International Business Machines (IBM) 10-Q 27 Oct 09 2009 Q3 Quarterly report Financial data

Consolidated Statement of Earni

Consolidated Statement of Earnings (USD $)
In Millions, except Per Share data	3 Months Ended Sep. 30, 2009		3 Months Ended Sep. 30, 2008		9 Months Ended Sep. 30, 2009		9 Months Ended Sep. 30, 2008
Revenue:
Services	$13,806		$14,773		$40,462		$44,550
Sales	9,216		9,892		26,363		30,156
Financing	544		636		1,702		1,918
Total revenue	23,566		25,302	[1]	68,528	[1]	76,623	[1]
Cost:
Services	9,233		10,230		27,441		31,287
Sales	3,404		3,789		9,527		11,687
Financing	301		324		919		924
Total cost	12,938		14,342	[1]	37,888	[1]	43,898
Gross profit	10,627	[1]	10,959	[1]	30,640		32,725
Expense and other income:
Selling, general and administrative	5,013		5,644		15,392		17,553
Research, development and engineering	1,446		1,579		4,360		4,809
Intellectual property and custom development income	(294)		(267)		(864)		(825)
Other (income) and expense	5		(51)		(326)		(201)
Interest expense	84		159		321		482
Total expense and other income	6,255	[1]	7,064		18,882	[1]	21,818
Income before income taxes	4,373	[1]	3,895		11,757	[1]	10,907
Provision for income taxes	1,159		1,071		3,145		2,999
Net income	$3,214		$2,824		$8,612		$7,907
Earnings per share of common stock:
Assuming dilution	2.4		2.04	[2]	6.42		5.65	[2]
Basic	2.44		2.08	[2]	6.47		5.75	[2]
Weighted-average number of common shares outstanding: (millions)
Assuming dilution	1338.2		1384.1	[2]	1341.6		1399.2	[2]
Basic	1319.9		1359.5	[2]	1330.1		1376.7	[2]
Cash dividend per common share	0.55		0.5		1.6		1.4
[1]Amounts may not add due to rounding.
[2]Reflects the adoption of the Financial Accounting Standards Board (FASB) guidance in determining whether instruments granted in share-based payment transactions are participating securities. See Note 2, "Accounting Changes," on pages 7 to 10 for additional information.

Consolidated Statement of Finan

Consolidated Statement of Financial Position (USD $)
In Millions	Sep. 30, 2009		Dec. 31, 2008
Current assets:
Cash and cash equivalents	$9,532		$12,741
Marketable securities	1,980		166
Notes and accounts receivable - trade (net of allowances of $221 in 2009 and $226 in 2008)	9,426		10,906
Short-term financing receivables (net of allowances of $410 in 2009 and $351 in 2008)	12,944		15,477
Other accounts receivable (net of allowances of $16 in 2009 and $55 in 2008)	1,252		1,172
Inventories, at lower of average cost or market:
Finished goods	554		524
Work in process and raw materials	1,992		2,176
Total inventories	2,546		2,701	[1]
Deferred taxes	1,832		1,542
Prepaid expenses and other current assets	3,934		4,299
Total current assets	43,446		49,004
Plant, rental machines and other property	39,789		38,445
Less: Accumulated depreciation	25,600		24,140
Plant, rental machines and other property - net	14,189		14,305
Long-term financing receivables (net of allowances of $115 in 2009 and $179 in 2008)	10,229		11,183
Prepaid pension assets	2,711		1,601
Deferred taxes	6,341		7,270
Goodwill	19,272		18,226
Intangible assets - net	2,436		2,878
Investments and sundry assets	5,051		5,058
Total assets	103,675		109,524	[1]
Current liabilities:
Taxes	2,213		2,743
Short-term debt	4,885		11,236
Accounts payable	6,145		7,014
Compensation and benefits	4,311		4,623
Deferred income	9,703		10,239
Other accrued expenses and liabilities	5,704		6,580
Total current liabilities	32,960	[1]	42,435
Long-term debt	20,583		22,689
Retirement and nonpension postretirement benefit obligations	18,427		19,452
Deferred income	3,348		3,171
Other liabilities	9,863		8,192	[2]
Total liabilities	85,182	[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 - 2,113,714,035; 2008 - 2,096,981,860)	40,482		39,129
Retained earnings	76,812		70,353
Treasury stock, at cost (shares: 2009 - 800,111,099; 2008 - 757,885,937)	(78,411)		(74,171)
Accumulated other comprehensive income/(loss)	(20,487)		(21,845)
Total IBM stockholders' equity	18,396		13,465	[1],[2]
Noncontrolling interests	98		119	[2]
Total stockholders' equity	18,493	[1]	13,584	[2]
Total liabilities and stockholders' equity	$103,675		$109,524	[1]
[1]Amounts may not add due to rounding.
[2]Reflects the adoption of the FASB guidance on noncontrolling interests in consolidated financial statements. See Note 2, "Accounting Changes," on pages 7 to 10 for additional information.

