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 IBM Reports 2017 First-Quarter Results
   Tuesday, April 18, 2017 4:06:00 PM ET

IBM (IBM )

Continued Strong Growth in Strategic Imperatives Led by IBM Cloud

Highlights

-- Diluted EPS from continuing operations: GAAP of $1.85; Operating (non-GAAP) of $2.38

-- Revenue from continuing operations of $18.2 billion

-- Strategic imperatives revenue of $7.8 billion in the quarter, up 12 percent (up 13 percent adjusting for currency)

-- Strategic imperatives revenue of $33.6 billion over the last 12 months represents 42 percent of IBM revenue

-- Cloud revenue of $14.6 billion over the last 12 months -- Cloud as-a-Service annual exit run rate of $8.6 billion in the quarter, up 59 percent year to year (up 61 percent adjusting for currency)

-- Maintains full-year EPS and free cash flow expectations.

IBM (IBM ) today announced first-quarter earnings results.

"In the first quarter, both the IBM Cloud and our cognitive solutions again grew strongly, which fueled robust performance in our strategic imperatives," said Ginni Rometty, IBM chairman, president and chief executive officer. "In addition, we are developing and bringing to market emerging technologies such as blockchain and quantum, revolutionizing how enterprises will tackle complex business problems in the years ahead."

                                                                         FIRST QUARTER 2017
                                                          ---------------------------------------------------------------------------------------
                                                                                              Gross Profit
                                                          Diluted EPS    Net Income                 Margin
                                                          ----------- -------------------- ----------- -------------------- --------------------
                                                                                                                             
GAAP from Continuing Operations                                 $1.85                            $1.8B                                     42.8%
    Year/Year                                 -11%          -13%                -3.7Pts
------------------------------------ -------------------- ----------- -------------------- ----------- -------------------- --------------------
Operating (Non-GAAP)                                            $2.38                            $2.3B                                     44.5%
    Year/Year                                   1%           -1%                -3.0Pts
------------------------------------ -------------------- ----------- -------------------- ----------- -------------------- --------------------
                                                                                                                             
                                                                                             Strategic
REVENUE                                  Total IBM   Imperatives                  Cloud
------------------------------------ -------------------- ----------- -------------------- ----------- -------------------- --------------------
                                                                                                                             
As reported (US$)                                              $18.2B                            $7.8B                                     $3.5B
    Year/Year                                  -3%           12%                    33%
------------------------------------ -------------------- ----------- -------------------- ----------- -------------------- --------------------
    Year/Year adjusting for currency           -2%           13%                    35%
------------------------------------ -------------------- ----------- -------------------- ----------- -------------------- --------------------
 

"We continued to make investments in the first quarter to expand our cognitive and cloud platform and we increased our research and development spending," said Martin Schroeter, IBM senior vice president and chief financial officer. "At the same time we returned more than $2.6 billion to shareholders through dividends and gross share repurchases."

Strategic Imperatives

First-quarter cloud revenues increased 33 percent (up 35 percent adjusting for currency) to $3.5 billion. Cloud revenue over the last 12 months was $14.6 billion. The annual exit run rate for cloud as-a-service revenue increased to $8.6 billion from $5.4 billion in the first quarter of 2016. Revenues from analytics increased 6 percent (up 7 percent adjusting for currency). Revenues from mobile increased 20 percent (up 22 percent adjusting for currency) and revenues from security increased 9 percent (up 10 percent adjusting for currency).

Full-Year 2017 Expectations

The company continues to expect operating (non-GAAP) diluted earnings per share of at least $13.80 and GAAP diluted earnings per share of at least $11.95. Operating (non-GAAP) diluted earnings per share exclude $1.85 per share of charges for amortization of purchased intangible assets, other acquisition-related charges and retirement-related charges. IBM continues to expect free cash flow to be relatively flat year to year.

