International Business Machines (IBM) 10-Q 27 Apr 10 2010 Q1 Quarterly report Financial data

CONSOLIDATED STATEMENT OF EARNI

CONSOLIDATED STATEMENT OF EARNINGS (USD $)
In Millions, except Per Share data	3 Months Ended Mar. 31, 2010		3 Months Ended Mar. 31, 2009
Revenue:
Services	$13,805		$13,178
Sales	8,508		7,949
Financing	545		584
Total revenue	22,857	[1]	21,711
Cost:
Services	9,384		9,063
Sales	3,224		2,902
Financing	273		316
Total cost	12,880	[1]	12,280	[1]
Gross profit	9,976	[1]	9,431
Expense and other income:
Selling, general and administrative	5,677		5,264
Research, development and engineering	1,509		1,480
Intellectual property and custom development income	(261)		(268)
Other (income) and expense	(545)		(304)
Interest expense	82		136
Total expense and other income	6,462		6,309	[1]
Income before income taxes	3,515	[1]	3,122
Provision for income taxes	914		827
Net income	$2,601		$2,295
Earnings per share of common stock:
Assuming dilution (in dollars per share)	1.97		1.7
Basic (in dollars per share)	$2		1.71
Weighted-average number of common shares outstanding: (millions)
Assuming dilution (in shares)	1321.6		1349.5
Basic (in shares)	1301.2		1344.3
Cash dividend per common share (in dollars per share)	0.55		0.5
[1]Amounts may not add due to rounding.

CONSOLIDATED STATEMENT OF FINAN

CONSOLIDATED STATEMENT OF FINANCIAL POSITION (USD $)
In Millions	Mar. 31, 2010		Dec. 31, 2009
Current assets:
Cash and cash equivalents	$12,472		$12,183
Marketable securities	1,505		1,791
Notes and accounts receivable - trade (net of allowances of $214 in 2010 and $217 in 2009)	9,324		10,736
Short-term financing receivables (net of allowances of $415 in 2010 and $438 in 2009)	13,083		14,914
Other accounts receivable (net of allowances of $9 in 2010 and $15 in 2009)	1,104		1,143
Inventories, at lower of average cost or market:
Finished goods	555		533
Work in process and raw materials	1,969		1,960
Total inventories	2,524		2,494	[1]
Deferred taxes	1,565		1,730
Prepaid expenses and other current assets	4,121		3,946
Total current assets	45,697	[1]	48,935	[1]
Plant, rental machines and other property	39,018		39,596
Less: Accumulated depreciation	25,178		25,431
Plant, rental machines and other property - net	13,841	[1]	14,165
Long-term financing receivables (net of allowances of $94 in 2010 and $97 in 2009)	9,542		10,644
Prepaid pension assets	3,289		3,001
Deferred taxes	3,537		4,195
Goodwill	20,889		20,190
Intangible assets - net	2,618		2,513
Investments and sundry assets	5,794		5,379
Total assets	105,208	[1]	109,022
Current liabilities:
Taxes	2,775		3,826
Short-term debt	5,014		4,168
Accounts payable	6,345		7,436
Compensation and benefits	3,701		4,505
Deferred income	11,456		10,845
Other accrued expenses and liabilities	5,285		5,223
Total current liabilities	34,575	[1]	36,002	[1]
Long-term debt	21,305		21,932
Retirement and nonpension postretirement benefit obligations	15,216		15,953
Deferred income	3,456		3,562
Other liabilities	8,506		8,819
Total liabilities	83,059	[1]	86,267	[1]
IBM stockholders' equity:
Common stock, par value $0.20 per share, and additional paid-in capital Shares authorized: 4,687,500,000 Shares issued: 2010 - 2,135,047,313 / 2009 - 2,127,016,668	42,665		41,810
Retained earnings	82,783		80,900
Treasury stock - at cost Shares: 2010 - 852,699,660 / 2009 - 821,679,245	(85,238)		(81,243)
Accumulated other comprehensive income/(loss)	(18,178)		(18,830)
Total IBM stockholders' equity	22,033	[1]	22,637
Noncontrolling interests	116		118
Total equity	22,149		22,755
Total liabilities and equity	$105,208		$109,022
[1]Amounts may not add due to rounding.