Statement of Financial Position

Statement of Financial Position Parenthetical (USD $)
In Millions, except Share data	Sep. 30, 2009	Dec. 31, 2008
Statement of Financial Position
Allowance for doubtful accounts - notes and accounts receivable - trade	$221	$226
Allowance for doubtful accounts - short-term financing receivables	410	351
Allowance for doubtful accounts - other accounts receivable	16	55
Allowance for doubtful accounts - long-term financing receivables	$115	$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	2,113,714,035	2,096,981,860
Treasury stock, shares	800,111,099	757,885,937

Consolidated Statement of Cash

Consolidated Statement of Cash Flows (USD $)
In Millions	9 Months Ended Sep. 30, 2009		9 Months Ended Sep. 30, 2008
Cash flow from operating activities:
Net income	$8,612		$7,907
Adjustments to reconcile net income to cash provided from operating activities:
Depreciation	2,806		3,144
Amortization of intangibles	923		985
Stock-based compensation	416		501
Net gain on asset sales and other	(350)		(353)
Changes in operating assets and liabilities, net of acquisitions/divestitures	1,917		7
Net cash provided by operating activities	14,325	[1]	12,191
Cash flow from investing activities:
Payments for plant, rental machines and other property, net of proceeds from dispositions	(2,121)		(2,951)
Investment in software	(476)		(555)
Acquisition of businesses, net of cash acquired	(125)		(6,017)
Divestiture of businesses, net of cash transferred	406		71
Non-operating finance receivables - net	490		203
Purchases of marketable securities and other investments	(4,491)		(4,260)
Proceeds from disposition of marketable securities and other investments	2,082		5,103
Net cash used in investing activities	(4,234)	[1]	(8,405)	[1]
Cash flow from financing activities:
Proceeds from new debt	2,414		8,251
Payments to settle debt	(10,760)		(7,597)
Short-term repayments less than 90 days - net	(151)		(1,523)
Common stock repurchases	(4,365)		(9,838)
Common stock transactions - other	1,502		3,658
Cash dividends paid	(2,133)		(1,916)
Net cash used in financing activities	(13,494)	[1]	(8,964)	[1]
Effect of exchange rate changes on cash and cash equivalents	193		(58)
Net change in cash and cash equivalents	(3,210)		(5,236)
Cash and cash equivalents at January 1	12,741		14,991
Cash and cash equivalents at September 30	$9,532		$9,755
[1]Amounts may not add due to rounding.