Cash Flow and Balance Sheet

In the first quarter, the company generated net cash from operating activities of $4.0 billion, or $1.9 billion excluding Global Financing receivables. IBM’s free cash flow was $1.1 billion, down year to year consistent with the amount of the Japan tax refund received in the first quarter of 2016. IBM returned $1.3 billion in dividends and $1.3 billion of gross share repurchases to shareholders. At the end of March 2017, IBM had $3.8 billion remaining in the current share repurchase authorization.

IBM ended the first quarter of 2017 with $10.7 billion of cash on hand. Debt, including Global Financing debt of $28.5 billion, totaled $42.8 billion. Core (non-Global Financing) debt totaled $14.3 billion. The balance sheet remains strong and is well positioned to support the business over the long term.

Segment Results for First Quarter

-- Cognitive Solutions (includes Solutions Software and Transaction Processing Software) -- revenues of $4.1 billion, up 2.1 percent (up 2.8 percent adjusting for currency) were driven by growth in analytics and security, which include Watson-related offerings.

-- Global Business Services (includes Consulting, Global Process Services and Application Management) -- revenues of $4.0 billion, down 3.0 percent (down 1.9 percent adjusting for currency). Strategic imperatives grew double digits led by the cloud and mobile practices.

-- Technology Services & Cloud Platforms (includes Infrastructure Services, Technical Support Services and Integration Software) -- revenues of $8.2 billion, down 2.5 percent (down 2.0 percent adjusting for currency) with strong growth in strategic imperatives driven by hybrid cloud services.

-- Systems (includes Systems Hardware and Operating Systems Software) -- revenues of $1.4 billion, down 16.8 percent (down 16.1 percent adjusting for currency).

-- Global Financing (includes financing and used equipment sales) -- revenues of $405 million, down 1.2 percent (down 2.1 percent adjusting for currency).

Tax Rate

For the first quarter, IBM’s ongoing effective GAAP tax rate was approximately 12 percent. The ongoing effective operating (non-GAAP) tax rate was approximately 15 percent, which is within the expected range of 15 percent plus or minus 3 points provided earlier this year. IBM’s reported tax rates include the effect from a discrete tax benefit disclosed earlier this year.

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 client 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, 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; product quality issues; impacts of 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 and ecosystems; the company’s ability to successfully manage acquisitions, alliances and dispositions; risks from legal proceedings; risk factors related to IBM securities; and other risks, uncertainties and factors discussed in the company’s Form 10-Qs, 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 --

-- presenting operating (non-GAAP) earnings per share amounts and related income statement items;

-- adjusting for free cash flow;

-- adjusting for currency (i.e., at constant currency).

Free cash flow guidance is derived using an estimate of profit, working capital and operational cash outflows. The company views Global Financing receivables as a profit-generating investment, which it seeks to maximize and therefore it is not considered when formulating guidance for free cash flow. As a result, the company does not estimate a GAAP Net Cash from Operations expectation metric.

The rationale for management’s use of these non-GAAP measures is included in Exhibit 99.2 in 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 5:00 p.m. EDT, today. The webcast may be accessed via a link at http://www.ibm.com/investor/events/earnings/1q17.html . Presentation charts will be available 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
                                                                                    (Unaudited; Dollars in millions except per share amounts)
 
                                                                                                                              Three Months Ended
                                                                                                                                                      March 31,
                                                                                    --------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                          2017                                                 2016
                                                                                    --------------------------------------------------------------------- -------------------- -------------------------------------------------
                                                                                                                                                           
REVENUE
Cognitive Solutions                                                                                    $  4,062                                                                                   $  3,979
Global Business Services                                                                                  4,006                                                                                      4,131
Technology Services & Cloud Platforms                                                                     8,216                                                                                      8,424
Systems                                                                                                   1,395                                                                                      1,675
Global Financing                                                                                            405                                                                                        410
Other                                                                                     71             66  
                                                                                    -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ --------------------
TOTAL REVENUE                                                                                            18,155                                                                                     18,684
                                                                                                                                                                                
GROSS PROFIT                                                                                              7,772                                                                                      8,686
                                                                                                                                                                                
