International Business Machines (IBM) 10-Q 28 Jul 09 2009 Q2 Quarterly report Financial data

Consolidated Statement of Earni

Consolidated Statement of Earnings (USD $)
In Millions, except Per Share data	3 Months Ended Jun. 30, 2009		3 Months Ended Jun. 30, 2008		6 Months Ended Jun. 30, 2009		6 Months Ended Jun. 30, 2008
Revenue:
Services	$13,479		$15,203		$26,656		$29,777
Sales	9,198		10,976		17,147		20,263
Financing	574		642		1,158		1,282
Total Revenue	23,250	[1]	26,820	[1]	44,962	[1]	51,322
Cost:
Services	9,145		10,709		18,208		21,057
Sales	3,221		4,225		6,123		7,899
Financing	303		286		618		600
Total Cost	12,669		15,221	[1]	24,949		29,556
Gross profit	10,581		11,599		20,012	[1]	21,766
Expense and other income:
Selling, general and administrative	5,115		6,289		10,379		11,909
Research, development and engineering	1,434		1,660		2,914		3,229
Intellectual property and custom development income	(302)		(285)		(570)		(559)
Other (income) and expense	(28)		(24)		(331)		(149)
Interest expense	101		145		237		323
Total expense and other income	6,319	[1]	7,786	[1]	12,628	[1]	14,754	[1]
Income before income taxes	4,262		3,814	[1]	7,385	[1]	7,012
Provision for income taxes	1,159		1,049		1,986		1,928
Net income	$3,103		$2,765		$5,398		$5,084
Earnings per share of common stock:
Assuming dilution	2.32		1.97	[2]	4.02		3.61	[2]
Basic	2.34		2.01	[2]	4.04		3.67	[2]
Weighted-average number of common shares outstanding: (millions)
Assuming dilution	1336.9		1402.1	[2]	1343.2		1406.7	[2]
Basic	1326.1		1376.2	[2]	1335.2		1385.2	[2]
Cash dividend per common share	0.55		0.5		1.05		0.9
[1]Amounts may not add due to rounding
[2]Reflects the adoption of FSP EITF 03-6-1, "Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities." See Note 2, "Accounting Changes," on pages 7 to 9 for additional information.

Consolidated Statement of Finan

Consolidated Statement of Financial Position (USD $)
In Millions	Jun. 30, 2009		Dec. 31, 2008
Current assets:
Cash and cash equivalents	$11,678		$12,741
Marketable securities	848		166
Notes and accounts receivable - trade (net of allowances of $241 in 2009 and $226 in 2008)	9,561		10,906
Short-term financing receivables (net of allowances of $400 in 2009 and $351 in 2008)	13,116		15,477
Other accounts receivable (net of allowances of $57 in 2009 and $55 in 2008)	1,179		1,172
Inventories, at lower of average cost or market:
Finished goods	565		524
Work in process and raw materials	2,126		2,176
Total inventories	2,691		2,701	[1]
Deferred taxes	1,652		1,542
Prepaid expenses and other current assets	3,709		4,299
Total current assets	44,435	[1]	49,004
Plant, rental machines and other property	38,669		38,445
Less: Accumulated depreciation	24,721		24,140
Plant, rental machines and other property - net	13,948		14,305
Long-term financing receivables (net of allowances of $132 in 2009 and $179 in 2008)	10,197		11,183
Prepaid pension assets	2,182		1,601
Deferred taxes	6,762		7,270
Goodwill	18,737		18,226
Intangible assets - net	2,580		2,878
Investments and sundry assets	4,813		5,058
Total Assets	103,655	[1]	109,524	[1]
Current liabilities:
Taxes	2,259		2,743
Short-term debt	8,504		11,236
Accounts payable	5,869		7,014
Compensation and benefits	3,901		4,623
Deferred income	10,335		10,239
Other accrued expenses and liabilities	5,562		6,580
Total current liabilities	36,430		42,435
Long-term debt	20,868		22,689
Retirement and nonpension postretirement benefit obligations	18,459		19,452
Deferred income	3,283		3,171
Other liabilities	9,141		8,192	[2]
Total liabilities	88,182	[1]	95,939	[2]
IBM stockholders' equity:
Common stock, par value $.20 per share, and additional paid-in capital - shares authorized: 4,687,500,000, shares issued (2009 - 2,105,119,767; 2008 - 2,096,981,860)	39,774		39,129
Retained earnings	74,328		70,353
Treasury stock, at cost (shares: 2009 - 794,236,190; 2008 - 757,885,937)	(77,679)		(74,171)
Accumulated other comprehensive income/(loss)	(21,043)		(21,845)
Total IBM stockholders' equity	15,380		13,465	[2]
Noncontrolling interests	94		119	[2]
Total stockholders' equity	15,473	[1]	13,584	[2]
Total liabilities and stockholders' equity	$103,655		$109,524
[1]Amounts may not add due to rounding
[2]Reflects adoption of SFAS No. 160 "Noncontrolling Interests in Consolidated Financial Statements - an amendment of ARB No. 51." See Note 2, "Accounting Changes," on pages 7 to 9 for additional information.