Basis of Presentation

Basis of Presentation
	9 Months Ended Sep. 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 October27, 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
	9 Months Ended Sep. 30, 2009 USD / shares
Notes to Financial Statements
Accounting Changes:	2. Accounting Changes: In October2009, the Financial Accounting Standards Board (FASB) issued amended revenue recognition guidance for arrangements with multiple deliverables. The new guidance eliminates the residual method of revenue recognition and allows the use of managements best estimate of selling price for individual elements of an arrangement when vendor specific objective evidence (VSOE), vendor objective evidence (VOE) or third-party evidence (TPE) is unavailable. For the company, this guidance is effective for all new or materially modified arrangements entered into on or after January1, 2011 with earlier application permitted as of the beginning of a fiscal year. Full retrospective application of the new guidance is optional. The company is currently assessing its implementation of this new guidance, but does not expect a material impact on the Consolidated Financial Statements. In October2009, the FASB issued guidance which amends the scope of existing software revenue recognition accounting. Tangible products containing software components and non-software components that function together to deliver the products essential functionality would be scoped out of the accounting guidance on software and accounted for based on other appropriate revenue recognition guidance. For the company, this guidance is effective for all new or materially modified arrangements entered into on or after January1, 2011 with earlier application permitted as of the beginning of a fiscal year. Full retrospective application of the new guidance is optional. This guidance must be adopted in the same period that the company adopts the amended accounting for arrangements with multiple deliverables described in the preceding paragraph. The company is currently assessing its implementation of this new guidance, but does not expect a material impact on the Consolidated Financial Statements. In September2009, the FASB issued amended guidance concerning fair value measurements of investments in certain entities that calculate net asset value per share (or its equivalent). If fair value is not readily determinable, the amended guidance permits, as a practical expedient, a reporting entity to measure the fair value of an investment using the net asset value per share (or its equivalent) provided by the investee without further adjustment. The amendments are effective for interim and annual periods ending after December15, 2009. The company does not expect a material impact on the Consolidated Financial Statements due to the adoption of this amended guidance. In August2009, the FASB issued guidance on the measurement of liabilities at fair value. The guidance provides clarification that in circumstances in which a quoted market price in an active market for an identical liability is not available, an entity is required to measure fair value using a valuation technique that uses the quoted price of an identical liability when traded as an asset or, if unavailable, quoted prices for similar liabilities or similar assets when traded as assets. If none of this information is available, an entity should use a valuation technique in accordance with exi

Fair Value

Fair Value
	9 Months Ended Sep. 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 September30, 2009 and December31, 2008. (Dollars in millions) At September30, 2009 Level 1 Level 2 Level 3 Netting (1) Total Assets: Cash and cash equivalents $ 1,975 $ 5,087 $ $ $ 7,062 Marketable securities 1,980 1,980 Derivative assets (2) 890 (707 ) 183 Investments and sundry assets 290 17 307 Total Assets $ 2,265 $ 7,974 $ $ (707 ) $ 9,532 Liabilities: Derivative liabilities (3) $ $ 2,165 $ $ (707 ) $ 1,458 Total Liabilities $ $ 2,165 $ $ (707 ) $ 1,458 (1) Represents netting of derivative exposures covered by a qualifying master netting agreement. (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 September30, 2009 are $150 million and $739 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 September30, 2009 are $1,162 million and $1,002 million, respectively. (Dollarsinmillions) 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. (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 September30, 2009 and December31, 2008, the company did not have any financial assets or financial liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) in the Consolidated Statement of Financial P

Fair Value of Financial Instrum

Fair Value of Financial Instruments
	9 Months Ended Sep. 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 consolidated 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 Fair value of publicly-traded long-term debt is based on quoted market prices for the identical liability when traded as an asset in an active market. For other long-term debt for which a quoted market price is not available, an expected present value technique that uses rates currently available to the company for debt with similar terms and remaining maturities is used to estimate fair value. The carrying amount of long-term debt is $20,583 million and $22,689 million and the estimated fair value is $22,338 million and $23,351 million at September30, 2009 and December31, 2008, respectively.