GROSS PROFIT MARGIN
Cognitive Solutions                                                                                        77.3 %                                                                                     82.0 %
Global Business Services                                                                                   23.6 %                                                                                     25.8 %
Technology Services & Cloud Platforms                                                                      38.9 %                                                                                     40.9 %
Systems                                                                                                    47.5 %                                                                                     57.2 %
Global Financing                                                                                           31.8 %                                                                                     42.4 %
                                                                                                                                                                                
TOTAL GROSS PROFIT MARGIN                                                                                  42.8 %                                                                                     46.5 %
                                                                                                                                                                                
                                                                                                                                                                                
EXPENSE AND OTHER INCOME
S,G&A                                                                                                     5,152                                                                                      6,012
R,D&E                                                                                                     1,533                                                                                      1,458
Intellectual property and
custom development income                                                                                  (445 )                                                                                     (217 )
Other (income) and expense                                                                                  (28 )                                                                                      253
Interest expense                                                                                            135                                                                                        147
                                                                                                                       
                                                                                    --------------------------------------------------------------------- -------------------- -------------------------------------------------
TOTAL EXPENSE AND OTHER INCOME                                                                            6,348                                                                                      7,652
                                                                                                                                                                                
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES                                                                                       1,424                                                                                      1,034
      Pre-tax margin                                                                                        7.8 %                                                                                      5.5 %
Provision for / (Benefit) from income taxes                                                                (329 )                                                                                     (983 )
      Effective tax rate                                                                                  -23.1 %                    *                                                               -95.1 %
                                                                                                                                                                                
INCOME FROM CONTINUING OPERATIONS                                                                      $  1,753                                                                                   $  2,016
                                                                                                                                                                                
DISCONTINUED OPERATIONS
      Income/(Loss) from discontinued operations, net of taxes                            (3 )                              (3 )
                                                                                    -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ --------------------
                                                                                                                                                                                
NET INCOME                                                                                             $  1,750                          $  2,014  
                                                                                    ==================== ====== ==================== ==================== ==================== ==================== ====== ====================
                                                                                                                                                                                
EARNINGS PER SHARE OF COMMON STOCK:
  Assuming Dilution
      Continuing Operations                                                                            $   1.85                                                                                   $   2.09
      Discontinued Operations                                                                          $   0.00                          $   0.00  
                                                                                    -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ --------------------
  TOTAL                                                                                                $   1.85                          $   2.09  
                                                                                    ==================== ====== ==================== ==================== ==================== ==================== ====== ====================
                                                                                                                                                                                
  Basic
      Continuing Operations                                                                            $   1.86                                                                                   $   2.09
      Discontinued Operations                                                                          $   0.00                          $   0.00  
                                                                                    -------------------- ------ -------------------- -------------------- -------------------- -------------------- ------ --------------------
  TOTAL                                                                                                $   1.86                          $   2.09  
                                                                                    ==================== ====== ==================== ==================== ==================== ==================== ====== ====================
                                                                                                                                                                                
WEIGHTED-AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING (M’s):
  Assuming Dilution                                                                                       947.8                                                                                      964.4
  Basic                                                                                                   942.4                                                                                      961.7
 
* Reflects adoption of the FASB guidance on intra-entity
transfers of assets
 
                                                            INTERNATIONAL BUSINESS MACHINES CORPORATION
                                                               CONDENSED CONSOLIDATED BALANCE SHEET
                                                                            (Unaudited)
                                                                 At                                     At
(Dollars in Millions)                                                            March 31,                                               December 31,
                                                                                   2017                                                      2016
                                                                   -------------------------------------                     -------------------------------------
ASSETS:
                                                                                                                              
Current Assets:
Cash and cash equivalents                                               $   10,096                                                $    7,826
Marketable securities                                                          599                                                       701
Notes and accounts receivable - trade, net                                   8,377                                                     9,182
Short-term financing receivables, net                                       16,362                                                    19,006
Other accounts receivable, net                                               1,130                                                     1,057
Inventory                                                                    1,609                                                     1,553
Prepaid expenses and other current assets                                    4,715                                                     4,564
                                                                                                           
