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 IBM Reports 2017 Fourth-Quarter and Full-Year Results
   Thursday, January 18, 2018 4:06:00 PM ET

IBM (IBM )

Highlights

-- Fourth-quarter GAAP EPS from continuing operations of $(1.14) -- Includes a one-time charge of $5.5 billion associated with the enactment of U.S. tax reform

-- Fourth-quarter operating (non-GAAP) EPS of $5.18 -- Excludes the one-time charge of $5.5 billion associated with the enactment of U.S. tax reform -- Consistent with the basis of previously-provided 2017 expectations

-- Fourth-quarter revenue of $22.5 billion, up 4 percent (up 1 percent adjusting for currency)

-- Full-year strategic imperatives revenue of $36.5 billion, up 11 percent; represents 46 percent of IBM revenue -- Fourth-quarter strategic imperatives revenue up 17 percent (up 14 percent adjusting for currency)



-- Full-year cloud revenue of $17.0 billion, up 24 percent year to year -- As-a-service annual exit run rate of $10.3 billion in the quarter, up 20 percent year to year (up 18 percent adjusting for currency)

IBM (IBM ) today announced fourth-quarter and full-year 2017 earnings results.

"Our strategic imperatives revenue again grew at a double-digit rate and now represents 46 percent of our total revenue, and we are pleased with our overall revenue growth in the quarter," said Ginni Rometty, IBM chairman, president and chief executive officer. "During 2017, we strengthened our position as the leading enterprise cloud provider and established IBM as the blockchain leader for business. Looking ahead, we are uniquely positioned to help clients use data and AI to build smarter businesses."

                                                                                                                 FOURTH QUARTER 2017
                                                                               -------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                   Net Income                        Gross Profit  
                                                                               Diluted EPS          (Loss)           Margin
                                                                               ----------- -------------------- -------------------- ----------- -------------------- -------------------- ------------
                     GAAP from Continuing Operations                               $(1.14)                    *                          $(1.1B)                    *                             48.2%
                         Year/Year                                -124%                    *         -123%                    *        -1.9Pts
                     ------------------------------------ -------------------- ----------- -------------------- -------------------- ----------- -------------------- -------------------- ------------
                     Operating (Non-GAAP)                                            $5.18                                                 $4.8B                                                  49.5%
                         Year/Year                                   3%              1%          -1.4Pts
                     ------------------------------------ -------------------- ----------- -------------------- -------------------- ----------- -------------------- -------------------- ------------
                                                                                                                                                                                                                                     As-a-service
                                                                                                                                       Strategic                                                                                      annual exit
                     REVENUE                                  Total IBM     Imperatives            Cloud               run rate
                     ------------------------------------ -------------------- ----------- -------------------- -------------------- ----------- -------------------- -------------------- ------------ -------------------- --------------------
                                                                                                                                                                                                                              
                     As reported (US$)                                              $22.5B                                                $11.1B                                                  $5.5B                                    $10.3B
                         Year/Year                                   4%             17%              30%                    20%
                     ------------------------------------ -------------------- ----------- -------------------- -------------------- ----------- -------------------- -------------------- ------------ -------------------- --------------------
                         Year/Year adjusting for currency            1%             14%              27%                    18%
                     ------------------------------------ -------------------- ----------- -------------------- -------------------- ----------- -------------------- -------------------- ------------ -------------------- --------------------
                                                                                                                                                                                                                              
                     * Includes a one-time charge of $5.5 billion associated with the
                     enactment of U.S. tax reform.

"Over the past several years we have invested aggressively in technology and our people to reposition IBM," said James Kavanaugh, IBM senior vice president and chief financial officer. "2018 will be all about reinforcing IBM’s leadership position in key high-value segments of the IT industry, including cloud, AI, security and blockchain."

