International Business Machines (IBM) 10-Q 2008 Q2 Quarterly report

EXHIBIT 12

COMPUTATION OF RATIO OF INCOME FROM

CONTINUING OPERATIONS TO FIXED CHARGES

FOR SIX MONTHS ENDED JUNE 30,

(UNAUDITED)

(Dollars in millions)	2008		2007
Income from continuing operations before income taxes (1)	$	7,015	$	5,725
Add: Fixed charges, excluding capitalized interest	917		814
Income as adjusted before income taxes	$	7,932	$	6,539
Fixed charges:
Interest expense	$	714	$	597
Capitalized interest	8		3
Portion of rental expense representative of interest	203		217
Total fixed charges	$	925	$	817
Ratio of income from continuing operations to fixed charges	8.58		8.00

(1)Income from continuing operations before income taxes excludes (a) amortization of capitalized interest and (b) the company’s share in the income and losses of less-than-fifty percent-owned affiliates.

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SEGMENT INFORMATION - ON CONTINUING OPERATIONS BASIS

(UNAUDITED)

	Global Services
	Global		Global
	Technology		Business		Systems and				Global		Total
(Dollars in millions)	Services		Services		Technology		Software		Financing		Segments
Three Months Ended June 30, 2008:
External revenue	$10,100		$5,107		$5,212		$5,574		$634		$26,626
Internal revenue	390		259		215		719		525		2,108
Total revenue	$10,489		$5,366		$5,427		$6,293		$1,159		$28,734
Pre-tax income	$994		$637		$400		$1,492		$428		$3,951
Revenue year-to-year change	14.5	%	15.0	%	1.3	%	18.2	%	23.5	%	12.9	%
Pre-tax income year-to-year change	26.2	%	31.2	%	20.7	%	19.4	%	28.7	%	24.0	%
Pre-tax income margin	9.5	%	11.9	%	7.4	%	23.7	%	36.9	%	13.8	%
Three Months Ended June 30, 2007:
External revenue	$8,756		$4,338		$5,102		$4,777	��	$597		$23,571
Internal revenue	409		329		255		549		341		1,883
Total revenue	$9,165		$4,667		$5,357		$5,326		$938		$25,453
Pre-tax income	$788		$486		$332		$1,250		$332		$3,187
Pre-tax income margin	8.6	%	10.4	%	6.2	%	23.5	%	35.4	%	12.5	%

Reconciliations to IBM as Reported:

	Three Months Ended			Three Months Ended
(Dollars in millions)	June 30, 2008			June 30, 2007
Revenue:
Total reportable segments	$	28,734		$	25,453
Eliminations/other	(1,915		)	(1,681		)
Total IBM Consolidated	$	26,820		$	23,772
Pre-tax income:
Total reportable segments	$	3,951		$	3,187
Eliminations/other	(138		)*	(46		)*
Total IBM Consolidated	$	3,814		$	3,142

*Includes the gain from the divestiture of the company’s printing business and the interest expense associated with the debt to support the company’s accelerated share repurchase.

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SEGMENT INFORMATION - ON CONTINUING OPERATIONS BASIS

(UNAUDITED)

	Global Services
	Global			Global
	Technology			Business			Systems and						Global			Total
(Dollars in millions)	Services			Services			Technology			Software			Financing			Segments
Six Months Ended June 30, 2008:
External revenue	$	19,777		$	10,018		$	9,431		$	10,421		$	1,266		$	50,913
Internal revenue	778			517			410			1,386			911			4,002
Total revenue	$	20,555		$	10,535		$	9,841		$	11,807		$	2,177		$	54,915
Pre-tax income	$	1,982		$	1,216		$	546		$	2,759		$	816		$	7,319
Revenue year-to-year change	15.2		%	15.1		%	(3.0		)%	16.2		%	14.5		%	11.6		%
Pre-tax income year-to-year change	34.9		%	27.3		%	27.5		%	20.7		%	15.6		%	25.2		%
Pre-tax income margin	9.6		%	11.5		%	5.5		%	23.4		%	37.5		%	13.3		%
Six Months Ended June 30, 2007:
External revenue	$	17,013		$	8,521		$	9,622		$	9,028		$	1,211		$	45,397
Internal revenue	834			630			523			1,134			689			3,810
Total revenue	$	17,848		$	9,152		$	10,145		$	10,162		$	1,901		$	49,207
Pre-tax income	$	1,469		$	955		$	428		$	2,286		$	706		$	5,844
Pre-tax income margin	8.2		%	10.4		%	4.2		%	22.5		%	37.1		%	11.9		%

Reconciliations to IBM as Reported:

	Six Months Ended			Six Months Ended
(Dollars in millions)	June 30, 2008			June 30, 2007
Revenue:
Total reportable segments	$	54,915		$	49,207
Eliminations/other	(3,593		)	(3,406		)
Total IBM Consolidated	$	51,322		$	45,801
Pre-tax income:
Total reportable segments	$	7,319		$	5,844
Eliminations/other	(307		)*	(124		)*
Total IBM Consolidated	$	7,012		$	5,721

*Includes the gain from the divestiture of the company’s printing business and the interest expense associated with the debt to support the company’s accelerated share repurchase.

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