Statement of Financial Position

Statement of Financial Position Parenthetical (USD $)
In Millions, except Share data	Jun. 30, 2009	Dec. 31, 2008
Statement of Financial Position
Allowance for doubtful accounts - notes and accounts receivable - trade	$241	$226
Allowance for doubtful accounts - short-term financing receivables	400	351
Allowance for doubtful accounts - other accounts receivable	57	55
Allowance for doubtful accounts - long-term financing receivables	$132	$179
Common stock, par value per share	0.2	0.2
Common stock, shares authorized	4,687,500,000	4,687,500,000
Common stock, shares issued	2,105,119,767	2,096,981,860
Treasury stock, shares	794,236,190	757,885,937

Consolidated Statement of Cash

Consolidated Statement of Cash Flows (USD $)
In Millions	6 Months Ended Jun. 30, 2009		6 Months Ended Jun. 30, 2008
Cash flow from operating activities:
Net income	$5,398		$5,084
Adjustments to reconcile net income to cash provided from operating activities:
Depreciation	1,853		2,096
Amortization of intangibles	618		654
Stock-based compensation	269		340
Net gain on asset sales and other	(340)		(75)
Change in operating assets and liabilities, net of acquisitions/divestitures	1,330		353
Net cash provided by operating activities	9,127	[1]	8,453	[1]
Cash flow from investing activities:
Payments for plant, rental machines and other property, net of proceeds from dispositions	(1,304)		(1,999)
Investment in software	(319)		(381)
Acquisition of businesses, net of cash acquired	(100)		(5,891)
Divestiture of businesses, net of cash transferred	356		29
Non-operating finance receivables - net	487	[2]	219	[2]
Purchases of marketable securities and other investments	(2,330)	[2]	(2,971)	[2]
Proceeds from disposition of marketable securities and other investments	1,314	[2]	4,084	[2]
Net cash used in investing activities	(1,897)	[1]	(6,909)	[1]
Cash flow from financing activities:
Proceeds from new debt	1,969		6,813
Payments to settle debt	(5,040)		(5,924)
Short-term repayments less than 90 days - net	(934)		(2,273)
Common stock repurchases	(3,436)		(7,164)
Common stock transactions - other	522		2,704
Cash dividends paid	(1,407)		(1,239)
Net cash used in financing activities	(8,326)		(7,083)
Effect of exchange rate changes on cash and cash equivalents	33		175
Net change in cash and cash equivalents	(1,063)		(5,365)	[1]
Cash and cash equivalents at January 1	12,741		14,991
Cash and cash equivalents at June 30	$11,678		$9,626
[1]Amounts may not add due to rounding
[2]Non-operating finance receivables - net represents net cash flows from short-term commercial financing arrangements (terms generally 30 to 90 days) with dealers and remarketers of predominantly non-IBM products. Amounts previously presented gross within Purchases/Proceeds of marketable securities and other investments.

Basis of Presentation

Basis of Presentation
	6 Months Ended Jun. 30, 2009 USD / shares
Notes to Financial Statements
Basis of Presentation:	1. Basis of Presentation: The accompanying consolidated financial statements and footnotes thereto are unaudited. In the opinion of the management of the International Business Machines Corporation (the company), these statements include all adjustments, which are of a normal recurring nature, necessary to present a fair statement of the companys results of operations, financial position and cash flows. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the amounts of assets, liabilities, revenue, costs, expenses and accumulated other comprehensive income/(loss) that are reported in the Consolidated Financial Statements and accompanying disclosures. Actual results may be different. See the companys 2008 Annual Report for a discussion of the companys critical accounting estimates. Interim results are not necessarily indicative of results for a full year. The information included in this Form10-Q should be read in conjunction with the companys 2008 Annual Report. The company evaluated subsequent events through July28, 2009, the date the companys Board of Directors reviewed the financial statements to be issued. The company issued the financial statements on the same day. Within the financial tables in this Form10-Q, certain columns and rows may not add due to the use of rounded numbers for disclosure purposes. Percentages presented are calculated from the underlying whole-dollar amounts.

Accounting Changes

Accounting Changes
	6 Months Ended Jun. 30, 2009 USD / shares
Notes to Financial Statements
Accounting Changes:	2. Accounting Changes: In June2009, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No.168, The FASB Accounting Standards Codification TMand the Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No.162 (the Codification). The Codification, which was launched on July1, 2009, became the single source of authoritative nongovernmental U.S. GAAP, superseding existing FASB, American Institute of Certified Public Accountants (AICPA), Emerging Issues Task Force (EITF) and related literature. The Codification eliminates the GAAP hierarchy contained in SFAS No.162 and establishes one level of authoritative GAAP. All other literature is considered non-authoritative. This Statement is effective for financial statements issued for interim and annual periods ending after September15, 2009. The company will adopt this Statement for its quarter ending September30, 2009. There will be no change to the companys Consolidated Financial Statements due to the implementation of this Statement. In June2009, the FASB issued SFAS No.167, Amendments to FASB Interpretation No.46(R), and SFAS No.166, Accounting for Transfers of Financial Assetsan amendment of FASB Statement No.140. SFAS No.167 amends FASB Interpretation 46(R)to eliminate the quantitative approach previously required for determining the primary beneficiary of a variable interest entity and requires ongoing qualitative reassessments of whether an enterprise is the primary beneficiary of a variable interest entity. SFAS No.166 amends SFAS No.140 by removing the exemption from consolidation for Qualifying Special Purpose Entities (QSPEs). This Statement also limits the circumstances in which a financial asset, or portion of a financial asset, should be derecognized when the transferor has not transferred the entire original financial asset to an entity that is not consolidated with the transferor in the financial statements being presented and/or when the transferor has continuing involvement with the transferred financial asset. The company will adopt these Statements for interim and annual reporting periods beginning on January1, 2010. The company does not expect the adoption of these standards to have any material impact on the Consolidated Financial Statements. In May2009, the FASB issued SFAS No.165, Subsequent Events. This Statement sets forth: 1) the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements; 2) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements; and 3) the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. This Statement is effective for interim and annual periods ending after June15, 2009. The company adopted this Statement in the quarter ended June30, 2009. This Statement did not impact the consolidated financial results. In April2009, the FASB issued FASB Staff Position (FSP)