Financing Receivables

Financing Receivables
	9 Months Ended Sep. 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 September30, At December31, (Dollars in millions) 2009 2008 Current: Net investment in sales-type and direct financing leases $ 4,181 $ 4,226 Commercial financing receivables 3,800 5,781 Client loan receivables 4,411 4,861 Installment payment receivables 552 608 Total $ 12,944 $ 15,477 Noncurrent: Net investment in sales-type and direct financing leases $ 5,397 $ 5,938 Commercial financing receivables 60 94 Client loan receivables 4,367 4,718 Installment payment receivables 405 433 Total $ 10,229 $ 11,183 Net investment in sales-type and direct financing leases is for leases that relate principally to the companys systems products and are for terms ranging generally from two to six years. Net investment in sales-type and direct financing leases includes unguaranteed residual values of $868 million and $916 million at September30, 2009 and December31, 2008, respectively, and is reflected net of unearned income of $962 million and $1,049 million and of allowance for doubtful accounts of $179 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 generally 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 $260 million and $373 million at September30, 2009 and December31, 2008, respectively. The company did not have any financing receivables held for sale as of September30, 2009 and December31, 2008.

Derivatives and Hedging Transac

Derivatives and Hedging Transactions
	9 Months Ended Sep. 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 September30, 2009 was $906 million for which the company has posted collateral of $217 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 September30, 2009 was $890 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 $707 million of liabilities included in master netting arrang

Stock-Based Compensation

Stock-Based Compensation
	9 Months Ended Sep. 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 September30, Nine Months Ended September30, (Dollars in millions) 2009 2008 2009 2008 Cost $ 22 $ 29 $ 69 $ 88 Selling, general and administrative 114 116 313 368 Research, development and engineering 11 15 34 44 Pre-tax stock-based compensation cost 147 160 416 501 Income tax benefits (52 ) (58 ) (147 ) (168 ) Total stock-based compensation cost $ 95 $ 103 $ 270 $ 333 The reduction in pre-tax stock-based compensation cost for the three months ended September30, 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 ($39 million), partially offset by an increase related to restricted and performance-based stock units ($26 million). The reduction in pre-tax stock-based compensation cost for the nine months ended September30, 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 ($128 million), partially offset by an increase related to restricted and performance-based stock units ($44 million). As of September30, 2009, the total unrecognized compensation cost of $1,139 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 September30, 2009 and 2008.

Segments

Segments
	9 Months Ended Sep. 30, 2009 USD / shares
Notes to Financial Statements
Segments:	8. Segments: The following tables reflect 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 Global Technology Global Business Systems and Global Total (Dollarsinmillions) Services Services Software Technology Financing Segments For the Three Months Ended September30, 2009: External revenue $ 9,434 $ 4,338 $ 5,114 $ 3,917 $ 536 $ 23,339 Internal revenue 355 214 656 260 419 1,904 Total revenue $ 9,789 $ 4,552 $ 5,770 $ 4,177 $ 955 $ 25,243 Pre-tax income $ 1,471 $ 659 $ 1,850 $ 225 $ 408 $ 4,614 Revenue year-to-year change (4.5 )% (11.8 )% (2.3 )% (10.2 )% (12.4 )% (6.7 )% Pre-tax income year-to-year change 23.8 % (8.9 )% 21.2 % (20.6 )% 16.8 % 13.3 % Pre-tax income margin 15.0 % 14.5 % 32.1 % 5.4 % 42.7 % 18.3 % For the Three Months Ended September30, 2008: External revenue $ 9,864 $ 4,900 $ 5,249 $ 4,431 $ 633 $ 25,077 Internal revenue 384 259 655 223 456 1,978 Total revenue $ 10,248 $ 5,160 $ 5,904 $ 4,654 $ 1,090 $ 27,055 Pre-tax income $ 1,189 $ 724 $ 1,527 $ 283 $ 349 $ 4,072 Pre-tax income margin 11.6 % 14.0 % 25.9 % 6.1 % 32.0 % 15.1 % Reconciliations to IBM as Reported: Three MonthsEnded Three MonthsEnded (Dollarsinmillions) September30,2009 September30,2008 Revenue: Total reportable segments $ 25,243 $ 27,055 Eliminations/other (1,677 ) (1,753 ) Total IBM Consolidated $ 23,566 $ 25,302 Pre-tax income: Total reportable segments $ 4,614 $ 4,072 Eliminations/other (241 )* (177 )* Total IBM Consolidated $ 4,373 $ 3,895 * Includes the gain from the divestiture of the companys printing business, the interest expense associated with the debt to support the companys accelerated