Strategic Imperatives Revenue

Fourth-quarter cloud revenues increased 30 percent to $5.5 billion (up 27 percent adjusting for currency). Cloud revenue over the last 12 months was $17.0 billion, including $9.3 billion delivered as-a-service and $7.8 billion for hardware, software and services to enable IBM clients to implement comprehensive cloud solutions. The annual exit run rate for as-a-service revenue increased to $10.3 billion from $8.6 billion in the fourth quarter of 2016. In the quarter, revenues from analytics increased 9 percent (up 6 percent adjusting for currency). Revenues from mobile increased 23 percent (up 21 percent adjusting for currency) and revenues from security increased 132 percent (up 127 percent adjusting for currency).

Full-Year 2018 Expectations

The company will discuss 2018 expectations during today’s quarterly earnings conference call.

Cash Flow and Balance Sheet

In the fourth quarter, the company generated net cash from operating activities of $5.7 billion, or $7.8 billion excluding Global Financing receivables. IBM’s free cash flow was $6.8 billion. IBM returned $1.4 billion in dividends and $0.7 billion of gross share repurchases to shareholders. At the end of December 2017, IBM had $3.8 billion remaining in the current share repurchase authorization.

The company generated full-year free cash flow of $13.0 billion, excluding Global Financing receivables. The company returned $9.8 billion to shareholders through $5.5 billion in dividends and $4.3 billion of gross share repurchases.

IBM ended the fourth quarter of 2017 with $12.6 billion of cash on hand. Debt totaled $46.8 billion, including Global Financing debt of $31.4 billion. The balance sheet remains strong and is well positioned over the long term.

Segment Results for Fourth Quarter

-- Cognitive Solutions (includes solutions software and transaction processing software) -- revenues of $5.4 billion, up 3 percent (flat adjusting for currency), driven by security and transaction processing software.

-- Global Business Services (includes consulting, global process services and application management) -- revenues of $4.2 billion, up 1 percent (down 2 percent adjusting for currency). Strategic imperatives revenue grew 9 percent led by the cloud practice, mobile and analytics.

-- Technology Services & Cloud Platforms (includes infrastructure services, technical support services and integration software) -- revenues of $9.2 billion, down 1 percent (down 4 percent adjusting for currency). Strategic imperatives revenue grew 15 percent, driven by hybrid cloud services, security and mobile.

-- Systems (includes systems hardware and operating systems software) -- revenues of $3.3 billion, up 32 percent (up 28 percent adjusting for currency) driven by growth in IBM Z, Power Systems and storage.

-- Global Financing (includes financing and used equipment sales) -- revenues of $450 million, up 1 percent (down 2 percent adjusting for currency).

Tax Rate

The enactment of the Tax Cuts and Jobs Act in December 2017 resulted in a one-time charge of $5.5 billion in the fourth quarter. The charge encompasses several elements, including a tax on accumulated overseas profits and the revaluation of deferred tax assets and liabilities. As a result, IBM’s reported GAAP tax rate, which includes the one-time charge, was 124 percent for the fourth quarter, and 49 percent for the full year. IBM’s operating (non-GAAP) tax rate, which excludes the one-time charge, was 6 percent for the fourth quarter; and 7 percent for the full year, which includes the effect of discrete tax benefits in the first and second quarters. Without discrete tax items, the full-year operating (non-GAAP) tax rate was 12 percent, at the low end of the company’s previously estimated range.

Full-Year Results

-- Full-year GAAP EPS from continuing operations of $6.14 -- Includes a one-time charge of $5.5 billion associated with the enactment of U.S. tax reform

-- Full-year operating (non-GAAP) EPS of $13.80 -- Excludes the one-time charge of $5.5 billion associated with the enactment of U.S. tax reform

-- Full-year revenue of $79.1 billion, down 1 percent

                                                                                                                   FULL YEAR 2017
                                                                               -------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                     Gross Profit  
                                                                               Diluted EPS      Net Income           Margin
                                                                               ----------- -------------------- -------------------- ----------- -------------------- -------------------- ------------
                                                                                                                                                                                                                              