                                                                   -------------------------------------                     -------------------------------------
Total Current Assets                                                        42,889                                                    43,888
                                                                                                                              
Property, plant and equipment, net                                          10,865                                                    10,830
Long-term financing receivables, net                                         8,502                                                     9,021
Prepaid pension assets                                                       3,491                                                     3,034
Deferred taxes                                                               6,457                                                     5,224
Goodwill and intangibles, net                                               40,743                                                    40,887
Investments and sundry assets                                                4,549                                                     4,585
                                                                                                           
                                                                   -------------------------------------                     -------------------------------------
Total Assets                                                            $  117,495                             $  117,470  
                                                                   ====== ======== ====================                      ====== ======== ====================
                                                                                                                              
                                                                                                                              
LIABILITIES:
                                                                                                                              
Current Liabilities:
Taxes                                                                   $    2,747                                                $    3,235
Short-term debt                                                              8,340                                                     7,513
Accounts payable                                                             5,324                                                     6,209
Deferred income                                                             12,351                                                    11,035
Other liabilities                                                            7,719                                                     8,283
                                                                                                           
                                                                   -------------------------------------                     -------------------------------------
Total Current Liabilities                                                   36,481                                                    36,275
                                                                                                                              
Long-term debt                                                              34,441                                                    34,655
Retirement related obligations                                              16,967                                                    17,070
Deferred income                                                              3,557                                                     3,600
Other liabilities                                                            7,601                                                     7,477
                                                                                                           
                                                                   -------------------------------------                     -------------------------------------
Total Liabilities                                                           99,047                                                    99,078
                                                                                                                              
                                                                                                                              
EQUITY:
                                                                                                                              
IBM Stockholders’ Equity:
Common stock                                                                54,104                                                    53,935
Retained earnings                                                          153,292                                                   152,759
Treasury stock -- at cost                                                 (160,359 )                                                (159,050 )
Accumulated other comprehensive income/(loss)                              (28,710 )                                                 (29,398 )
                                                                                                           
                                                                   -------------------------------------                     -------------------------------------
Total IBM stockholders’ equity                                              18,327                                                    18,246
                                                                                                                              
Noncontrolling interests                                                       121                                                       146
                                                                                                           
                                                                   -------------------------------------                     -------------------------------------
Total Equity                                                                18,448                                                    18,392
                                                                                                           
                                                                   -------------------------------------                     -------------------------------------
Total Liabilities and Equity                                            $  117,495                             $  117,470  
                                                                   ====== ======== ====================                      ====== ======== ====================
 
                                                                      INTERNATIONAL BUSINESS MACHINES CORPORATION
                                                                                  CASH FLOW ANALYSIS
                                                                                      (Unaudited)
 
                                                                                         Three Months Ended
(Dollars in Millions)                                                                                            March 31,
                                                                         -----------------------------------------------------------------------------------------
                                                                                                            
                                                                                        2017                                                   2016
                                                                         ----------------------------------                     ----------------------------------
                                                                                                                                                                   
Net Cash Provided by Operating Activities per GAAP:                          $  3,955                                               $  5,530                      * **
                                                                                                                                                                   
    Less: change in Global Financing (GF)
        Receivables                                                             2,047                                                  2,236                      *
    Capital Expenditures, Net                                                    (819 )                                                 (971 )
                                                                                                                                                                   
Free Cash Flow                                                                  1,088                                                  2,323                      **
                                                                                                                                                                   
    Acquisitions                                                                 (109 )                                               (2,590 )
    Divestitures                                                                   (1 )                                                   47
    Dividends                                                                  (1,321 )                                               (1,250 )
    Share Repurchase                                                           (1,293 )                                                 (939 )
    Non-GF Debt                                                                   244                                                  5,871
    Other (includes GF Receivables and GF Debt)                                 3,560                                                  3,212                      **
                                                                                                                                                                   