Stockholders Equity

Stockholders Equity
	1/1/2009 - 9/30/2009 USD / shares
Stockholders' Equity
Stockholders' Equity	9. Stockholders Equity: (Dollars in millions) Common Stock and Additional Paidin Capital Retained Earnings Treasury Stock Accumulated Other Comprehensive Income/(Loss) Total IBM Stockholders Equity Noncontrolling Interests* Total Stockholders Equity Stockholders equity, January 1, 2009 $ 39,129 $ 70,353 $ (74,171 ) $ (21,845 ) $ 13,465 $ 119 $ 13,584 Net income 8,612 8,612 8,612 Other comprehensive income, net of tax (total) 1,358 1,358 1,358 Cash dividends declared common stock (2,133 ) (2,133 ) (2,133 ) Stock transactions related to employee plans net 1,353 (20 ) 166 1,499 1,499 Other treasury shares purchased not retired (4,406 ) (4,406 ) (4,406 ) Changes in noncontrolling interests (22 ) (22 ) Stockholders equity - September30, 2009 $ 40,482 $ 76,812 $ (78,411 ) $ (20,487 ) $ 18,396 $ 98 $ 18,493 (Dollars in millions) Common Stock and Additional Paidin Capital Retained Earnings Treasury Stock Accumulated Other Comprehensive Income/(Loss) Total IBM Stockholders Equity Noncontrolling Interests* Total Stockholders Equity Stockholders equity, January 1, 2008 $ 35,188 $ 60,640 $ (63,945 ) $ (3,414 ) $ 28,470 $ 145 $ 28,615 Net income 7,907 7,907 7,907 Other comprehensive income, net of tax (total) (970 ) (970 ) (970 ) Cash dividends declared common stock (1,916 ) (1,916 ) (1,916 ) Stock transactions related to employee plans net 3,632 (33 ) 387 3,986 3,986 Other treasury shares purchased not retired 54 (10,013 ) (9,959 ) (9,959 ) Changes in noncontrolling interests $ (45 ) $ (45 ) Stockholders equity September30, 2008 $ 38,874 $ 66,600 $ (73,571 ) $ (4,384 ) $ 27,519 $ 100 $ 27,619 * Reflects the adoption of the FASB guidance on noncontrolling interests in consolidated financial statements. See Note 2, Accounting Changes, on pages7 to 10 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 September30, Nine Months Ended September30, (Dollars in millions) 2009 2008 2009 2008 Net income $ 3,214 $ 2,824 $ 8,612 $ 7,907 Other comprehensive income/(loss) net of tax: Foreign currency translation adjustments 912 (2,000 ) 1,678 (1,543 ) Prior service costs, net gains/(losses) and transition assets/(obligations) 212 128 563 404 Net unr