                     GAAP from Continuing Operations                                 $6.14                    *                            $5.8B                    *                             45.8%
                         Year/Year                                 -50%                    *          -52%                    *        -2.1Pts
                     ------------------------------------ -------------------- ----------- -------------------- -------------------- ----------- -------------------- -------------------- ------------
                     Operating (Non-GAAP)                                           $13.80                                                $12.9B                                                  47.4%
                         Year/Year                                   2%             -1%          -1.6Pts
                     ------------------------------------ -------------------- ----------- -------------------- -------------------- ----------- -------------------- -------------------- ------------
                                                                                                                                                                                                                                     As-a-service
                                                                                                                                       Strategic                                                                                      annual exit
                     REVENUE                                  Total IBM     Imperatives            Cloud               run rate
                     ------------------------------------ -------------------- ----------- -------------------- -------------------- ----------- -------------------- -------------------- ------------ -------------------- --------------------
                     As reported (US$)                                              $79.1B                                                $36.5B                                                 $17.0B                                    $10.3B
                         Year/Year                                  -1%             11%              24%                    20%
                     ------------------------------------ -------------------- ----------- -------------------- -------------------- ----------- -------------------- -------------------- ------------ -------------------- --------------------
                         Year/Year adjusting for currency           -1%             11%              24%                    18%
                     ------------------------------------ -------------------- ----------- -------------------- -------------------- ----------- -------------------- -------------------- ------------ -------------------- --------------------
                                                                                                                                                                                                                              
                     * Includes a one-time charge of $5.5 billion associated with the
                     enactment of U.S. tax reform.

Forward-Looking and Cautionary Statements

Except for the historical information and discussions contained herein, statements contained in this release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on the company’s current assumptions regarding future business and financial performance. These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially, including the following: a downturn in economic environment and client spending budgets; the company’s failure to meet growth and productivity objectives, a failure of the company’s innovation initiatives; risks from investing in growth opportunities; failure of the company’s intellectual property portfolio to prevent competitive offerings and the failure of the company to obtain necessary licenses; cybersecurity and data privacy considerations; fluctuations in financial results, impact of local legal, economic, political and health conditions; adverse effects from environmental matters, tax matters and the company’s pension plans; ineffective internal controls; the company’s use of accounting estimates; the company’s ability to attract and retain key personnel and its reliance on critical skills; impacts of relationships with critical suppliers; product quality issues; impacts of business with government clients; currency fluctuations and customer financing risks; impact of changes in market liquidity conditions and customer credit risk on receivables; reliance on third party distribution channels and ecosystems; the company’s ability to successfully manage acquisitions, alliances and dispositions; risks from legal proceedings; risk factors related to IBM securities; and other risks, uncertainties and factors discussed in the company’s Form 10-Qs, Form 10-K and in the company’s other filings with the U.S. Securities and Exchange Commission (SEC) or in materials incorporated therein by reference. Any forward-looking statement in this release speaks only as of the date on which it is made. The company assumes no obligation to update or revise any forward-looking statements.

Presentation of Information in this Press Release

In an effort to provide investors with additional information regarding the company’s results as determined by generally accepted accounting principles (GAAP), the company has also disclosed in this press release the following non-GAAP information which management believes provides useful information to investors:

IBM results --

-- presenting operating (non-GAAP) earnings per share amounts and related income statement items;

-- adjusting for free cash flow;

-- adjusting for currency (i.e., at constant currency).

Free cash flow guidance is derived using an estimate of profit, working capital and operational cash outflows. The company views Global Financing receivables as a profit-generating investment, which it seeks to maximize and therefore it is not considered when formulating guidance for free cash flow. As a result, the company does not estimate a GAAP Net Cash from Operations expectation metric.

The rationale for management’s use of these non-GAAP measures is included in Exhibit 99.2 in the Form 8-K that includes this press release and is being submitted today to the SEC.

Conference Call and Webcast

IBM’s regular quarterly earnings conference call is scheduled to begin at 5:00 p.m. EST, today. The Webcast may be accessed via a link at http://www.ibm.com/investor/events/earnings/4q17.html . Presentation charts will be available shortly before the Webcast.

Financial Results Below (certain amounts may not add due to use of rounded numbers; percentages presented are calculated from the underlying whole-dollar amounts).