Fair Value

Fair Value
	6 Months Ended Jun. 30, 2009 USD / shares
Notes to Financial Statements
Fair Value:	3. Fair Value: Financial Assets and Financial Liabilities Measured at Fair Value on a Recurring Basis The following tables present the companys financial assets and financial liabilities that are measured at fair value on a recurring basis at June30, 2009 and December31, 2008 consistent with the fair value hierarchy provisions of SFAS No.157. (Dollars in millions) At June30, 2009 Level 1 Level 2 Level 3 Netting (1) Total Assets: Cash and cash equivalents $ 1,846 $ 7,447 $ $ $ 9,293 Marketable securities 848 848 Derivative assets (2) 879 (542 ) 337 Investments and sundry assets 269 6 275 Total Assets $ 2,115 $ 9,180 $ $ (542 ) $ 10,753 Liabilities: Derivative liabilities (3) $ $ 1,725 $ $ (542 ) $ 1,183 Total Liabilities $ $ 1,725 $ $ (542 ) $ 1,183 (1) Represents netting of derivative exposures covered by a qualifying master netting agreement in accordance with FASB Interpretation No.39, Offsetting of Amounts Relating to Certain Contracts. (2) The gross balances of derivative assets contained within prepaid expenses and other current assets, and investments and sundry assets in the Consolidated Statement of Financial Position at June30, 2009 are $210 million and $669 million, respectively. (3) The gross balances of derivative liabilities contained within other accrued expenses and liabilities, and other liabilities in the Consolidated Statement of Financial Position at June30, 2009 are $986 million and $739 million, respectively. (Dollars in millions) At December31, 2008 Level 1 Level 2 Level 3 Netting (1) Total Assets: Cash and cash equivalents $ 1,950 $ 8,059 $ $ $ 10,009 Marketable securities 166 166 Derivative assets (2) 56 1,834 (875 ) 1,015 Investments and sundry assets 165 6 171 Total Assets $ 2,171 $ 10,065 $ $ (875 ) $ 11,361 Liabilities: Derivative liabilities (3) $ $ 2,116 $ $ (875 ) $ 1,241 Total Liabilities $ $ 2,116 $ $ (875 ) $ 1,241 (1) Represents netting of derivative exposures covered by a qualifying master netting agreement in accordance with FASB Interpretation No.39, Offsetting of Amounts Relating to Certain Contracts. (2) The gross balances of derivative assets contained within prepaid expenses and other current assets, and investments and sundry assets in the Consolidated Statement of Financial Position at December31, 2008 are $773 million and $1,117 million, respectively. (3) The gross balances of derivative liabilities contained within other accrued expenses and liabilities, and other liabilities in the Consolidated Statement of Financial Position at December31, 2008 are $1,414 million and $702 million, respectively. At June30, 2009 and December31, 2008, the company did not have any financial assets or financial liabilities measured at fair value on a recurring basis usi

Fair Value of Financial Instrum

Fair Value of Financial Instruments
	6 Months Ended Jun. 30, 2009 USD / shares
Notes to Financial Statements
Fair Value of Financial Instruments:	4. Fair Value of Financial Instruments: Cash and cash equivalents, debt and marketable equity securities and derivative financial instruments are recognized and measured at fair value in the companys financial statements. Notes and other accounts receivable and other investments are financial assets with carrying values that approximate fair value. Accounts payable, other accrued expenses and short-term debt are financial liabilities with carrying values that approximate fair value. In the absence of quoted prices in active markets, considerable judgment is required in developing estimates of fair value. Estimates are not necessarily indicative of the amounts the company could realize in a current market transaction. The following methods and assumptions are used to estimate fair values: Loans and Long-term Receivables Estimates of fair value are based on discounted future cash flows using current interest rates offered for similar loans to clients with similar credit ratings for the same remaining maturities. Long-term Debt For publicly-traded debt, estimates of fair value are based on market prices. For other debt, fair value is estimated based on rates currently available to the company for debt with similar terms and remaining maturities. The carrying amount of long-term debt is $20,868 million and $22,689 million and the estimated fair value is $22,999 million and $23,351 million at June30, 2009 and December31, 2008, respectively.