Change in Cash, Cash Equivalents and
Short-term Marketable Securities                                             $  2,168         $  6,674  
                                                                         ===== ====== ==================== ==================== ===== ====== ====================
                                                                                                                                                                   
* Revised classification of certain financing receivables
** Reclassified to reflect adoption of the FASB guidance on
stock-based compensation
 
                                                     INTERNATIONAL BUSINESS MACHINES CORPORATION
                                                                      CASH FLOW
                                                                     (Unaudited)
 
                                                                        Three Months Ended
(Dollars in Millions)                                                                           March 31,
                                                                          -----------------------------------------------------
                                                                                2017              2016
                                                                          ----------------                     ----------------
                                                                                                                                
Net Income from Operations                                                    $   1,750                            $   2,014
    Depreciation/Amortization of Intangibles                                      1,098                                1,025
    Stock-based Compensation                                                        129                                  133
    Working Capital / Other                                                      (1,070 )                                123   **
    Global Financing A/R                                                          2,047                                2,236   *
Net Cash Provided by Operating Activities                                     $   3,955                            $   5,530   * **
    Capital Expenditures, net of payments & proceeds                               (819 )                               (971 )
    Divestitures, net of cash transferred                                            (1 )                                 47
    Acquisitions, net of cash acquired                                             (109 )                             (2,590 )
    Marketable Securities / Other Investments, net                                1,278                                1,628   *
Net Cash Used in Investing Activities                                         $     350                              ($1,886 ) *
    Debt, net of payments & proceeds                                                476                                4,963
    Dividends                                                                    (1,321 )                             (1,250 )
    Common Stock Repurchases                                                     (1,293 )                               (939 )
    Common Stock Transactions - Other                                                 4                                   32   **
Net Cash Used in Financing Activities                                           ($2,134 )                          $   2,806   **
Effect of Exchange Rate changes on Cash                                             100                                  217
Net Change in Cash & Cash Equivalents                                         $   2,270                            $   6,668
 
* Revised classification of certain financing receivables
** Reclassified to reflect adoption of the FASB guidance on
stock-based compensation
 
                                                                                                                                                                                INTERNATIONAL BUSINESS MACHINES CORPORATION
                                                                                                                                                                                               SEGMENT DATA
                                                                                                                                                                                                (Unaudited)
 
                                                                                                                                                                                                           FIRST - QUARTER 2017
                                                                      ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                      Cognitive Solutions &                                                                                                                                                     
                                                                                                                        Industry Services
                                                                      ---------------------------------------------------------------------------------------------------------------------
                                                                                                                                                                                                                Technology
                                                                                                                                                                Global                                                             Services &
(Dollars in Millions)                                                                     Cognitive                                                            Business                                                               Cloud                                                                                                                                    Global
                                                                                          Solutions                                         Services                                          Platforms                                          Systems                                          Financing
                                                                      -------------------------------------------------------------------- -------------------------------------------------------------------- -------------------------------------------------------------------- -------------------------------------------------------------------- -------------------------------------------------
Revenue
External                                                                                 $ 4,062                                                              $ 4,006                                                              $ 8,216                                                              $ 1,395                                                              $    405
Internal                                                                  716          86         160         167          363  
                                                                      -------------------- ----- -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- ------ --------------------
Total Segment Revenue                                                                    $ 4,778                                                              $ 4,092                                                              $ 8,376                                                              $ 1,562                                                              $    768
                                                                                                                                                                                                                                                                                                                                                           
Pre-tax Income from Continuing Operations                                                  1,274                                                                  291                                                                  687                                                                 (186 )                                                                 311
                                                                                                                                                                                                                                                                                                                                                           
Pre-tax margin                                                                              26.7 %                                                                7.1 %                                                                8.2 %                                                              (11.9 )%                                                               40.5 %
                                                                                                                                                                                                                                                                                                                                                           
                                                                                                                                                                                                                                                                                                                                                           
Change YTY Revenue - External                                                                2.1 %                                                               (3.0 )%                                                              (2.5 )%                                                             (16.8 )%                                                               (1.2 )%
Change YTY Revenue - External @constant currency                                             2.8 %                                                               (1.9 )%                                                              (2.0 )%                                                             (16.1 )%                                                               (2.1 )%
 
 
                                                                                                                                                                                                                              FIRST - QUARTER 2016
                                                                      ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                      Cognitive Solutions &
                                                                                                                        Industry Services
                                                                      ---------------------------------------------------------------------------------------------------------------------
                                                                                                                                                                                                                                   Technology
                                                                                                                                                                Global                                                             Services &
(Dollars in Millions)                                                                     Cognitive                                                            Business                                                               Cloud                                                                                                                                    Global
                                                                                          Solutions                                         Services                                          Platforms                                          Systems                                          Financing
                                                                      -------------------------------------------------------------------- -------------------------------------------------------------------- -------------------------------------------------------------------- -------------------------------------------------------------------- -------------------------------------------------
Revenue
External                                                                                 $ 3,979                                                              $ 4,131                                                              $ 8,424                                                              $ 1,675                                                              $    410
Internal                                                                  668         113         165         212          486  
                                                                      -------------------- ----- -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- ------ --------------------
Total Segment Revenue                                                                    $ 4,647                                                              $ 4,245                                                              $ 8,589                                                              $ 1,888                                                              $    896
                                                                                                                                                                                                                                                                                                                                                           
Pre-tax Income from Continuing Operations                                                  1,013                                                                  190                                                                  258                                                                  (10 )                                                                 386
                                                                                                                                                                                                                                                                                                                                                           
Pre-tax margin                                                                              21.8 %                                                                4.5 %                                                                3.0 %                                                               (0.5 )%                                                               43.1 %
 
                                                                              INTERNATIONAL BUSINESS MACHINES CORPORATION
                                                                       U.S. GAAP TO OPERATING (Non-GAAP) RESULTS RECONCILIATION
                                                                       (Unaudited; Dollars in millions except per share amounts)
                                                   
                                                                                                                             FIRST - QUARTER 2017
                                                                                                                             CONTINUING OPERATIONS
                                                                       --------------------------------------------------------------------------------------------------------------------------------
                                                                                        Acquisition-      Retirement-   
                                                                                                              Related                             Related                               Operating
                                                                            GAAP        Adjustments*     Adjustments**        (Non-GAAP)
                                                                       ---------------------------------- ----------------------------------- ----------------------------------- ---------------------
                                                                                                                                                                                   
Gross Profit                                                             $ 7,772                             $  119                              $  193                                $  8,083
                                                                                                                                                                                   
Gross Profit Margin                                                         42.8 %                                0.7Pts                              1.1Pts                               44.5 %
                                                                                                                                                                                   
S,G&A                                                                      5,152                               (139 )                              (136 )                                 4,877
                                                                                                                                                                                   
R,D&E                                                                      1,533                                  -                                 (49 )                                 1,484
                                                                                                                                                                                   
Other (Income) & Expense                                                     (28 )                               (4 )                                 -                                     (31 )
                                                                                                                                                                                   
Total Expense & Other (Income)                                             6,348                               (143 )                              (185 )                                 6,020
                                                                                                                                                                                   
Pre-tax Income from Continuing Operations                                  1,424                                262                                 378                                   2,063
                                                                                                                                                                                   
Pre-tax Income Margin from Continuing Operations                             7.8 %                                1.4Pts                              2.1Pts                               11.4 %
                                                                                                                                                                                   
Provision for / (Benefit) from Income Taxes***                              (329 )                               67                                  70                                    (192 )
                                                                                                                                                                                   
Effective Tax Rate                                                         (23.1 )%                               7.6Pts                              8.7Pts                               (9.3 )%
                                                                                                                                                                                   
Income from Continuing Operations                                          1,753                                195                                 308                                   2,255
                                                                                                                                                                                   
Income Margin from Continuing Operations                                     9.7 %                                1.1Pts                              1.7Pts                               12.4 %
                                                                                                                                                                                   
Diluted Earnings Per Share: Continuing Operations                        $  1.85                             $ 0.21                              $ 0.32                                $   2.38
                                                                        
                                                                                                                             FIRST - QUARTER 2016
                                                                                                                             CONTINUING OPERATIONS
                                                                       --------------------------------------------------------------------------------------------------------------------------------
                                                                                                           Acquisition-                         Retirement-
                                                                                                              Related                             Related                               Operating
                                                                            GAAP        Adjustments*     Adjustments**        (Non-GAAP)
                                                                       ---------------------------------- ----------------------------------- ----------------------------------- ---------------------
                                                                                                                                                                                   
Gross Profit                                                             $ 8,686                             $  112                              $   79                                $  8,877
                                                                                                                                                                                   
Gross Profit Margin                                                         46.5 %                                0.6Pts                              0.4Pts                               47.5 %
                                                                                                                                                                                   
S,G&A                                                                      6,012                                (67 )                               (55 )                                 5,890
                                                                                                                                                                                   
R,D&E                                                                      1,458                                  -                                  (9 )                                 1,449
                                                                                                                                                                                   
Other (Income) & Expense                                                     253                                 (6 )                                 -                                     247
                                                                                                                                                                                   
Total Expense & Other (Income)                                             7,652                                (73 )                               (63 )                                 7,516
                                                                                                                                                                                   
Pre-tax Income from Continuing Operations                                  1,034                                185                                 142                                   1,361
                                                                                                                                                                                   
Pre-tax Income Margin from Continuing Operations                             5.5 %                                1.0Pts                              0.8Pts                                7.3 %
                                                                                                                                                                                   
Provision for / (Benefit) from Income Taxes***                              (983 )                               47                                  27                                    (909 )
                                                                                                                                                                                   
Effective Tax Rate                                                         (95.1 )%                              18.2Pts                             13.8Pts                              (66.8 )%
                                                                                                                                                                                   
Income from Continuing Operations                                          2,016                                138                                 115                                   2,270
                                                                                                                                                                                   
Income Margin from Continuing Operations                                    10.8 %                                0.7Pts                              0.6Pts                               12.1 %
                                                                                                                                                                                   
Diluted Earnings Per Share: Continuing Operations                        $  2.09                             $ 0.14                              $ 0.12                                $   2.35
* Includes amortization of purchased intangible assets, in
process R&D, severance cost for acquired employees, vacant space
for acquired companies, deal costs and acquisition integration tax
charges.
** Includes retirement-related interest cost, expected return
on plan assets, recognized actuarial losses or gains, amortization
of transition assets, other settlements, curtailments,
multi-employer plans and insolvency insurance.
*** Tax impact on operating (non-GAAP) pre-tax income from
continuing operations is calculated under the same accounting
principles applied to the As Reported pre-tax income under ASC
740, which employs an annual effective tax rate method to the
results.
      
                                          INTERNATIONAL BUSINESS MACHINES CORPORATION
                                        RECONCILIATION OF OPERATING EARNINGS PER SHARE
                                                          (Unaudited)
 
                                                         2017
EPS Guidance                                                                                                  Expectations
------------------------------------------                                                                --------------------
IBM GAAP EPS                                                                                                   at least $11.95
IBM Operating EPS (non-GAAP)                                                                                   at least $13.80
                                                                                                           
Adjustments
    Acquisition related charges *                                                                                        $0.75
    Non-Operating Retirement-Related Items                                                                               $1.10
 
* Includes acquisitions through March 31, 2017

http://cts.businesswire.com/ct/CT?id=bwnews&sty=20170418006539r1&sid=cmtx6&distro=nx&lang=en

View source version on businesswire.com: http://www.businesswire.com/news/home/20170418006539/en/

SOURCE: IBM"> <Property FormalName="PrimaryTwitterHandle" Value="@ibm

IBM 
Ian Colley, 914-434-3043 
colley@us.ibm.com 
or 
John Bukovinsky, 732-618-3531 
jbuko@us.ibm.com


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