                                                                                                                                                      INTERNATIONAL BUSINESS MACHINES CORPORATION
                                                                                                                                                             COMPARATIVE FINANCIAL RESULTS
                                                                                                                                               (Unaudited; Dollars in millions except per share amounts)
                                                              
                                                                                                                                     Three Months Ended                                                                                                       Twelve Months Ended
                                                                                                                                        December 31,                                                                                                                                December 31,
                                                                                  ------------------------------------------------------------------------------------------------------------------------                     -----------------------------------------------------------------------------------------------------------------------
                                                                                                         2017                                               2016                                                                  2017                                               2016
                                                                                  --------------------------------------------------                     -------------------------------------------------                     -------------------------------------------------                     -------------------------------------------------
                                                                                                                                                                                                                                                                                                      
REVENUE
Cognitive Solutions                                                                                  $   5,432                                                              $  5,297                                                              $ 18,453                                                              $ 18,187
Global Business Services                                                                                 4,152                                                                 4,121                                                                16,348                                                                16,700
Technology Services & Cloud Platforms                                                                    9,198                                                                 9,308                                                                34,277                                                                35,337
Systems                                                                                                  3,332                                                                 2,530                                                                 8,194                                                                 7,714
Global Financing                                                                                           450                                                                   447                                                                 1,696                                                                 1,692
Other                                                                                   (20 )                                               66                             171                             289  
                                                                                  -------------------- ------- --------------------                      -------------------- ------ --------------------                      -------------------- ------ --------------------                      -------------------- ------ --------------------
TOTAL REVENUE                                                                                           22,543                                                                21,770                                                                79,139                                                                79,919
                                                                                                                                                                                                                                                                                                      
GROSS PROFIT                                                                                            10,862                                                                10,893                                                                36,227                                                                38,294
                                                                                                                                                                                                                                                                                                      
GROSS PROFIT MARGIN
Cognitive Solutions                                                                                       79.2 %                                                                82.7 %                                                                78.6 %                                                                81.9 %
Global Business Services                                                                                  24.8 %                                                                26.9 %                                                                25.2 %                                                                27.0 %
Technology Services & Cloud Platforms                                                                     40.9 %                                                                42.9 %                                                                40.4 %                                                                41.9 %
Systems                                                                                                   55.7 %                                                                56.9 %                                                                53.2 %                                                                55.7 %
Global Financing                                                                                          29.5 %                                                                36.2 %                                                                29.3 %                                                                38.7 %
                                                                                                                                                                                                                                                                                                      
TOTAL GROSS PROFIT MARGIN                                                                                 48.2 %                                                                50.0 %                                                                45.8 %                                                                47.9 %
                                                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                                                      
EXPENSE AND OTHER INCOME
S,G&A                                                                                                    5,147                                                                 4,976                                                                20,107                                                                21,069
R,D&E                                                                                                    1,427                                                                 1,431                                                                 5,787                                                                 5,751
Intellectual property and
  custom development income                                                                               (348 )                                                                (521 )                                                              (1,466 )                                                              (1,631 )
Other (income) and expense                                                                                   2                                                                  (136 )                                                                (216 )                                                                 145
Interest expense                                                                                           164                                                                   157                                                                   615                                                                   630
                                                                                                                                                                                                                                             
                                                                                  --------------------------------------------------                     -------------------------------------------------                     -------------------------------------------------                     -------------------------------------------------
TOTAL EXPENSE AND OTHER INCOME                                                                           6,393                                                                 5,907                                                                24,827                                                                25,964
                                                                                                                                                                                                                                                                                                      
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES                                                                                      4,469                                                                 4,986                                                                11,400                                                                12,330
    Pre-tax margin                                                                                        19.8 %                                                                22.9 %                                                                14.4 %                                                                15.4 %
Provision for / (Benefit from) income taxes                                                              5,522                                                                   480                                                                 5,642                                                                   449
    Effective tax rate                                                                                   123.6 %                                                                 9.6 %                                                                49.5 %                                                                 3.6 %
                                                                                                                                                                                                                                                                                                      
INCOME / (LOSS) FROM CONTINUING OPERATIONS                                                             ($1,053 )                                                            $  4,505                                                              $  5,758                                                              $ 11,881
                                                                                                                                                                                                                                                                                                      
