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EXHIBIT 12
COMPUTATION OF RATIO OF INCOME FROM CONTINUING OPERATIONS TO
FIXED CHARGES AND INCOME FROM CONTINUING OPERATIONS TO
COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(UNAUDITED)
<Table>
<Caption>
(Dollars in millions)
For Nine Months Ended
------------------------------------------
September 30, 2002 September 30, 2001*
------------------ ------------------
Income from continuing operations
before income taxes (1) $4,821 $7,887
Add: Fixed charges, excluding
capitalized interest 939 1,312
------ ------
Income as adjusted before income taxes $5,760 $9,199
====== ======
Fixed charges:
Interest expense $ 594 $ 971
Capitalized interest 32 24
Portion of rental expense representative of
interest 345 341
------ ------
Total fixed charges $ 971 $1,336
====== ======
Preferred stock dividends (2) -- 14
Combined fixed charges and preferred stock
dividends $ 971 $1,350
====== ======
Ratio of income from continuing
operations to fixed charges 5.93 6.89
Ratio of income from continuing
operations to combined fixed charges
and preferred stock dividends 5.93 6.81
</Table>
* Reclassified to conform with 2002 presentation.
(1) Income from continuing operations before income taxes excludes (a)
amortization of capitalized interest and (b) the company's share in the
income and losses of less-than-fifty percent-owned affiliates.
(2) Included in the ratio computation are preferred stock dividends of $10
million for the first nine months of 2001, or $14 million representing the
pre-tax income that would be required to cover those dividend requirements based
on the company's effective tax rate for the nine months ended September 30,
2001.
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SEGMENT INFORMATION - ON CONTINUING OPERATIONS BASIS
(UNAUDITED)
<Table>
<Caption>
Hardware Segments
----------------------------------------
Personal and
Global Enterprise Printing
(Dollars in millions) Services Systems Systems Technology
- ---------------------------------------------------------------------------------------------------
THREE MONTHS ENDED SEPTEMBER 30, 2002:
External revenue $ 8,895 $ 3,028 $ 2,736 $ 1,039
Internal revenue 708 200 33 214
------- ------- ------- -------
Total revenue $ 9,603 $ 3,228 $ 2,769 $ 1,253
======= ======= ======= =======
Pre-tax income (loss) $ 1,259 $ 381 $ (20) $ (17)
======= ======= ======= =======
Revenue year-to-year change 2.5% (0.1)% (2.7)% (11.9)%
Pre-tax income year-to-year change (8.3)% 96.4% 71.4% 78.2%
Pre-tax income margin 13.1% 11.8% (0.7)% (1.4)%
THREE MONTHS ENDED SEPTEMBER 30, 2001*:
External revenue $ 8,682 $ 3,056 $ 2,829 $ 1,006
Internal revenue 684 175 18 416
------- ------- ------- -------
Total revenue $ 9,366 $ 3,231 $ 2,847 $ 1,422
======= ======= ======= =======
Pre-tax income (loss) $ 1,373 $ 194 $ (70) $ (78)
======= ======= ======= =======
Pre-tax income margin 14.7% 6.0% (2.5)% (5.5)%
</Table>
* Reclassified to conform with 2002 presentation.
RECONCILIATIONS TO IBM AS REPORTED:
<Table>
<Caption>
Three Months Ended Three Months Ended
(Dollars in millions) September 30, 2002 September 30, 2001*
------------------ ------------------
Revenue:
Total reportable segments $ 21,533 $ 21,564
Eliminations/other (1,712) (1,781)
-------- --------
Total IBM Consolidated $ 19,821 $ 19,783
======== ========
Pretax income:
Total reportable segments $ 2,550 $ 2,361
Eliminations/other (146) 47
-------- --------
Total IBM Consolidated $ 2,404 $ 2,408
======== ========
</Table>
* Reclassified to conform with 2002 presentation.
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<Table>
<Caption>
Global Enterprise Total
Software Financing Investments Segments
-------- --------- ----------- --------
$ 3,110 $ 789 $ 240 $ 19,837
302 238 1 1,696
-------- -------- -------- --------
$ 3,412 $ 1,027 $ 241 $ 21,533
======== ======== ======== ========
$ 799 $ 218 $ (70) $ 2,550
======== ======== ======== ========
(0.7)% 0.9% (0.8)% (0.1)%
13.5% (30.6)% 7.9% 8.0%
23.4% 21.2% (29.0)% 11.8%
$ 3,201 $ 814 $ 242 $ 19,830
236 204 1 1,734
-------- -------- -------- --------
$ 3,437 $ 1,018 $ 243 $ 21,564
======== ======== ======== ========
$ 704 $ 314 $ (76) $ 2,361
======== ======== ======== ========
20.5% 30.8% (31.3)% 10.9%
</Table>
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SEGMENT INFORMATION - ON CONTINUING OPERATIONS BASIS
(UNAUDITED)
<Table>
<Caption>
Hardware Segments
------------------------------------------
Personal and
Global Enterprise Printing
(Dollars in millions) Services Systems Systems Technology
- -----------------------------------------------------------------------------------------------------
NINE MONTHS ENDED SEPTEMBER 30, 2002:
External revenue $ 25,785 $ 8,446 $ 8,047 $ 2,972
Internal revenue 2,089 526 79 649
-------- -------- -------- --------
Total revenue $ 27,874 $ 8,972 $ 8,126 $ 3,621
======== ======== ======== ========
Pre-tax income (loss) $ 3,038 $ 740 $ 10 $ (1,099)
======== ======== ======== ========
Revenue year-to-year change 0.2% (12.2)% (10.9)% (29.0)%
Pre-tax income year-to-year change (18.9)% (33.4)% 107.4% NM
Pre-tax income margin 10.9% 8.2% 0.1% (30.4)%
NINE MONTHS ENDED SEPTEMBER 30, 2001*:
External revenue $ 25,895 $ 9,669 $ 9,072 $ 3,960
Internal revenue 1,923 547 50 1,143
-------- -------- -------- --------
Total revenue $ 27,818 $ 10,216 $ 9,122 $ 5,103
======== ======== ======== ========
Pre-tax income (loss) $ 3,748 $ 1,111 $ (136) $ 161
======== ======== ======== ========
Pre-tax income margin 13.5% 10.9% (1.5)% 3.2%
</Table>
* Reclassified to conform with 2002 presentation.
NM - not meaningful
RECONCILIATIONS TO IBM AS REPORTED:
<Table>
<Caption>
Nine Months Ended Nine Months Ended
(Dollars in millions) September 30, 2002 September 30, 2001*
------------------ -------------------
Revenue:
Total reportable segments $ 62,399 $ 66,017
Eliminations/other (4,897) (5,091)
-------- --------
Total IBM Consolidated $ 57,502 $ 60,926
======== ========
Pretax income:
Total reportable segments $ 5,434 $ 7,520
Eliminations/other (622) 336
-------- --------
Total IBM Consolidated $ 4,812 $ 7,856
======== ========
</Table>
* Reclassified to conform with 2002 presentation.
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<Table>
<Caption>
Global Enterprise Total
Software Financing Investments Segments
-------- --------- ----------- --------
$ 9,273 $ 2,375 $ 694 $ 57,592
844 617 3 4,807
-------- -------- -------- --------
$ 10,117 $ 2,992 $ 697 $ 62,399
======== ======== ======== ========
$ 2,272 $ 677 $ (204) $ 5,434
======== ======== ======== ========
2.8% (4.5)% (11.1)% (5.5)%
13.5% (22.9)% 16.0% (27.7)%
22.5% 22.6% (29.3)% 8.7%
$ 9,155 $ 2,486 $ 782 $ 61,019
686 647 2 4,998
-------- -------- -------- --------
$ 9,841 $ 3,133 $ 784 $ 66,017
======== ======== ======== ========
$ 2,001 $ 878 $ (243) $ 7,520
======== ======== ======== ========
20.3% 28.0% (31.0)% 11.4%
</Table>