1_CONSOLIDATED STATEMENT OF FIN

CONSOLIDATED STATEMENT OF FINANCIAL POSITION (Parenthetical) (USD $)
In Millions, except Share data	Mar. 31, 2010	Dec. 31, 2009
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Notes and accounts receivable - trade, allowances	$214	$217
Short-term financing receivables, allowances	415	438
Other accounts receivable, allowances	9	15
Long-term financing receivables, allowances	$94	$97
Common stock, par value (in dollars per share)	0.2	0.2
Common stock, Shares authorized: (in shares)	4,687,500,000	4,687,500,000
Common stock, Shares issued: (in shares)	2,135,047,313	2,127,016,668
Treasury stock, Shares: (in shares)	852,699,660	821,679,245

CONSOLIDATED STATEMENT OF CASH

CONSOLIDATED STATEMENT OF CASH FLOWS (USD $)
In Millions	3 Months Ended Mar. 31, 2010		3 Months Ended Mar. 31, 2009
Cash flow from operating activities:
Net income	$2,601		$2,295
Adjustments to reconcile net income to cash provided from operating activities:
Depreciation	924		917
Amortization of intangibles	286		312
Stock-based compensation	169		137
Net (gain)/loss on asset sales and other	(578)		(298)
Changes in operating assets and liabilities, net of acquisitions/divestitures	1,033		1,024
Net cash provided by operating activities	4,437	[1]	4,386	[1]
Cash flow from investing activities:
Payments for plant, rental machines and other property, net of proceeds from dispositions	(758)		(599)
Investment in software	(146)		(161)
Acquisition of businesses, net of cash acquired	(824)		(21)
Divestiture of businesses, net of cash transferred			356
Non-operating finance receivables - net	457		387
Purchases of marketable securities and other investments	(1,747)		(922)
Proceeds from disposition of marketable securities and other investments	2,319		912
Net cash used in investing activities	(699)		(48)
Cash flow from financing activities:
Proceeds from new debt	1,190		913
Payments to settle debt	(2,382)		(3,478)
Short-term borrowings/(repayments) less than 90 days - net	1,673		181
Common stock repurchases	(4,017)		(1,765)
Common stock transactions - other	885		242
Cash dividends paid	(718)		(675)
Net cash used in financing activities	(3,368)	[1]	(4,583)	[1]
Effect of exchange rate changes on cash and cash equivalents	(81)		(202)
Net change in cash and cash equivalents	289		(447)
Cash and cash equivalents at January 1	12,183		12,741
Cash and cash equivalents at March 31	$12,472		$12,294
[1]Amounts may not add due to rounding.

Basis of Presentation

Basis of Presentation
	3 Months Ended Mar. 31, 2010
Basis of Presentation:
Basis of Presentation:	1. Basis of Presentation: The accompanying Consolidated Financial Statements and footnotes thereto of the International Business Machines Corporation (IBM and/or the company) have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The financial statements and footnotes are unaudited. In the opinion of the companys management, 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 GAAP requires management to make estimates and assumptions that affect the 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 2009 Annual Report on pages52 to 54 for a discussion of the companys critical accounting estimates. Interim results are not necessarily indicative of financial results for a full year. The information included in this Form10-Q should be read in conjunction with the companys 2009 Annual Report. Noncontrolling interest amounts in income of $2 million, net of tax, for the three months ended March31, 2010 and March31, 2009, respectively, are not presented separately in the Consolidated Statement of Earnings due to immateriality, but are reflected within the other (income) and expense line item. Additionally, changes to noncontrolling interests are presented in Note 10, Equity Activity, on page25. Within the financial tables presented, 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. Certain prior year amounts have been reclassified to conform to the current year presentation. This is annotated where applicable.

Accounting Changes

Accounting Changes
	3 Months Ended Mar. 31, 2010
Accounting Changes:
Accounting Changes:	2. Accounting Changes: In January2010, the Financial Accounting Standards Board (FASB) issued additional disclosure requirements for fair value measurements. The guidance requires previous fair value hierarchy disclosures to be further disaggregated by class of assets and liabilities. A class is often a subset of assets or liabilities within a line item in the statement of financial position. In addition, significant transfers between Levels 1 and 2 of the fair value hierarchy are required to be disclosed. These additional requirements became effective January1, 2010 for quarterly and annual reporting. These amendments did not have an impact on the consolidated financial results as this guidance relates only to additional disclosures. See Note 4, Fair Value, on pages11 to 13 for further information. In addition, the fair value disclosure amendments also require more detailed disclosures of the changes in Level 3 instruments. These changes will be effective January1, 2011 and are not expected to have an impact on the consolidated financial results as this guidance only relates to additional disclosures. In October2009, the FASB issued amended revenue recognition guidance for arrangements with multiple deliverables. The new guidance requires the use of managements best estimate of selling price (BESP) for the deliverables in an arrangement when vendor specific objective evidence (VSOE), vendor objective evidence (VOE) or third party evidence (TPE) of the selling price is not available. In addition, excluding specific software revenue guidance, the residual method of allocating arrangement consideration is no longer permitted, and an entity is required to allocate arrangement consideration using the relative selling price method. In accordance with the guidance, the company has elected to early adopt its provisions as of January1, 2010 on a prospective basis for all new or materially modified arrangements entered into on or after that date. The adoption of this guidance did not have a material impact on the Consolidated Financial Statements. Also, in October2009, the FASB issued guidance which amended the scope of existing software revenue recognition guidance. Tangible products containing software components and non-software components that function together to deliver the tangible products essential functionality are no longer within the scope of software revenue guidance and are accounted for based on other applicable revenue recognition guidance. In addition, the amendments require that hardware components of a tangible product containing software components are always excluded from the software revenue guidance. This guidance must be adopted in the same period that the company adopts the amended guidance for arrangements with multiple deliverables described in the preceding paragraph. Therefore, the company elected to early adopt this guidance as of January1, 2010 on a prospective basis for all new or materially modified arrangements entered into on or after that date. The adoption of this guidance did not have a material impact on the Consolidated Financial Statements. See Note 3, Revenue Recognition for Arrangements with Mult

Revenue Recognition

Revenue Recognition
	3 Months Ended Mar. 31, 2010
Revenue Recognition for Arrangements with Multiple Deliverables:
Revenue Recognition for Arrangements with Multiple Deliverables:	3. Revenue Recognition for Arrangements with Multiple Deliverables: As discussed in Note 2, Accounting Changes, on page7, effective January1, 2010 the company adopted on a prospective basis for all new or materially modified arrangements entered into on or after that date the amended accounting guidance for multiple-deliverable revenue arrangements and the amended guidance related to the scope of existing software revenue recognition guidance. The amended guidance does not generally change the units of accounting for the companys revenue transactions. Most of the companys products and services qualify as separate units of accounting. The company enters into revenue arrangements that may consist of multiple deliverables of its products and services based on the needs of its clients. These arrangements may include any combination of services, software, hardware and/or financing. For example, a client may purchase a server that includes operating system software. In addition, the arrangement may include post-contract support for the software and a contract for post-warranty maintenance service for the hardware. These types of arrangements can also include financing provided by the company. These arrangements consist of multiple deliverables, with the hardware and software delivered in one reporting period and the software support and hardware maintenance services delivered across multiple reporting periods. In another example, a client may outsource the running of its datacenter operations to the company on a long term, multiple year basis and periodically purchase servers and/or software products from the company to upgrade or expand its facility. The outsourcing services are provided on a continuous basis across multiple reporting periods and the hardware and software products are delivered in one reporting period. To the extent that a deliverable in a multiple-deliverable arrangement is subject to specific guidance that deliverable is accounted for in accordance with such specific guidance. Examples of such arrangements may include leased hardware which is subject to specific leasing guidance or software which is subject to specific software revenue recognition guidance on whether and/or how to separate multiple deliverable arrangements into separate units of accounting (separability) and how to allocate the arrangement consideration among those separate units of accounting (allocation). For all other deliverables in multiple-deliverable arrangements, the guidance below is applied for separability and allocation. A multiple-deliverable arrangement is separated into more than one unit of accounting if the following criteria are met: The delivered item(s)has value to the client on a stand-alone basis; and If the arrangement includes a general right of return relative to the delivered item(s), delivery or performance of the undelivered item(s) is considered probable and substantially in the control of the company. If these criteria are not met, the arrangement is accounted for as one unit of accounting which would result in revenue being recognized ratably over the contract term or being deferred until the earlier of when such c

Fair Value

Fair Value
	3 Months Ended Mar. 31, 2010
Fair Value:
Fair Value:	4. Fair Value: Exit prices are used to measure assets and liabilities that fall within the scope of the fair value measurements guidance. Under this guidance, the company is required to classify certain assets and liabilities based on the following fair value hierarchy: Level 1Quoted prices in active markets that are unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities; Level 2Quoted prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities in active markets or financial instruments for which significant inputs are observable, either directly or indirectly; and Level 3Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable. The guidance requires the use of observable market data if such data is available without undue cost and effort. When available, the company uses unadjusted quoted market prices to measure the fair value and classifies such items within Level 1. If quoted market prices are not available, fair value is based upon internally developed models that use current market-based or independently sourced market parameters such as interest rates and currency rates. Items valued using internally generated models are classified according to the lowest level input or value driver that is significant to the valuation. The determination of fair value considers various factors including interest rate yield curves and time value underlying the financial instruments. For derivatives and debt securities, the company uses a discounted cash flow analysis using discount rates commensurate with the duration of the instrument. In determining the fair value of financial instruments, the company considers certain market valuation adjustments to the base valuations calculated using the methodologies described below for several parameters that market participants would consider in determining fair value: Counterparty credit risk adjustments are applied to financial instruments, taking into account the actual credit risk of a counterparty as observed in the credit default swap market to determine the true fair value of such an instrument. Credit risk adjustments are applied to reflect the companys own credit risk when valuing all liabilities measured at fair value. The methodology is consistent with that applied in developing counterparty credit risk adjustments, but incorporates the companys own credit risk as observed in the credit default swap market. As an example, the fair value of derivatives is derived by a discounted cash flow model using observable market inputs such as known notional value amounts, yield curves, spot and forward exchange rates as well as discount rates. These inputs relate to liquid, heavily traded currencies with active markets which are available for the full term of the derivative. Certain financial assets are measured at fair value on a nonrecurring basis. These assets include equity method investments that are recognized at fair value at the end of the period to the extent that they are deemed to be other-than-t

Financial Instruments

Financial Instruments (excluding derivatives)
	3 Months Ended Mar. 31, 2010
Financial Instruments (excluding derivatives):
Financial Instruments (excluding derivatives):	5. Financial Instruments (excluding derivatives): Cash and cash equivalents, debt and marketable equity securities 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 $21,305 million and $21,932 million and the estimated fair value is $22,261 million and $23,748 million at March31, 2010 and December31, 2009, respectively. Debt and Marketable Equity Securities The following tables summarize the companys debt and marketable equity securities all of which are considered available-for-sale and recorded at fair value in the Consolidated Statement of Financial Position. Gross Gross (Dollarsinmillions) Adjusted Unrealized Unrealized Fair At March31, 2010 Cost Gains Losses Value Cash and cash equivalents* Time deposits and certificates of deposit $ 4,192 $ $ (0 ) $ 4,192 Commercial paper 2,813 (0 ) 2,813 Money market funds 2,274 2,274 U.S. Federal Government securities 100 (0 ) 100 Other securities 73 73 Total $ 9,452 $ $ (0 ) $ 9,452 Debt securities current** Commercial paper $ 904 $ $ (0 ) $ 904 Other securities 2 2 U.S. Federal Government securities 600 (0 ) 600 Total $ 1,505 $ $ (0 ) $ 1,505 Debt securities noncurrent*** Other securities $ 8 $ 1 $ (0 ) $ 9 Total $ 8 $ 1 $ (0 ) $ 9 Non-equity method alliance investments*** $ 185 $ 248 $ (0 ) $ 433 * Included within cash and cash equivalents in the Consolidated Statement of Financial Position. ** Reported as marketable securities within the Consolidated Statement of Financial Position. *** Included within investments and sundry assets in the

Financing Receivables

Financing Receivables
	3 Months Ended Mar. 31, 2010
Financing Receivables:
Financing Receivables:	6. Financing Receivables: The following table presents financing receivables, net of allowances for doubtful accounts, including residual values. At March31, At December31, (Dollars in millions) 2010 2009 Current: Net investment in sales-type and direct financing leases $ 4,041 $ 4,105 Commercial financing receivables 4,066 5,604 Client loan receivables 4,310 4,475 Installment payment receivables 666 730 Total $ 13,083 $ 14,914 Noncurrent: Net investment in sales-type and direct financing leases $ 4,868 $ 5,331 Commercial financing receivables 53 58 Client loan receivables 4,174 4,759 Installment payment receivables 447 496 Total $ 9,542 $ 10,644 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 from two to six years. Net investment in sales-type and direct financing leases includes unguaranteed residual values of $815 million and $849 million at March31, 2010 and December31, 2009, respectively, and is reflected net of unearned income of $842 million and $905 million and of allowance for doubtful accounts receivable of $158 million and $159 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 are loans that are provided by Global Financing primarily to clients to finance the purchase of 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 $258 million and $271 million at March31, 2010 and December31, 2009, respectively. The company did not have any financing receivables held for sale as of March31, 2010 and December31, 2009.

Derivatives and Hedging Transac

Derivatives and Hedging Transactions
	3 Months Ended Mar. 31, 2010
Derivatives and Hedging Transactions:
Derivatives and Hedging Transactions:	7. 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 under these collateralized arrangements that were in a liability position at March31, 2010 and December31, 2009 was $245 million and $779 million, respectively, for which the company has posted collateral of $0.2 million and $37 million, respectively. 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 March31, 2010 and December31, 2009 was $1,130 million and $838 million, respectively. This amount represents the maximum exposure to loss at the reporting date as a result of the counterparties

Stock-Based Compensation

Stock-Based Compensation
	3 Months Ended Mar. 31, 2010
Stock-Based Compensation:
Stock-Based Compensation:	8. 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: (Dollarsinmillions) ForthethreemonthsendedMarch31: 2010 2009 Cost $ 25 $ 24 Selling, general and administrative expense 133 101 Research, development and engineering expense 12 12 Pre-tax stock-based compensation cost 169 137 Income tax benefits (62 ) (48 ) Total stock-based compensation cost $ 107 $ 89 The increase in pre-tax stock-based compensation cost for the three-month period ended March31, 2010, as compared to the corresponding period in the prior year, was principally the result of an increase related to restricted and performance-based stock units ($49 million), partially offset by a reduction in the level of stock option grants ($17 million). As of March31, 2010, the total unrecognized compensation cost of $958 million related to non-vested awards is expected to be recognized over a weighted-average period of approximately 2.5 years. There was no significant capitalized stock-based compensation cost at March31, 2010 and 2009.

Segments

Segments
	3 Months Ended Mar. 31, 2010
Segments:
Segments:	9. Segments: The following table reflects the results of operations of the segments consistent with the companys management and measurement system. These results are not necessarily a depiction that is in conformity with GAAP. Performance measurement is based on pre-tax income. These results are used, in part, by senior 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 March31, 2010: External revenue $ 9,306 $ 4,410 $ 5,018 $ 3,385 $ 537 $ 22,657 Internal revenue 320 203 758 173 403 1,858 Total revenue $ 9,626 $ 4,613 $ 5,776 $ 3,559 $ 941 $ 24,515 Pre-tax income $ 964 $ 445 $ 2,052 $ (170 ) $ 427 $ 3,719 Revenue year-to-year change 5.8 % (0.4 )% 12.1 % 4.5 % (2.9 )% 5.4 % Pre-tax income year-to-year change (12.6 )% (14.6 )% 53.7 % nm % 18.7 % 11.1 % Pre-tax income margin 10.0 % 9.7 % 35.5 % (4.8 )% 45.4 % 15.2 % For the three months ended March31, 2009: External revenue $ 8,754 $ 4,397 $ 4,539 $ 3,228 $ 578 $ 21,498 Internal revenue 342 232 614 176 390 1,754 Total revenue $ 9,096 $ 4,629 $ 5,153 $ 3,404 $ 968 $ 23,251 Pre-tax income $ 1,104 $ 521 $ 1,335 $ 28 $ 360 $ 3,348 Pre-tax income margin 12.1 % 11.3 % 25.9 % 0.8 % 37.2 % 14.4 % nm - not meaningful Reconciliations to IBM as Reported: (Dollarsinmillions) ForthethreemonthsendedMarch31: 2010 2009 Revenue: Total reportable segments $ 24,515 $ 23,251 Eliminations/other (1,658 ) (1,540 ) Total IBM Consolidated $ 22,857 $ 21,711 Pre-tax income: Total reportable segments $ 3,719 $ 3,348 Eliminations/other (205 ) (226 ) Total IBM Consolidated $ 3,515 $ 3,122

Equity Activity

Equity Activity
	3 Months Ended Mar. 31, 2010
Equity Activity:
Equity Activity:	10. Equity Activity: (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 Equity Equity - January1, 2010 $ 41,810 $ 80,900 $ (81,243 ) $ (18,830 ) $ 22,637 $ 118 $ 22,755 Net income 2,601 2,601 2,601 Other comprehensive income/(loss), net of tax (total) 652 652 652 Cash dividends declared common stock (718 ) (718 ) (718 ) Stock transactions related to employee plans net 854 100 955 955 Other treasury shares purchased not retired (4,095 ) (4,095 ) (4,095 ) Changes in noncontrolling interests (2 ) (2 ) Equity March31, 2010 $ 42,665 $ 82,783 $ (85,238 ) $ (18,178 ) $ 22,033 $ 116 $ 22,149 (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 Equity Equity - January1, 2009 $ 39,129 $ 70,353 $ (74,171 ) $ (21,845 ) $ 13,465 $ 119 $ 13,584 Net income 2,295 2,295 2,295 Other comprehensive income/(loss), net of tax (total) 196 196 196 Cash dividends declared common stock (675 ) (675 ) (675 ) Stock transactions related to employee plans net 301 (6 ) (9 ) 286 286 Other treasury shares purchased not retired (1,968 ) (1,968 ) (1,968 ) Changes in noncontrolling interests $ (27 ) $ (27 ) Equity March31, 2009 $ 39,430 $ 71,968 $ (76,148 ) $ (21,649 ) $ 13,601 $ 92 $ 13,693 The following table summarizes Net income plus Other comprehensive income/(loss), a component of stockholders equity in the Consolidated Statement of Financial Position: (Dollarsinmillions) ForthethreemonthsendedMarch31: 2010 2009 Net income $ 2,601 $ 2,295 Other comprehensive income/(loss) net of tax: Foreign currency translation adjustments (152 ) (384 ) Net change in retirement-related benefit plans 224 233 Net unrealized gains/(losses) on marketable securities 42 (6 ) Net unrealized gains on cash flow hedge derivatives 539 354 Total other comprehensive income/(loss) 652 196 Net income plus other comprehensive income/(loss) $ 3,253 $ 2,491

Retirement-Related Benefits

Retirement-Related Benefits
	3 Months Ended Mar. 31, 2010
Retirement-Related Benefits:
Retirement-Related Benefits:	11. 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 table provides the total retirement-related benefit plans impact on income before income taxes. Yr.toYr. (Dollarsinmillions) Percent ForthethreemonthsendedMarch31: 2010 2009* Change Retirement-related plans cost: Defined benefit and contribution pension plans cost $ 321 $ 351 (8.5 )% Nonpension postretirement plans cost 87 85 2.1 Total $ 408 $ 436 (6.4 )% * Reclassified to conform with 2010 presentation. The following table provides the components of the cost/(income) for the companys pension plans: Cost/(Income) of Pension Plans (Dollarsinmillions) U.S.Plans Non-U.S.Plans For the three months endedMarch31: 2010 2009 2010 2009* Service cost $ $ $ 127 $ 139 Interest cost 653 675 469 442 Expected return on plan assets (1,007 ) (1,002 ) (626 ) (593 ) Amortization of prior service cost/(credits) 2 2 (42 ) (30 ) Recognized actuarial losses 119 109 178 160 Plan amendments/curtailments/settlements 27 9 Multiemployer plan/other costs 31 23 Total net periodic pension (income)/cost of defined benefit plans (234 ) (216 ) 165 149 Cost of defined contribution plans 265 306 124 112 Total pension plan cost recognized in the Consolidated Statement of Earnings $ 31 $ 90 $ 290 $ 261 * Reclassified to conform with 2010 presentation. In 2010, the company expects to contribute to its non-U.S. defined benefit plans approximately $800 million, which is the legally mandated minimum contribution for the companys non-U.S. plans. In the first quarter of 2010, the company contributed $213 million to its non-U.S. plans. The following table provides the components of the cost for the companys nonpension postretirement plans. Cost of Nonpension Postretirement Plans (Dollarsinmillions) U.S.Plan Non-U.S.Plans For the three months endedMarch31: 2010 2009 2010 2009 Service cost $ 9 $ 11 $ 2 $ 2 Interest cost 65 71 15 11 Expected return on plan assets (2 ) (2 ) Amortization of prior service credits (4 ) (10 ) (1 ) (1 ) Recognized actuarial losses 3 3 Total nonpension postretirement plan cost recognized in the Consolidated Statement of Earnings $ 71 $ 72 $ 16 $ 13 The company received a $9.0 million subsidy in the first quarter of 2010 in connection with the Medicare Prescription Drug Improvement and Modernization Act of 2003. A portion of this amount is used by the company to reduce its obligation and expense related to the plan, and the remainder is contributed to the plan to reduce contributions required by the participants. For furth

Acquisitions/Divestitures

Acquisitions/Divestitures
	3 Months Ended Mar. 31, 2010
Acquisitions/Divestitures:
Acquisitions:	12. Acquisitions/Divestitures: Acquisitions: During the three months ended March31, 2010, the company completed five acquisitions at an aggregate cost of $996 million. The Software segment completed three acquisitions in the first quarter: Lombardi Software,Inc., Intelliden Inc. and Initiate Systems,Inc., all privately held companies. Global Technology Services (GTS) completed one acquisition in the first quarter: the core operating assets of Wilshire Credit Corporation. Global Business Services (GBS) completed one acquisition in the first quarter: National Interest Security Company, LLC, a privately held company. Each acquisition further complemented and enhanced the companys portfolio of product offerings. Lombardi is a leading provider of business process management software and services and will become part of the companys application integration software portfolio. Intelliden is a leading provider of intelligent network automation software and will extend the companys network management offerings. Initiate is a market leader in data integrity software for information sharing among health care and government organizations. Wilshires mortgage servicing platform will continue the companys strategic focus on the mortgage services industry and strengthens its commitment to deliver mortgage business process outsourcing solutions. National Interest Security Company will strengthen the companys ability to deliver advanced analytics and IT solutions to the public sector. Purchase price consideration for all acquisitions is paid in cash. All 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 March31, 2010: (Dollarsinmillions) AmortizationLife(yrs.) TotalAcquisitions Current assets $ 177 Fixed assets/noncurrent 14 Intangible assets: Goodwill NA 724 Completed technology 3-7 132 Client relationships 3-7 105 In-Process Research and Development NA 4 Patents/trademarks 1-7 5 Total assets acquired 1,161 Current liabilities (137 ) Noncurrent liabilities (28 ) Total liabilities assumed (165 ) Total purchase price $ 996 NA not applicable The acquisitions were accounted for as business combinations using the acquisition method, and accordingly, the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in 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 6.0 years. With the exception of goodwill, these identified intangible assets will be amortized on a straight-line basis over their useful lives. Goodwill of $724 million has been assig
Divestitures:	Divestitures: On March31, 2010, the company completed the sale of its activities associated with the sales and support of Dassault Systemes (Dassault) product lifecycle management (PLM) software, including customer contracts and related assets to Dassault. The company received net proceeds of $459 million and recognized a net gain of $591 million on the transaction in the first quarter of 2010. The gain was net of the fair value of certain contractual terms, certain transaction costs and the assets and liabilities sold. The gain was recorded in other (income) and expense on the Consolidated Statement of Earnings and the net proceeds are reflected in proceeds from disposition of marketable securities and other investments within cash flow from investing activities on the Consolidated Statement of Cash Flows. 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 cash 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 will enable 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 March31, 2010, the companys ownership in InfoPrint was 3.9 percent. See the companys 2009 Annual Report on pages85 and 86 for additional information.

Intangible Assets Including Goo

Intangible Assets Including Goodwill
	3 Months Ended Mar. 31, 2010
Intangible Assets Including Goodwill:
Intangible Assets Including Goodwill:	13. Intangible Assets Including Goodwill: The following table details the companys intangible asset balances by major asset class: AtMarch31,2010 (Dollarsinmillions) GrossCarrying Accumulated NetCarrying Intangible asset class Amount Amortization Amount Capitalized software $ 1,717 $ (824 ) $ 893 Client-related 1,289 (546 ) 743 Completed technology 1,342 (496 ) 846 In-process RD 4 0 4 Patents/trademarks 174 (60 ) 114 Other(a) 70 (52 ) 18 Total $ 4,597 $ (1,978 ) $ 2,618 AtDecember31,2009 (Dollarsinmillions) GrossCarrying Accumulated NetCarrying Intangibleassetclass Amount Amortization Amount Capitalized software $ 1,765 $ (846 ) $ 919 Client-related 1,367 (677 ) 690 Completed technology 1,222 (452 ) 770 Patents/trademarks 174 (59 ) 115 Other(a) 94 (75 ) 19 Total $ 4,622 $ (2,109 ) $ 2,513 (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 increased $105 million during the first quarter of 2010, primarily due to acquired intangibles additions, partially offset by amortization. The aggregate intangible amortization expense was $286 million and $312 million for the quarters ended March31, 2010 and 2009, respectively. In addition, in the first quarter, the company retired $400 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 March31, 2010: Capitalized Acquired (Dollars in millions) Software Intangibles Total 2010 (for Q2-Q4) $ 441 $ 344 $ 785 2011 335 415 750 2012 106 349 455 2013 7 311 318 2014 178 178 The changes in the goodwill balances by reportable segment, for the quarter ended March31, 2010 and for the year ended December31, 2009 are as follows: Foreign Currency Purchase Translation (Dollarsinmillions) Balance Goodwill Price AndOther Balance Segment 01/01/10 Additions Adjustments Divestitures Adjustments 3/31/10 Global Business Services $ 4,042 $ 253 $ $ $ (97 ) $ 4,198 Global Technology Services 2,777 31 (93 ) 2,716 Software 12,605 439 (4 ) 170 13,210 Systems and Technology 766 (1 ) 765 Total $ 20,190 $ 724 $ (4 ) $ $ (20 ) $ 20,889 Foreign Currency Purchase Translation (Dollarsinmillions) Balance Goodwill Pr