DISCONTINUED OPERATIONS
    Income/(Loss) from discontinued operations, net of taxes                             (1 )                                               (4 )                                               (5 )                                               (9 )
                                                                                  -------------------- ------- --------------------                      -------------------- ------ --------------------                      -------------------- ------ --------------------                      -------------------- ------ --------------------
                                                                                                                                                                                                                                                                                                      
NET INCOME / (LOSS)                                                                 ($1,054 )                                                            $  4,501                                           $  5,753                                           $ 11,872  
                                                                                  ==================== ======= ====================                      ==================== ====== ====================                      ==================== ====== ====================                      ==================== ====== ====================
                                                                                                                                                                                                                                                                                                      
                                                                                                                                                                                                                                                                                                      
EARNINGS / (LOSS) PER SHARE OF COMMON STOCK:
    Assuming Dilution
        Continuing Operations                                                                           ($1.14 )                                                            $   4.73                                                              $   6.14                                                              $  12.39
        Discontinued Operations                                                                      $    0.00                          ($0.01 )                                                            $   0.00                          ($0.01 )
                                                                                  -------------------- ------- --------------------                      -------------------- ------ --------------------                      -------------------- ------ --------------------                      -------------------- ------ --------------------
    TOTAL                                                                            ($1.14 )                                                            $   4.72                                           $   6.14                                           $  12.38  
                                                                                  ==================== ======= ====================                      ==================== ====== ====================                      ==================== ====== ====================                      ==================== ====== ====================
                                                                                                                                                                                                                                                                                                      
    Basic
        Continuing Operations                                                                           ($1.14 )                                                            $   4.75                                                              $   6.17                                                              $  12.44
        Discontinued Operations                                                                      $    0.00                          ($0.01 )                                                            $   0.00                          ($0.01 )
                                                                                  -------------------- ------- --------------------                      -------------------- ------ --------------------                      -------------------- ------ --------------------                      -------------------- ------ --------------------
    TOTAL                                                                            ($1.14 )                                                            $   4.74                                           $   6.17                                           $  12.43  
                                                                                  ==================== ======= ====================                      ==================== ====== ====================                      ==================== ====== ====================                      ==================== ====== ====================
                                                                                                                                                                                                                                                                                                      
WEIGHTED-AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING (M’s):
    Assuming Dilution                                                                                    928.9                                                                 952.7                                                                 937.4                                                                 958.7
    Basic                                                                                                924.5                                                                 948.6                                                                 932.8                                                                 955.4
 
                                                            INTERNATIONAL BUSINESS MACHINES CORPORATION
                                                               CONDENSED CONSOLIDATED BALANCE SHEET
                                                                            (Unaudited)
 
                                                                 At                                     At
(Dollars in Millions)                                                          December 31,                                              December 31,
                                                                                   2017                                                      2016
                                                                   -------------------------------------                     -------------------------------------
ASSETS:
                                                                                                                              
Current Assets:
Cash and cash equivalents                                               $   11,972                                                $    7,826
Marketable securities                                                          608                                                       701
Notes and accounts receivable - trade, net                                   8,928                                                     9,182
Short-term financing receivables, net                                       21,721                                                    19,006
Other accounts receivable, net                                                 981                                                     1,057
Inventory                                                                    1,583                                                     1,553
Prepaid expenses and other current assets                                    3,942                                                     4,564
                                                                                                           
                                                                   -------------------------------------                     -------------------------------------
Total Current Assets                                                        49,735                                                    43,888
                                                                                                                              
Property, plant and equipment, net                                          11,116                                                    10,830
Long-term financing receivables, net                                         9,550                                                     9,021
Prepaid pension assets                                                       4,643                                                     3,034
Deferred taxes                                                               4,862                                                     5,224
Goodwill and intangibles, net                                               40,531                                                    40,887
Investments and sundry assets                                                4,919                                                     4,585
                                                                                                           
                                                                   -------------------------------------                     -------------------------------------
Total Assets                                                            $  125,356                             $  117,470  
                                                                   ====== ======== ====================                      ====== ======== ====================
                                                                                                                              