Financing Receivables

Financing Receivables
	6 Months Ended Jun. 30, 2009 USD / shares
Notes to Financial Statements
Financing Receivables:	5. Financing Receivables: The following table presents financing receivables, net of allowances for doubtful accounts, including residual values. At June30, At December31, (Dollars in millions) 2009 2008 Current: Net investment in sales-type and direct financing leases $ 4,064 $ 4,226 Commercial financing receivables 3,904 5,781 Client loan receivables 4,492 4,861 Installment payment receivables 656 608 Total $ 13,116 $ 15,477 Noncurrent: Net investment in sales-type and direct financing leases $ 5,396 $ 5,938 Commercial financing receivables 72 94 Client loan receivables 4,323 4,718 Installment payment receivables 405 433 Total $ 10,197 $ 11,183 Net investment in sales-type and direct financing leases is for leases that relate principally to the companys equipment and are for terms ranging from two to seven years. Net investment in sales-type and direct financing leases includes unguaranteed residual values of $881 million and $916 million at June30, 2009 and December31, 2008, respectively, and is reflected net of unearned income of $987 million and $1,049 million and of allowance for doubtful accounts of $201 million and $217 million at those dates, respectively. Commercial financing receivables relate primarily to inventory and accounts receivable financing for dealers and remarketers of IBM and non-IBM products. Payment terms for inventory and accounts receivable financing generally range from 30 to 90 days. Client loan receivables relate to loans that are provided by Global Financing primarily to the companys clients to finance the purchase of the companys software and services. Separate contractual relationships on these financing arrangements are for terms ranging from two to seven years. Each financing contract is priced independently at competitive market rates. The company has a history of enforcing the terms of these separate financing agreements. The company utilizes certain of its financing receivables as collateral for non-recourse borrowings. Financing receivables pledged as collateral for borrowings were $238 million and $373 million at June30, 2009 and December31, 2008, respectively. The company did not have any financing receivables held for sale as of June30, 2009 and December31, 2008.

Derivatives and Hedging Transac

Derivatives and Hedging Transactions
	6 Months Ended Jun. 30, 2009 USD / shares
Notes to Financial Statements
Derivatives and Hedging Transactions:	6. Derivatives and Hedging Transactions: The company operates in multiple functional currencies and is a significant lender and borrower in the global markets. In the normal course of business, the company is exposed to the impact of interest rate changes and foreign currency fluctuations, and to a lesser extent equity and commodity price changes and client credit risk. The company limits these risks by following established risk management policies and procedures, including the use of derivatives, and, where cost effective, financing with debt in the currencies in which assets are denominated. For interest rate exposures, derivatives are used to better align rate movements between the interest rates associated with the companys lease and other financial assets and the interest rates associated with its financing debt. Derivatives are also used to manage the related cost of debt. For foreign currency exposures, derivatives are used to better manage the cash flow volatility arising from foreign exchange rate fluctuations. As a result of the use of derivative instruments, the company is exposed to the risk that counterparties to derivative contracts will fail to meet their contractual obligations. To mitigate the counterparty credit risk, the company has a policy of only entering into contracts with carefully selected major financial institutions based upon their credit ratings and other factors. The companys established policies and procedures for mitigating credit risk on principal transactions include reviewing and establishing limits for credit exposure and continually assessing the creditworthiness of counterparties. The right of set-off that exists under certain of these arrangements enables the legal entities of the company subject to the arrangement to net amounts due to and from the counterparty reducing the maximum loss from credit risk in the event of counterparty default. The company is also a party to collateral security arrangements with certain counterparties. These arrangements require the company to hold or post collateral (cash or U.S. Treasury securities) when the derivative fair values exceed contractually established thresholds. Posting thresholds can be fixed or can vary based on credit default swap pricing or credit ratings received from the major credit agencies. The aggregate fair value of all derivative instruments with credit-risk related contingent features that were in a liability position at June30, 2009 was $494 million for which the company has posted collateral of $37 million. Full overnight collateralization of these agreements would be required in the event that the companys credit rating falls below investment grade or if its credit default swap spread exceeds 250 basis points, as applicable, pursuant to the terms of the collateral security arrangements. The aggregate fair value of derivative instruments in net asset positions as of June30, 2009 was $879 million. This amount represents the maximum exposure to loss at the reporting date as a result of the counterparties failing to perform as contracted. This exposure is reduced by $542 million of liabilities included in master netting arrangements wit

Stock-Based Compensation

Stock-Based Compensation
	6 Months Ended Jun. 30, 2009 USD / shares
Notes to Financial Statements
Stock-Based Compensation:	7. Stock-Based Compensation: Stock-based compensation cost is measured at grant date, based on the fair value of the award, and is recognized over the employee requisite service period. The following table presents total stock-based compensation cost included in the Consolidated Statement of Earnings: Three Months Ended June30, Six Months Ended June30, (Dollars in millions) 2009 2008 2009 2008 Cost $ 22 $ 30 $ 46 $ 59 Selling, general and administrative 99 125 199 252 Research, development and engineering 11 15 23 29 Pre-tax stock-based compensation cost 132 170 269 340 Income tax benefits (46 ) (63 ) (94 ) (110 ) Total stock-based compensation cost $ 86 $ 106 $ 175 $ 230 The reduction in pre-tax stock-based compensation cost for the three months ended June30, 2009, as compared to the corresponding period in the prior year, was principally the result of a reduction in the level of stock option grants ($46 million), partially offset by an increase related to restricted and performance-based stock units ($9 million). The reduction in pre-tax stock-based compensation cost for the six months ended June30, 2009, as compared to the corresponding period in the prior year, was principally the result of a reduction in the level of stock option grants ($89 million), partially offset by an increase related to restricted and performance-based stock units ($18 million). As of June30, 2009, the total unrecognized compensation cost of $1,315 million related to non-vested awards is expected to be recognized over a weighted-average period of approximately three years. There were no significant capitalized stock-based compensation costs at June30, 2009 and 2008.