Retirement-Related Benefits

Retirement-Related Benefits
	9 Months Ended Sep. 30, 2009 USD / shares
Retirement-Related Benefits Disclosure:
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: ForthethreemonthsendedSeptember30: (Dollarsinmillions) 2009 2008 Yr.toYr. Percent Change Retirement-related plans cost: Defined benefit and contribution pension plans cost $ 248 $ 288 (13.9 )% Nonpension postretirement plans cost 88 93 (5.4 ) Total $ 336 $ 381 (11.8 )% For the nine months ended September30: (Dollars in millions) 2009 2008 Yr. to Yr. Percent Change Retirement-related plans cost: Defined benefit and contribution pension plans cost $ 809 $ 939 (13.8 )% Nonpension postretirement plans cost 261 278 (6.1 ) Total $ 1,070 $ 1,217 (12.1 )% The following tables provide the components of the cost/(income) for the companys pension plans: Cost/(Income) of Pension Plans ForthethreemonthsendedSeptember30: U.S. Plans Non-U.S. Plans (Dollarsinmillions) 2009 2008* 2009 2008* Service cost $ $ $ 152 $ 166 Interest cost 671 689 490 519 Expected return on plan assets (1,002 ) (994 ) (652 ) (689 ) Amortization of prior service cost/(credits) 2 (2 ) (32 ) (32 ) Recognized actuarial losses 103 73 159 154 Plan amendments/curtailments/settlements (3 ) Multiemployer plan/other costs 17 15 Total net periodic pension (income)/cost of defined benefit plans (226 ) (234 ) 131 132 Cost of defined contribution plans 221 254 122 136 Total pension plan (income)/cost recognized in the Consolidated Statement of Earnings $ (5 ) $ 20 $ 253 $ 268 *Reclassified to conform with 2009 presentation. For the nine months ended September30: U.S. Plans Non-U.S. Plans (Dollars in millions) 2009 2008* 2009 2008* Service cost $ $ $ 435 $ 502 Interest cost 2,012 2,067 1,396 1,584 Expected return on plan assets (3,007 ) (2,983 ) (1,865 ) (2,107 ) Amortization of prior service cost/(credits) 7 (5 ) (93 ) (98 ) Recognized actuarial losses 308 218 462 469 Plan amendments/curtailments/settlements 5 Multiemployer plan/other costs 41 46 Total net periodic pension (income)/cost of defined benefit plans (679 ) (703 ) 382 395 Cost of defined contribution plans 756 828 351 420 Total pension plan cost recognized in the Consolidated Statement of Earnings $ 76 $

Acquisitions and Divestitures

Acquisitions and Divestitures
	9 Months Ended Sep. 30, 2009 USD / shares
Notes to Financial Statements
Acquisitions:	11. Acquisitions/Divestitures: Acquisitions: During the nine months ended September30, 2009, the company completed three acquisitions at an aggregate cost of $60 million. The Software segment completed acquisitions of three privately held companies: in the second quarter, Outblaze Limited and Exeros,Inc.; and in the third quarter, Ounce Labs,Inc. 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 September30, 2009: (Dollarsinmillions) AmortizationLife(yrs.) TotalAcquisitions Current assets $ 2 Fixed assets/noncurrent 0 Intangible assets: Goodwill N/A 54 Completed technology 5 7 Client relationships 5 1 IPRD N/A Other 5 1 Total assets acquired 64 Current liabilities (3 ) Noncurrent liabilities Total liabilities assumed (3 ) Total purchase price $ 60 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 $54 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 September30, 2009, the companys ownership in InfoPrint was 12.1 percent. See the companys 2008 Annual Report on page83 for additional information.

Intangible Assets Including Goo

Intangible Assets Including Goodwill
	9 Months Ended Sep. 30, 2009 USD / shares
Intangible Assets Including Goodwill:
Intangible Assets Including Goodwill	12. Intangible Assets Including Goodwill: The following table details the companys intangible asset balances by major asset class: AtSeptember30,2009 (Dollarsinmillions) GrossCarrying Accumulated NetCarrying Intangibleassetclass Amount Amortization Amount Capitalized software $ 1,798 $ (854 ) $ 944 Client-related 1,525 (830 ) 694 Completed technology 1,106 (419 ) 686 Patents/trademarks 182 (94 ) 88 Other(a) 115 (92 ) 23 Total $ 4,725 $ (2,289 ) $ 2,436 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 $443 million during the first nine months of 2009, primarily due to the amortization of acquired intangibles. The aggregate intangible amortization expense was $313 million and $931 million for the third quarter and first nine months of 2009, respectively, versus $331 million and $985 million for the third quarter and first nine months ended September30, 2008, respectively. In addition, in the first nine months of 2009, the company retired $668 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 September30, 2009: Capitalized Acquired (Dollars in millions) Software Intangibles Total 2009 (for Q4) $ 178 $ 112 $ 291 2010 508 395 902 2011 215 346 561 2012 43 278 322 2013 201 201 The changes in the goodwill balances by reportable segment, for the quarter ended September30, 2009, are as follows: Foreign Currency Purchase Translation (Dollarsinmillions) Balance Goodwill Price AndOther Balance Segment 12/31/2008 Additions Adjustments Divestitures Adjustments 9/30/2009 Global Business Services $ 3,870 $ $ $ $ 179 $ 4,049 Global Technology Services 2,616 155 2,772 Software 10,966 54 36 629 11,685 Systems and Technology 772 (6 ) 1

Restructuring-Related Liabiliti

Restructuring-Related Liabilities
	9 Months Ended Sep. 30, 2009 USD / shares
Restructuring-Related Liabilities
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.* 9/30/2009 Current: Workforce $ 95 $ (73 ) $ 11 $ 34 Space 23 (14 ) 10 20 Other 7 7 Total Current $ 125 $ (87 ) $ 22 $ 60 Noncurrent: Workforce $ 453 $ $ 34 $ 487 Space 23 (8 ) 16 Total Noncurrent $ 476 $ $ 26 $ 503 * 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
	9 Months Ended Sep. 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 August24, 2009, the U.S. Court of Appeals reversed the August10, 2007 ruling and remanded the SCO v. Novell case for trial. Novells motion for rehearing en banc is pending. On August25, 2009, the U.S. Bankruptcy Court for the District of Delaware approved the appointment of a Chapter 11 Trustee of SCO. 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,

Commitments

Commitments
	9 Months Ended Sep. 30, 2009 USD / shares
Notes to Financial Statements
Commitments:	15. Commitments: The companys extended lines of credit to third-party entities include unused amounts of $4,322 million and $4,403 million at September30, 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 $2,758 million and $3,342 million at September30, 2009 and December31, 2008, respectively. The company has applied the guidance 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 $86 million and $50 million at September30, 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 2008 Balance at January1 $ 358 $ 412 Current period accruals 245 294 Accrual adjustments to reflect actual experience (0 ) 37 Charges incurred (309 ) (373 ) Balance at September30

Subsequent Events

Subsequent Events
	9 Months Ended Sep. 30, 2009 USD / shares
Notes to Financial Statements
Subsequent Events:	16. Subsequent Events: On October27, 2009, the company announced that the Board of Directors approved a quarterly dividend of $0.55 per common share. The dividend is payable December10, 2009 to stockholders of record on November10, 2009. In addition, on October27, 2009, the company announced that the Board of Directors authorized $5 billion in additional funds for use in the companys common stock repurchase program. On October 26, 2009, the company announced that it had signed an agreement with Dassault Systems (DS) under which DS would acquire the companys activities associated with sales and support of DSs product lifecycle management (PLM) software solutions, including customer contracts and related assets. This transaction is subject to customary closing conditions and is not expected to close until the first half of 2010. The company expects to record a gain when this transaction is completed. On October5, 2009, the company announced that it had signed an agreement with Bank of America Corporation to acquire the core operating assets of Wilshire Credit Corporation, including the Wilshire mortgage servicing platform. This acquisition continues the companys strategic focus on the mortgage services industry and strengthens its commitment to deliver mortgage business process outsourcing solutions. The agreement is subject to customary closing conditions and is not expected to close until the first quarter of 2010. On October2, 2009, the company completed the acquisition of SPSS,Inc., a publicly-held company, for cash consideration of approximately $1.2 billion. This acquisition strengthens the companys business analytics and optimization strategy by providing predictive analytic capabilities that can help customers predict future events and proactively act upon that insight. SPSS will be integrated into the companys Information Management software portfolio. On October1, 2009, the company completed the divestiture of its UniData and UniVerse software products and related tools to Rocket Software, a privately-held global software development firm.

Document and Entity Information

Document and Entity Information (USD $)
In Millions, except Share data	9 Months Ended Sep. 30, 2009	Jun. 30, 2008
Document and Entity Information
Document Type	10-Q
Document Period End Date	2009-09-30
Amendment Flag	false
Entity Registrant Name	International Business Machines Corporation
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	1,313,602,936
Entity Public Float		$160,600