                                                                                                                              
LIABILITIES:
                                                                                                                              
Current Liabilities:
Taxes                                                                   $    4,219                                                $    3,235
Short-term debt                                                              6,987                                                     7,513
Accounts payable                                                             6,451                                                     6,209
Deferred income                                                             11,552                                                    11,035
Other liabilities                                                            8,153                                                     8,283
                                                                                                           
                                                                   -------------------------------------                     -------------------------------------
Total Current Liabilities                                                   37,363                                                    36,275
                                                                                                                              
Long-term debt                                                              39,837                                                    34,655
Retirement related obligations                                              16,720                                                    17,070
Deferred income                                                              3,746                                                     3,600
Other liabilities                                                            9,965                                                     7,477
                                                                                                           
                                                                   -------------------------------------                     -------------------------------------
Total Liabilities                                                          107,631                                                    99,078
                                                                                                                              
                                                                                                                              
EQUITY:
                                                                                                                              
IBM Stockholders’ Equity:
Common stock                                                                54,566                                                    53,935
Retained earnings                                                          153,126                                                   152,759
Treasury stock -- at cost                                                 (163,507 )                                                (159,050 )
Accumulated other comprehensive income/(loss)                              (26,592 )                                                 (29,398 )
                                                                                                           
                                                                   -------------------------------------                     -------------------------------------
Total IBM stockholders’ equity                                              17,594                                                    18,246
                                                                                                                              
Noncontrolling interests                                                       131                                                       146
                                                                                                           
                                                                   -------------------------------------                     -------------------------------------
Total Equity                                                                17,725                                                    18,392
                                                                                                           
                                                                   -------------------------------------                     -------------------------------------
Total Liabilities and Equity                                            $  125,356                             $  117,470  
                                                                   ====== ======== ====================                      ====== ======== ====================
 
                                                                                                                 INTERNATIONAL BUSINESS MACHINES CORPORATION
                                                                                                                             CASH FLOW ANALYSIS
                                                                                                                                 (Unaudited)
                                                                                                                                                                                                                                      
                                                                                        Three Months Ended                                                                         Twelve Months Ended
(Dollars in Millions)                                                                                         December 31,                                                                                                  December 31,
                                                                         --------------------------------------------------------------------------------------                         -------------------------------------------------------------------------------------
                                                                                       2017                              2016                                                      2017                              2016
                                                                         --------------------------------                     ---------------------------------                         --------------------------------                     --------------------------------
                                                                                                                                                                                                                                                                              
Net Cash Provided by Operating Activities per GAAP:                        $  5,733                                                              $   3,979     *                          $ 16,724                                             $ 17,084                      *
                                                                                                                                                                                                                                                                              
    Less: change in Global Financing (GF)
        Receivables                                                          (2,049 )                                                               (1,678 )                                   419                                                1,658
    Capital Expenditures, Net                                                  (965 )                                                                 (925 )                                (3,312 )                                             (3,726 )
                                                                                                                                                                                                                                                                              
Free Cash Flow                                                                6,817                                                                  4,731     *                            12,992                                               11,700                      *
                                                                                                                                                                                                                                                                              
    Acquisitions                                                                (53 )                                                                 (235 )                                  (496 )                                             (5,679 )
    Divestitures                                                               (240 )                                                                 (490 )                                  (205 )                                               (454 )
    Dividends                                                                (1,387 )                                                               (1,329 )                                (5,506 )                                             (5,256 )
    Share Repurchase                                                           (666 )                                                                 (871 )                                (4,340 )                                             (3,502 )
    Non-GF Debt                                                                (840 )                                                               (2,048 )                                 1,056                                                1,317
    Other (includes GF Receivables and GF Debt)                              (2,565 )                                                               (1,200 )   *                               552                                                2,208                      *
                                                                                                                                                                                                                                                                              
Change in Cash, Cash Equivalents and
Short-term Marketable Securities                                           $  1,065                          ($1,441 )                              $  4,053                          $    332  
                                                                         === ====== ====================                      ==================== ======= ===                          === ====== ====================                      === ====== ====================
                                                                                                                                                                                                                                      
* