compared with 49.0 percent in the 2010 fourth-quarter period. Total operating (non-GAAP) gross profit margin was 50.2 percent in the 2011 fourth quarter compared with 49.1 percent in the 2010 fourth-quarter period, with increases in Services and Software.

Total expense and other income increased 2 percent to $7.4 billion compared with the prior-year period. S,G&A expense of $6.1 billion increased 2 percent year over year compared with prior-year expense. R,D&E expense of $1.6 billion decreased 1 percent compared with the year-ago period. Intellectual property and custom development income decreased to $253 million compared with $318 million a year ago. Other (income) and expense was income of $44 million compared with prior-year income of $42 million. Interest expense increased to $113 million compared with $102 million in the prior year.

Total operating (non-GAAP) expense and other income increased 2 percent to $7.4 billion compared with the prior-year period. Operating (non-GAAP) S,G&A expense of $6.0 billion increased 2 percent year over year compared with prior-year expense. Operating (non-GAAP) R,D&E expense of $1.6 billion decreased 2 percent compared with the year-ago period.

Pre-tax income increased 5 percent to $7.3 billion; total operating (non-GAAP) pre-tax income increased 6 percent to $7.4 billion. Pre-tax margin was 24.7 percent, up 0.7 points; total operating (non-GAAP) pre-tax margin was 25.1 percent, up 0.9 points.

IBM’s tax rate was 24.5 percent, up 0.1 points year over year; total operating (non-GAAP) tax rate was 24.4 percent, up 0.7 points.

Net income margin increased 0.5 points to 18.6 percent; total operating (non-GAAP) net income margin was 19.0 percent, an increase of 0.5 points.

The weighted-average number of diluted common shares outstanding in the fourth-quarter 2011 was 1.19 billion compared with 1.26 billion shares in the same period of 2010.

In the quarter, IBM generated free cash flow of $9.0 billion excluding Global Financing receivables, up approximately $300 million year over year.

Full-Year 2011 Results

Net income for the year ended December 31, 2011 was $15.9 billion compared with $14.8 billion in the year-ago period, an increase of 7 percent. Operating (non-GAAP) net income was $16.3 billion compared with $15.0 billion in 2010, an increase of 9 percent.

Diluted earnings were $13.06 per share compared with $11.52 per diluted share in 2010, an increase of 13 percent. Operating (non-GAAP) diluted earnings were $13.44 per share, compared with operating diluted earnings of $11.67 per share in 2010, an increase of 15 percent. This was the company’s 9th consecutive year of double-digit EPS growth.

Revenues for 2011 totaled $106.9 billion, an increase of 7 percent (3 percent, adjusting for currency), compared with $99.9 billion in 2010.

GAAP - Operating (non-GAAP) Reconciliation

Operating (non-GAAP) diluted earnings for the year exclude $0.38 per share of net charges: $0.41 per share for the amortization of purchased intangible assets and other acquisition-related charges, offset by ($0.03) 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 $44.9 billion, an increase of 7 percent (6 percent, adjusting for currency) from the 2010 period. Revenues from Europe/Middle East/Africa were $34.0 billion, an increase of 7 percent (2 percent, adjusting for currency). Asia-Pacific revenues increased 9 percent (2 percent, adjusting for currency) to $25.3 billion. OEM revenues were $2.7 billion, down 2 percent (3 percent, adjusting for currency) compared with 2010.

Growth Markets

Revenues from the company’s growth markets increased 16 percent (11 percent, adjusting for currency), and represents 22 percent of IBM’s total geographic revenue. Revenues in the BRIC countries — Brazil, Russia, India and China — increased 19 percent (16 percent, adjusting for currency).

Segments

Total Global Services revenues increased 7 percent (2 percent, adjusting for currency). Revenues from the Global Technology Services segment totaled $40.9 billion, an increase of 7 percent (3 percent, adjusting for currency) compared with 2010. Revenues from the Global Business Services segment were $19.3 billion, up 6 percent (1 percent, adjusting for currency). Software segment revenues in 2011 totaled $24.9 billion, an increase of 11 percent (8 percent, adjusting for currency). Systems and Technology segment revenues were $19.0 billion, an increase of 6 percent (3 percent, adjusting for currency). Global Financing segment revenues totaled $2.1 billion, a decrease of 6 percent (9 percent, adjusting for currency).

***

The company’s total gross profit margin was 46.9 percent in 2011 compared with 46.1 percent in 2010. Overall gross profit margins improved year over year for the 8th consecutive year. Total operating (non-GAAP) gross profit margin was 47.2 percent in the 2011 period compared with 46.1 percent in the 2010 period, with increases in Services, Software, and Systems and Technology.

The weighted-average number of diluted common shares outstanding in 2011 was 1.21 billion compared with 1.29 billion shares in 2010. As of December 31, 2011, there were 1.16 billion basic common shares outstanding.

Debt, including Global Financing, totaled $31.3 billion, compared with $28.6 billion at year-end 2010. From a management segment view, Global Financing debt totaled $23.3 billion versus $22.8 billion at year-end 2010, resulting in a debt-to-equity ratio of 7.2 to 1. Non-global financing debt totaled $8.0 billion, an increase of $2.2 billion since year-end 2010, resulting in a debt-to-capitalization ratio of 32.0 percent from 22.6 percent.

IBM ended 2011 with $11.9 billion of cash on hand and generated free cash flow of $16.6 billion excluding Global Financing receivables, up approximately $300 million year over year. The company returned $18.5 billion to shareholders through $3.5 billion in dividends and $15.0 billion of share repurchases. The balance sheet remains strong, and the company 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; breaches of data security; 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).

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. Investors may participate by viewing the Webcast at www.ibm.com/investor/4q11. 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
2011 2010* Change 2011 2010* Change
REVENUE
 
Global Technology
Services $ 10,452 $ 10,165 2.8 % $ 40,879 $ 38,201 7.0 %
Gross margin 36.6 % 34.5 % 35.0 % 34.5 %
 
Global Business
Services 4,877 4,758 2.5 % 19,284 18,223 5.8 %
Gross margin 29.3 % 28.0 % 28.8 % 28.0 %
 
Software 7,648 7,039 8.7 % 24,944 22,485 10.9 %
Gross margin 89.8 % 89.6 % 88.5 % 87.9 %
 
Systems and
Technology 5,803 6,277 -7.6 % 18,985 17,973 5.6 %
Gross margin 40.5 % 43.6 % 39.8 % 38.1 %
 
Global Financing 548 628 -12.9 % 2,102 2,238 -6.1 %
Gross margin 49.7 % 51.8 % 49.8 % 51.3 %
 
Other 159 151 4.7 % 722 750 -3.8 %
Gross margin -11.0 % 10.3 % -54.5 % -8.6 %
 
TOTAL REVENUE 29,486 29,019 1.6 % 106,916 99,870 7.1 %
 
 
GROSS PROFIT 14,722 14,227 3.5 % 50,138 46,014 9.0 %
Gross margin 49.9 % 49.0 % 46.9 % 46.1 %
 
 
EXPENSE AND OTHER INCOME
 
S,G&A 6,076 5,951 2.1 % 23,594 21,837 8.0 %
% of revenue 20.6 % 20.5 % 22.1 % 21.9 %
 
R,D&E 1,555 1,578 -1.5 % 6,258 6,026 3.8 %
% of revenue 5.3 % 5.4 % 5.9 % 6.0 %
 
Intellectual property
and custom development
income (253 ) (318 ) -20.4 % (1,108 ) (1,154 ) -4.0 %
Other (income)
and expense (44 ) (42 ) 4.9 % (20 ) (787 ) -97.4 %
Interest expense 113 102 11.6 % 411 368 11.6 %
 
TOTAL EXPENSE AND
OTHER INCOME 7,448 7,271 2.4 % 29,135 26,291 10.8 %
% of revenue 25.3 % 25.1 % 27.3 % 26.3 %
 
INCOME BEFORE
INCOME TAXES 7,274 6,956 4.6 % 21,003 19,723 6.5 %
Pre-tax margin 24.7 % 24.0 % 19.6 % 19.7 %
 
Provision for
income taxes 1,784 1,698 5.1 % 5,148 4,890 5.3 %
Effective tax
rate 24.5 % 24.4 % 24.5 % 24.8 %
 