Segments

Segments
	6 Months Ended Jun. 30, 2009 USD / shares
Notes to Financial Statements
Segments:	8. Segments: The table on pages70 and 71 of this Form10-Q reflects the results of the companys reportable segments consistent with the management system used by the companys chief operating decision maker. These results are not necessarily a depiction that is in conformity with GAAP. For example, employee retirement plan costs are developed using actuarial assumptions on a country-by-country basis and allocated to the segments based on headcount. Different results could occur if actuarial assumptions that are unique to the segments were used. Performance measurement is based on income before income taxes (pre-tax income). These results are used, in part, by management, both in evaluating the performance of, and in allocating resources to, each of the segments. SEGMENT INFORMATION (UNAUDITED) Global Services (Dollarsinmillions) Global Technology Services Global Business Services Software Systems and Technology Global Financing Total Segments For the Three Months Ended June30, 2009: External revenue $ 9,108 $ 4,338 $ 5,166 $ 3,855 $ 568 $ 23,035 Internal revenue 343 223 614 244 447 1,870 Total revenue $ 9,451 $ 4,562 $ 5,780 $ 4,098 $ 1,014 $ 24,905 Pre-tax income $ 1,405 $ 608 $ 1,852 $ 333 $ 465 $ 4,663 Revenue year-to-year change (9.9 )% (15.0 )% (8.2 )% (24.5 )% (12.5 )% (13.3 )% Pre-tax income year-to-year change 41.3 % (4.5 )% 24.1 % (16.7 )% 8.6 % 18.0 % Pre-tax income margin 14.9 % 13.3 % 32.0 % 8.1 % 45.8 % 18.7 % For the Three Months Ended June30, 2008: External revenue $ 10,100 $ 5,107 $ 5,574 $ 5,212 $ 634 $ 26,626 Internal revenue 390 259 719 215 525 2,108 Total revenue $ 10,489 $ 5,366 $ 6,293 $ 5,427 $ 1,159 $ 28,734 Pre-tax income $ 994 $ 637 $ 1,492 $ 400 $ 428 $ 3,951 Pre-tax income margin 9.5 % 11.9 % 23.7 % 7.4 % 36.9 % 13.8 % Reconciliations to IBM as Reported: (Dollarsinmillions) ThreeMonthsEnded June30,2009 ThreeMonthsEnded June30,2008 Revenue: Total reportable segments $ 24,905 $ 28,734 Eliminations/other (1,655 ) (1,915 ) Total IBM Consolidated $ 23,250 $ 26,820 Pre-tax income: Total reportable segments $ 4,663 $ 3,951 Eliminations/other (401 )* (138 )** Total IBM Consolidated $ 4,262 $ 3,814 * Includes a provision for losses related to a joint venture investment. ** Includes the gain from the divestiture of the companys printing business and the interest expense associated with the debt to support the companys accelerated share repurchase. SEGMENT INFORMATION (UNAUDITED) Global Services (Dollarsinmillions) Global Technology Services Global Busin

Stockholders Equity

Stockholders Equity
	1/1/2009 - 6/30/2009 USD / shares
Notes to Financial Statements
Stockholders' Equity:	9. Stockholders' Equity: (Dollars in millions) Common Stock and Additional Paid-in Capital Retained Earnings Treasury Stock Accumulated Other Comprehensive Income/(Loss) Total IBM Corporation Stockholders Equity Noncontrolling Interests* Total Stockholders Equity Stockholders equity, January1, 2009 $ 39,129 $ 70,353 $ (74,171 ) $ (21,845 ) $ 13,465 $ 119 $ 13,584 Net income 5,398 5,398 5,398 Other comprehensive income, net of tax (total) 802 802 802 Cash dividends declared common stock (1,407 ) (1,407 ) (1,407 ) Stock transactions related to employee plans net 645 (16 ) 2 631 631 Other treasury shares purchased not retired (3,510 ) (3,510 ) (3,510 ) Changes in noncontrolling interests (25 ) (25 ) Stockholders equity June30, 2009 $ 39,774 $ 74,328 $ (77,679 ) $ (21,043 ) $ 15,380 $ 94 $ 15,473 (Dollars in millions) Common Stock and Additional Paid-in Capital Retained Earnings Treasury Stock Accumulated Other Comprehensive Income/(Loss) Total IBM Corporation Stockholders Equity Noncontrolling Interests* Total Stockholders Equity Stockholders equity, January1, 2008 $ 35,188 $ 60,640 $ (63,945 ) $ (3,414 ) $ 28,470 $ 145 $ 28,615 Net income 5,084 5,084 5,084 Other comprehensive income, net of tax (total) 408 408 408 Cash dividends declared common stock (1,239 ) (1,239 ) (1,239 ) Stock transactions related to employee plans net 2,693 (28 ) 287 2,952 2,952 Other treasury shares purchased not retired (7,410 ) (7,410 ) (7,410 ) Changes in noncontrolling interests 1 1 Stockholders equity June30, 2008 $ 37,882 $ 64,456 $ (71,068 ) $ (3,006 ) $ 28,264 $ 146 $ 28,410 * Reflects the adoption of SFAS No.160, Noncontrolling Interests in Consolidated Financial Statements an amendment of ARB No.51. See Note 2, Accounting Changes, on pages7 to 9 for additional information. The following table summarizes Net income plus other comprehensive income/(loss), a component of Stockholders equity in the Consolidated Statement of Financial Position: Three Months Ended June30, Six Months Ended June30, (Dollars in millions) 2009 2008 2009 2008 Net income $ 3,103 $ 2,765 $ 5,398 $ 5,084 Other comprehensive income/(loss) net of tax: Foreign currency translation adjustments 1,150 (2 ) 766 457 Prior service costs, net gains/(losses) and transition assets/(obligations) 118 151 351 277 Net unrealized (losses)/gains on marketable securities (1) 42 (19 ) 36 (176 ) Net unrealized gains/(losses) on cash flow hedge derivatives (704 ) 147 (351 ) (149 ) Total other comprehensive income/(loss)

Retirement-Related Benefits

Retirement-Related Benefits
	6 Months Ended Jun. 30, 2009 USD / shares
Notes to Financial Statements
Retirement-Related Benefits:	10. Retirement-Related Benefits: The company offers defined benefit pension plans, defined contribution pension plans, as well as nonpension postretirement plans primarily consisting of retiree medical benefits. The following tables provide the total retirement-related benefit plans impact on income before income taxes: For the three months ended June30: 2009 2008 Yr. to Yr. Percent Change (Dollars in millions) Retirement-related plans cost: Defined benefit and contribution pension plans cost $ 220 $ 290 (24.2 )% Nonpension postretirement plans cost 88 91 (3.1 ) Total $ 307 $ 381 (19.3 )% For the six months ended June30: 2009 2008 Yr. to Yr. Percent Change (Dollars in millions) Retirement-related plans cost: Defined benefit and contribution pension plans cost $ 561 $ 651 (13.8 )% Nonpension postretirement plans cost 173 185 (6.6 ) Total $ 734 $ 836 (12.2 )% The following tables provide the components of the cost/(income) for the companys pension plans: Cost/(Income) of Pension Plans U.S. Plans Non-U.S. Plans For the three months ended June30: 2009 2008* 2009 2008* (Dollars in millions) Service cost $ $ $ 145 $ 171 Interest cost 666 687 464 534 Expected return on plan assets (1,002 ) (994 ) (620 ) (714 ) Amortization of prior service cost/(credits) 3 (2 ) (31 ) (33 ) Recognized actuarial losses 97 70 143 159 Plan amendments/curtailments/settlements (1 ) Multiemployer plan/other costs 12 16 Total net periodic pension (income)/cost of defined benefit plans (236 ) (238 ) 112 132 Cost of defined contribution plans 228 252 116 143 Total pension plan cost recognized in the Consolidated Statement of Earnings $ (8 ) $ 15 $ 228 $ 275 *Reclassified to conform with 2009 presentation. U.S. Plans Non-U.S. Plans For the six months ended June30: 2009 2008* 2009 2008* (Dollars in millions) Service cost $ $ $ 284 $ 336 Interest cost 1,341 1,378 907 1,065 Expected return on plan assets (2,004 ) (1,989 ) (1,213 ) (1,418 ) Amortization of prior service cost/(credits) 5 (3 ) (61 ) (66 ) Recognized actuarial losses 205 145 303 315 Plan amendments/curtailments/settlements 8 Multiemployer plan/other costs 25 31 Total net periodic pension (income)/cost of defined benefit plans (453 ) (469 ) 252 263 Cost of defined contribution plans 534 573 228 283 Total pension plan cost recognized in the Consolidated Statement of Earnings $ 81 $ 105 $ 480 $ 546 *Reclassified to conform with 2009 presentation. In 2009, the company expects to contribute to its non-U.S. defined benefit plans approximately $1,100 million

Acquisitions and Divestitures

Acquisitions and Divestitures
	6 Months Ended Jun. 30, 2009 USD / shares
Notes to Financial Statements
Acquisitions:	11. Acquisitions/Divestitures: Acquisitions: During the six months ended June30, 2009, the company completed two acquisitions at an aggregate cost of $40 million. The Software segment completed two acquisitions in the second quarter: Outblaze Limited and Exeros,Inc., both privately held companies. Each acquisition further complemented and enhanced the companys portfolio of product offerings. Purchase price consideration was paid all in cash. These acquisitions are reported in the Consolidated Statement of Cash Flows net of acquired cash and cash equivalents. The table below reflects the purchase price related to these acquisitions and the resulting purchase price allocations as of June30, 2009: (Dollarsinmillions) Amortization Life(yrs.) Total Acquisitions Current assets $ 1 Fixed assets/noncurrent 0 Intangible assets: Goodwill N/A 33 Completed technology 5 5 Client relationships 5 1 IPRD N/A Other 5 0 Total assets acquired 40 Current liabilities (0 ) Noncurrent liabilities Total liabilities assumed (0 ) Total purchase price $ 40 The acquisitions were accounted for as purchase transactions, and accordingly, the assets and liabilities of the acquired entities were recorded at their estimated fair values at the date of acquisition. The primary items that generated the goodwill are the value of the synergies between the acquired companies and IBM and the acquired assembled workforce, neither of which qualify as an amortizable intangible asset. The overall weighted-average life of the identified amortizable intangible assets acquired is 5.0 years. With the exception of goodwill, these identified intangible assets will be amortized on a straight-line basis over their useful lives. Goodwill of $33 million has been assigned to the Software segment. Substantially all of the goodwill is not deductible for tax purposes.
Divestitures:	Divestitures: On March16, 2009, the company completed the sale of certain processes, resources, assets and third-party contracts related to its core logistics operations to Geodis. The company received proceeds of $365 million and recognized a net gain of $298 million on the transaction in the first quarter of 2009. The gain was net of the fair value of certain contractual terms, certain transaction costs and related real estate charges. As part of this transaction, the company outsourced its logistics operations to Geodis which enables the company to leverage industry-leading skills and scale and improve the productivity of the companys supply chain. In 2007, the company divested 51 percent of its printing business (InfoPrint) to Ricoh. The company also stated that it would divest its remaining ownership to Ricoh quarterly over a three year period from the closing date. At June30, 2009, the companys ownership in InfoPrint was 16.2 percent. See the companys 2008 Annual Report on page83 for additional information.

Intangible Assets Including Goo

Intangible Assets Including Goodwill
	6 Months Ended Jun. 30, 2009 USD / shares
Notes to Financial Statements
Intangible Assets Including Goodwill:	12. Intangible Assets Including Goodwill: The following table details the companys intangible asset balances by major asset class: AtJune30,2009 (Dollarsinmillions) GrossCarrying Accumulated NetCarrying Intangible asset class Amount Amortization Amount Capitalized software $ 1,829 $ (859 ) $ 970 Client-related 1,521 (768 ) 753 Completed technology 1,103 (370 ) 733 Patents/trademarks 181 (84 ) 97 Other(a) 111 (85 ) 26 Total $ 4,746 $ (2,166 ) $ 2,580 AtDecember31,2008 (Dollarsinmillions) GrossCarrying Accumulated NetCarrying Intangibleassetclass Amount Amortization Amount Capitalized software $ 1,861 $ (839 ) $ 1,022 Client-related 1,532 (663 ) 869 Completed technology 1,167 (327 ) 840 Patents/trademarks 188 (76 ) 112 Other(a) 154 (121 ) 35 Total $ 4,901 $ (2,023 ) $ 2,878 (a) Other intangibles are primarily acquired proprietary and non-proprietary business processes, methodologies and systems, and impacts from currency translation. The net carrying amount of intangible assets decreased $299 million during the first half of 2009, primarily due to amortization of acquired intangibles. The aggregate intangible amortization expense was $307 million and $618 million for the second quarter and first six months of 2009, respectively, versus $337 million and $654 million for the second quarter and first six months ended June30, 2008, respectively. In addition, in the first half of 2009, the company retired $478 million of fully amortized intangible assets, impacting both the gross carrying amount and accumulated amortization by this amount. The amortization expense for each of the five succeeding years relating to intangible assets currently recorded in the Consolidated Statement of Financial Position is estimated to be the following at June30, 2009: Capitalized Acquired (Dollars in millions) Software Intangibles Total 2009 (for Q3-Q4) $ 345 $ 235 $ 580 2010 444 394 838 2011 160 346 505 2012 22 278 300 2013 198 198 The changes in the goodwill balances by reportable segment, for the quarter ended June30, 2009, are as follows: Foreign Currency Purchase Translation (Dollarsinmillions) Balance Goodwill Price AndOther Balance Segment 12/31/08 Additions Adjustments Divestitures Adjustments 6/30/09 Global Business Services $ 3,870 $ $ $ $ 105 $ 3,975 Global Technology Services 2,616 82 2,699 Software 10,966 33 54 241 11,294 Systems and Technology 772 (6 ) 767 Total $ 18,226 $ 33 $ 48 $ $ 429 $ 18,737 Purchase price adjustments are related to acquisitions that were completed on or prior to December31, 2008 and are still

Restructuring-Related Liabiliti

Restructuring-Related Liabilities
	6 Months Ended Jun. 30, 2009 USD / shares
Notes to Financial Statements
Restructuring-Related Liabilities:	13. Restructuring-Related Liabilities: The following table provides a rollforward of the current and noncurrent liability balances for actions taken in the following periods: (1)the second quarter of 2005; (2)the fourth quarter of 2002 associated with the acquisition of the PricewaterhouseCoopers consulting business; (3)the second quarter of 2002 associated with the Microelectronics Division and the rebalancing of both the companys workforce and leased space resources; (4)the 2002 actions associated with the hard disk drive (HDD) business for reductions in workforce, manufacturing capacity and space; (5)the actions taken in 1999; and (6)the actions that were executed prior to 1994. Liability Liability asof asof (Dollarsinmillions) 12/31/2008 Payments OtherAdj.* 6/30/2009 Current: Workforce $ 95 $ (45 ) $ 8 $ 58 Space 23 (9 ) 7 21 Other 7 7 Total Current $ 125 $ (55 ) $ 15 $ 86 Noncurrent: Workforce $ 453 $ $ 8 $ 461 Space 23 (5 ) 19 Total Noncurrent $ 476 $ $ 3 $ 479 * The other adjustments column in the table above principally includes the reclassification of noncurrent to current, foreign currency translation adjustments and interest accretion.

Contingencies

Contingencies
	6 Months Ended Jun. 30, 2009 USD / shares
Notes to Financial Statements
Contingencies:	14. Contingencies: The company is involved in a variety of claims, demands, suits, investigations, tax matters and proceedings that arise from time to time in the ordinary course of its business, including actions with respect to contracts, intellectual property (IP), product liability, employment, benefits, securities, foreign operations and environmental matters. These actions may be commenced by a number of different parties, including competitors, partners, clients, current or former employees, government and regulatory agencies, stockholders and representatives of the locations in which the company does business. The following is a summary of the more significant legal matters involving the company. The company is a defendant in an action filed on March6, 2003 in state court in Salt Lake City, Utah by The SCO Group (SCO v. IBM). The company removed the case to Federal Court in Utah. Plaintiff is an alleged successor in interest to some of ATTs Unix IP rights, and alleges copyright infringement, unfair competition, interference with contract and breach of contract with regard to the companys distribution of AIX and Dynix and contribution of code to Linux. The company has asserted counterclaims, including breach of contract, violation of the Lanham Act, unfair competition, intentional torts, unfair and deceptive trade practices, breach of the General Public License that governs open source distributions, promissory estoppel and copyright infringement. In October2005, the company withdrew its patent counterclaims in an effort to simplify and focus the issues in the case and to expedite their resolution. Motions for summary judgment were heard in March2007, and the court has not yet issued its decision. On August10, 2007, the court in another suit, The SCO Group,Inc. v. Novell,Inc., issued a decision and order determining, among other things, that Novell is the owner of UNIX and UnixWare copyrights, and obligating SCO to recognize Novells waiver of SCOs claims against IBM and Sequent for breach of UNIX license agreements. At the request of the court in SCO v. IBM, on August31, 2007, each of the parties filed a status report with the court concerning the effect of the August10th Novell ruling on the SCO v. IBM case, including the pending motions. On September14, 2007, plaintiff filed for bankruptcy protection, and all proceedings in this case were stayed. In the SCO v. Novell case, on November25, 2008, SCO filed its notice of appeal to the U.S. Court of Appeals for the Tenth Circuit, which included an appeal of the August10, 2007 ruling. On November29, 2006, the company filed a lawsuit against Platform Solutions,Inc. (PSI) in the United States District Court for the Southern District of New York, alleging that PSI violated certain intellectual property rights of IBM. PSI asserted counterclaims against IBM. On January11, 2008, the court permitted T3 Technologies, a reseller of PSI computer systems, to intervene as a counterclaim-plaintiff. T3 claims that IBM violated certain antitrust laws by refusing to license its patents and trade secrets to PSI and by tying the sales of its mainframe computers to its mainframe operating syst

Commitments

Commitments
	6 Months Ended Jun. 30, 2009 USD / shares
Notes to Financial Statements
Commitments:	15. Commitments: The company's extended lines of credit to third-party entities include unused amounts of $4,623 million and $4,403 million at June30, 2009 and December31, 2008, respectively. A portion of these amounts was available to the companys business partners to support their working capital needs. In addition, the company has committed to provide future financing to its clients in connection with client purchase agreements for approximately $3,834 million and $3,342 million at June30, 2009 and December31, 2008, respectively. The company has applied the disclosure provisions of FIN 45, Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, to its agreements that contain guarantee or indemnification clauses. These disclosure provisions expand those required by SFAS No.5, by requiring a guarantor to disclose certain types of guarantees, even if the likelihood of requiring the guarantors performance is remote. The following is a description of arrangements in which the company is the guarantor. The company is a party to a variety of agreements pursuant to which it may be obligated to indemnify the other party with respect to certain matters. Typically, these obligations arise in the context of contracts entered into by the company, under which the company customarily agrees to hold the party harmless against losses arising from a breach of representations and covenants related to such matters as title to the assets sold, certain intellectual property (IP) rights, specified environmental matters, third-party performance of non-financial contractual obligations and certain income taxes. In each of these circumstances, payment by the company is conditioned on the other party making a claim pursuant to the procedures specified in the particular contract, which procedures typically allow the company to challenge the other partys claims. While typically indemnification provisions do not include a contractual maximum on the companys payment, the companys obligations under these agreements may be limited in terms of time and/or nature of claim, and in some instances, the company may have recourse against third parties for certain payments made by the company. It is not possible to predict the maximum potential amount of future payments under these or similar agreements, due to the conditional nature of the companys obligations and the unique facts and circumstances involved in each particular agreement. Historically, payments made by the company under these agreements have not had a material effect on the companys business, financial condition or results of operations. In addition, the company guarantees certain loans and financial commitments. The maximum potential future payment under these financial guarantees was $85 million and $50 million at June30, 2009 and December31, 2008, respectively. The fair value of the guarantees recognized in the Consolidated Statement of Financial Position is not material. Standard Warranty Liability Changes in the companys warranty liability balance are presented in the following table: (Dollarsinmillions) 2009

Subsequent Events

Subsequent Events
	6 Months Ended Jun. 30, 2009 USD / shares
Notes to Financial Statements
Subsequent Events:	16. Subsequent Events: On July28, 2009, the company announced that the Board of Directors approved a quarterly dividend of $0.55 per common share. The dividend is payable September10, 2009 to stockholders of record on August10, 2009. On July 28, 2009, the company announced that it had entered into a definitive merger agreement to acquire SPSS Inc., at a price of $50 per share, resulting in a total cash consideration of approximately $1.2 billion. The acquisition is subject to SPSS shareholder approval, applicable regulatory clearances and other customary closing conditions. It is expected to close later in the second half of 2009. This acquisition is expected to further expand the companys Information on Demand software portfolio and business analytics capabilities, including the range of offerings available through the companys recently announced Business Analytics and Optimization Consulting organization and network of Analytics Solution Centers.

Document and Entity Information

Document and Entity Information (USD $)
In Millions, except Share data	6 Months Ended Jun. 30, 2009	Jun. 30, 2008
Document and Entity Information
Document Type	10-Q
Document Period End Date	2009-06-30
Amendment Flag	false
Entity Registrant Name	International Business Machines Corp
Entity Central Index Key	0000051143
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Well-known Seasoned Issuer	Yes
Entity Common Stock, Shares Outstanding	1,310,883,577
Entity Public Float		$160,600