Restructuring-Related Liabiliti

Restructuring-Related Liabilities
	3 Months Ended Mar. 31, 2010
Restructuring-Related Liabilities:
Restructuring-Related Liabilities:	14. Restructuring-Related Liabilities: The following table provides a roll forward of the current and noncurrent liability balances for actions taken in the following periods: (1)the second quarter of 2005 associated with Global Services, primarily in Europe; (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 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 Other asof (Dollarsinmillions) 01/01/2010 Payments Adjustments* 3/31/2010 Current: Workforce $ 71 $ (18 ) $ $ 53 Space 16 (6 ) 3 12 Total Current $ 87 $ (24 ) $ 3 $ 65 Noncurrent: Workforce $ 427 $ $ (22 ) $ 405 Space 14 (3 ) 11 Total Noncurrent $ 441 $ $ (25 ) $ 415 * Principally includes the reclassification of noncurrent to current, foreign currency translation adjustments and interest accretion.

Contingencies

Contingencies
	3 Months Ended Mar. 31, 2010
Contingencies
Contingencies	15. 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, antitrust 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. Motions for summary judgment were heard in March2007, and the court has not yet issued its decision. On September14, 2007, plaintiff filed for bankruptcy protection, and all proceedings in this case were stayed. On August25, 2009, the U.S. Bankruptcy Court for the District of Delaware approved the appointment of a Chapter 11 Trustee of SCO. The court in another suit, the SCO Group,Inc. v. Novell,Inc., held a trial in March2010. The jury found that Novell is the owner of UNIX and UnixWare copyrights, and the issues currently pending before the judge include whether SCO is obligated to recognize Novells waiver of SCOs claims against IBM and Sequent for breach of UNIX license agreements. 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 claimed 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 systems. On June30, 2008, IBM acquired PSI. As a result of this transaction, IBM and PSI dismissed all claims against each other, and PSI withdrew a complaint it had filed with the European Commission in October2007 with regard to IBM. On September30, 2009, the court granted IBMs motion for summary judgment and dismissed T3s claims against IBM. This decision has been appealed by T3. In January2009, T3

Commitments

Commitments
	3 Months Ended Mar. 31, 2010
Commitments:
Commitments:	16. Commitments: The companys extended lines of credit to third-party entities include unused amounts of $3,619 million and $3,576 million at March31, 2010 and December31, 2009, 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 $2,634 million and $2,788 million at March31, 2010 and December31, 2009, 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 $83 million and $85 million at March31, 2010 and December31, 2009, respectively. The fair value of the guarantees recognized in the Consolidated Statement of Financial Position was not material. Standard Warranty Liability Changes in the companys warranty liability for standard warranties and deferred income for extended warranty contracts are presented in the following tables: (Dollarsinmillions) 2010 2009 Balance at January1 $ 316 $ 358 Current period accruals 94 77 Accrual adjustments to reflect actual experience 2 12 Charges incurred (100 ) (103 ) Ba

Subsequent Events

Subsequent Events
	3 Months Ended Mar. 31, 2010
Subsequent Events:
Subsequent Events:	17. Subsequent Events: On April27, 2010, the company announced that the Board of Directors approved a quarterly dividend of $0.65 per common share. The dividend is payable June10, 2010 to stockholders of record on May10, 2010. The dividend declaration represents an increase of $0.10 and is 18 percent higher than the prior quarterly dividend of $0.55 per common share. On April27, 2010, the company announced that the Board of Directors authorized $8 billion in additional funds for use in the companys common stock repurchase program.

Document and Entity Information

Document and Entity Information
	3 Months Ended Mar. 31, 2010
Document and Entity Information
Entity Registrant Name	INTERNATIONAL BUSINESS MACHINES CORP
Entity Central Index Key	0000051143
Document Type	10-Q
Document Period End Date	2010-03-31
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding	1,282,347,653
Document Fiscal Year Focus	2,010
Document Fiscal Period Focus	Q1