 
NET INCOME $ 5,490   $ 5,257   4.4 % $ 15,855   $ 14,833   6.9 %
Net margin 18.6 % 18.1 % 14.8 % 14.9 %
 
 
EARNINGS PER SHARE
OF COMMON STOCK:
ASSUMING DILUTION $ 4.62 $ 4.18 10.5 % $ 13.06 $ 11.52 13.4 %
BASIC $ 4.68 $ 4.24 10.4 % $ 13.25 $ 11.69 13.3 %
 
WEIGHTED-AVERAGE NUMBER
OF COMMON SHARES OUT-
STANDING (M's):
ASSUMING DILUTION 1,188.7 1,258.4 1,213.8 1,287.4
BASIC 1,172.2 1,240.1 1,197.0 1,268.8
 
* Segment gross profit margins in 2010 reclassified to conform with 2011 presentation.
 
INTERNATIONAL BUSINESS MACHINES CORPORATION
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
 
  At     At
(Dollars in Millions) December 31, December 31,
2011 2010
ASSETS
 
Current Assets:
Cash and cash equivalents $ 11,922 $ 10,661
Marketable securities -- 990
Notes and accounts receivable - trade
(net of allowances of $256 in 2011 and $324 in 2010) 11,179 10,834
Short-term financing receivables
(net of allowances of $311 in 2011 and $342 in 2010) 16,901 16,257
Other accounts receivable
(net of allowances of $11 in 2011 and $10 in 2010) 1,481 1,134
Inventories, at lower of average cost or market:
Finished goods 589 432
Work in process and raw materials   2,007     2,018  
Total inventories 2,595 2,450
Deferred taxes 1,601 1,564
Prepaid expenses and other current assets   5,249     4,226  
Total Current Assets 50,928 48,116
 
Property, plant and equipment 40,124 40,289
Less: Accumulated depreciation   26,241     26,193  
Property, plant and equipment - net 13,883 14,096
Long-term financing receivables
(net of allowances of $38 in 2011 and $58 in 2010) 10,776 10,548
Prepaid pension assets 2,843 3,068
Deferred taxes 3,503 3,220
Goodwill 26,213 25,136
Intangible assets - net 3,392 3,488
Investments and sundry assets   4,895     5,778  
Total Assets $ 116,433   $ 113,452  
 
LIABILITIES AND EQUITY
 
Current Liabilities:
Taxes $ 3,313 $ 4,216
Short-term debt 8,463 6,778
Accounts payable 8,517 7,804
Compensation and benefits 5,099 5,028
Deferred income 12,197 11,580
Other accrued expenses and liabilities   4,535     5,156  
Total Current Liabilities 42,123 40,562
 
Long-term debt 22,857 21,846
Retirement and nonpension postretirement
benefit obligations 18,374 15,978
Deferred income 3,847 3,666
Other liabilities   8,996     8,226  
Total Liabilities 96,197 90,279
 
Contingencies and commitments
 
EQUITY
IBM Stockholders' Equity:
Common stock 48,129 45,418
Retained earnings 104,857 92,532
Treasury stock -- at cost (110,963 ) (96,161 )
Accumulated other comprehensive income/(loss)   (21,885 )   (18,743 )
Total IBM stockholders' equity 20,138 23,046
 
Noncontrolling interests   97     126  
Total Equity   20,236     23,172  
Total Liabilities and Equity $ 116,433   $ 113,452  
 
INTERNATIONAL BUSINESS MACHINES CORPORATION
CASH FLOW ANALYSIS
 
  Three Months     Twelve Months
Ended Ended
(Dollars in Millions) December 31, December 31,
2011   2010 2011   2010
 
Net Cash from Operating Activities per GAAP: $ 7,097 $ 6,795 $ 19,846 $ 19,549
 
Less: the change in Global Financing (GF)
Receivables   (2,927 )   (2,991 )   (817 )   (734 )
Net Cash from Operating Activities
(Excluding GF Receivables) 10,024 9,786 20,663 20,283
 
Capital Expenditures, Net (1,059 ) (1,103 ) (4,059 ) (3,984 )
 
Free Cash Flow
(Excluding GF Receivables) 8,965 8,683 16,604 16,299
 
Acquisitions (1,588 ) (2,928 ) (1,811 ) (5,922 )
Divestitures 10 55 14 55
Dividends (880 ) (808 ) (3,473 ) (3,177 )
Share Repurchase (3,581 ) (3,601 ) (15,046 ) (15,375 )
Non-GF Debt 599 745 1,692 2,279
Other (includes GF Receivables, and
GF Debt) (2,906 ) (1,582 ) 2,291 3,518
 
Change in Cash, Cash Equivalents and
Short-term Marketable Securities $ 619   $ 564   $ 271     ($2,322 )
 
INTERNATIONAL BUSINESS MACHINES CORPORATION
SEGMENT DATA
 
  FOURTH-QUARTER 2011
(Dollars in Millions) Revenue   Pre-tax   Pre-tax
External   Internal   Total Income Margin
SEGMENTS
 
Global Technology Services $ 10,452 $ 299 $ 10,751 $ 1,930 18.0 %
Y-T-Y change 2.8 % 0.2 % 2.7 % 18.0 %
 
Global Business Services 4,877 193 5,069 841 16.6 %
Y-T-Y change 2.5 % -3.4 % 2.3 % 14.4 %
 
Software 7,648 851 8,499 3,710 43.7 %
Y-T-Y change 8.7 % 9.9 % 8.8 % 12.5 %
 
Systems and Technology 5,803 186 5,989 790 13.2 %
Y-T-Y change -7.6 % -19.8 % -8.0 % -32.6 %
 
Global Financing 548 569 1,116 514 46.1 %
Y-T-Y change -12.9 % -1.1 % -7.2 % -9.1 %
 
TOTAL REPORTABLE SEGMENTS $ 29,328 $ 2,098 $ 31,425 $ 7,786 24.8 %
Y-T-Y change 1.6 % 0.9 % 1.5 % 5.1 %
 
Eliminations / Other 159 (2,098 ) (1,939 ) (512 )
 
TOTAL IBM CONSOLIDATED $ 29,486 $ 0 $ 29,486 $ 7,274 24.7 %
Y-T-Y change 1.6 % 1.6 % 4.6 %
 
 
FOURTH-QUARTER 2010
(Dollars in Millions) Revenue Pre-tax Pre-tax
External Internal Total Income* Margin*
SEGMENTS
 
Global Technology Services $ 10,165 $ 299 $ 10,464 $ 1,635 15.6 %
 
Global Business Services 4,758 199 4,957 735 14.8 %
 
Software 7,039 774 7,813 3,299 42.2 %
 
Systems and Technology 6,277 232 6,509 1,173 18.0 %
 
Global Financing 628 575 1,203 566 47.0 %
 
TOTAL REPORTABLE SEGMENTS $ 28,867 $ 2,079 $ 30,947 $ 7,408 23.9 %
 
Eliminations / Other 151 (2,079 ) (1,928 ) (452 )
 
TOTAL IBM CONSOLIDATED $ 29,019 $ 0 $ 29,019 $ 6,956 24.0 %
 
* Reclassified to conform with 2011 presentation.
 
INTERNATIONAL BUSINESS MACHINES CORPORATION
SEGMENT DATA
 
  TWELVE-MONTHS 2011
(Dollars in Millions) Revenue   Pre-tax   Pre-tax
External   Internal   Total Income Margin
SEGMENTS
 
Global Technology Services $ 40,879 $ 1,242 $ 42,121 $ 6,284 14.9 %
Y-T-Y change 7.0 % -5.3 % 6.6 % 14.3 %
 
Global Business Services 19,284 797 20,081 3,006 15.0 %
Y-T-Y change 5.8 % -0.2 % 5.6 % 18.1 %
 
Software 24,944 3,276 28,219 9,970 35.3 %
Y-T-Y change 10.9 % 11.0 % 10.9 % 5.3 %
 
Systems and Technology 18,985 838 19,823 1,633 8.2 %
Y-T-Y change 5.6 % 4.3 % 5.6 % 12.2 %
 
Global Financing 2,102 2,092 4,195 2,011 47.9 %
Y-T-Y change -6.1 % 13.6 % 2.8 % 2.8 %
 
TOTAL REPORTABLE SEGMENTS $ 106,194 $ 8,246 $ 114,440 $ 22,904 20.0 %
Y-T-Y change 7.1 % 7.0 % 7.1 % 9.5 %
 
Eliminations / Other 722 (8,246 ) (7,524 ) (1,901 )
 
TOTAL IBM CONSOLIDATED $ 106,916 $ 0 $ 106,916 $ 21,003 19.6 %
Y-T-Y change 7.1 % 7.1 % 6.5 %
 
 
TWELVE-MONTHS 2010
(Dollars in Millions) Revenue Pre-tax Pre-tax
External Internal Total Income* Margin*
SEGMENTS
 
Global Technology Services $ 38,201 $ 1,313 $ 39,514 $ 5,499 13.9 %
 
Global Business Services 18,223 798 19,021 2,546 13.4 %
 
Software 22,485 2,950 25,436 9,466 37.2 %
 
Systems and Technology 17,973 804 18,777 1,456 7.8 %
 
Global Financing 2,238 1,842 4,080 1,956 48.0 %
 
TOTAL REPORTABLE SEGMENTS $ 99,120 $ 7,707 $ 106,827 $ 20,923 19.6 %
 
Eliminations / Other 750 (7,707 ) (6,956 ) (1,200 )
 
TOTAL IBM CONSOLIDATED $ 99,870 $ 0 $ 99,870 $ 19,723 19.7 %
 
* Reclassified to conform with 2011 presentation.
 
INTERNATIONAL BUSINESS MACHINES CORPORATION
U.S. GAAP TO OPERATING RESULTS RECONCILIATION
(Dollars in millions except per share amounts)
 
  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
 
 
FOURTH-QUARTER 2010
Acquisition- Retirement-
Related Related Operating
GAAP Adjustments* Adjustments** (Non-GAAP)
Gross Profit $ 14,227 $ 82 ($60 ) $ 14,249
 
Gross Profit Margin 49.0 % 0.3Pts -0.2Pts 49.1 %
 
S,G&A 5,951 (95 ) 28 5,884
 
R,D&E 1,578 0 33 1,611
 
Other (Income) & Expense (42 ) (2 ) 0 (44 )
 
Total Expense & Other (Income) 7,271 (98 ) 61 7,235
 
Pre-Tax Income 6,956 180 (121 ) 7,015
 
Pre-Tax Income Margin 24.0 % 0.6Pts -0.4Pts 24.2 %
 
Provision for Income Taxes*** 1,698 10 (47 ) 1,661
 
Effective Tax Rate 24.4 % -0.5Pts -0.3Pts 23.7 %
 
Net Income 5,257 170 (74 ) 5,354
 
Net Income Margin 18.1 % 0.6Pts -0.3Pts 18.5 %
 
Diluted Earnings Per Share $ 4.18 $ 0.14 ($0.06 ) $ 4.25
* 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 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
 
 
TWELVE-MONTHS 2010
Acquisition- Retirement-
Related Related Operating
GAAP Adjustments* Adjustments** (Non-GAAP)
Gross Profit $ 46,014 $ 260 ($204 ) $ 46,070
 
Gross Profit Margin 46.1 % 0.3Pts -0.2Pts 46.1 %
 
S,G&A 21,837 (294 ) 84 21,628
 
R,D&E 6,026 0 126 6,152
 
Other (Income) & Expense (787 ) (4 ) 0 (791 )
 
Total Expense & Other (Income) 26,291 (298 ) 210 26,202
 
Pre-Tax Income 19,723 558 (414 ) 19,867
 
Pre-Tax Income Margin 19.7 % 0.6Pts -0.4Pts 19.9 %
 
Provision for Income Taxes*** 4,890 116 (162 ) 4,844
 
Effective Tax Rate 24.8 % -0.1Pts -0.3Pts 24.4 %
 
Net Income 14,833 443 (253 ) 15,023
 
Net Income Margin 14.9 % 0.4Pts -0.3Pts 15.0 %
 
Diluted Earnings Per Share $ 11.52 $ 0.34 ($0.20 ) $ 11.67
* 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, 914-499-6107

mikefay@us.ibm.com

or
John Bukovinsky, 732-618-3531

jbuko@us.ibm.com

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INTERNATIONAL BUSINESS MACHINES CORPORATION COM STK USD0.20 (CDI) (IBM)
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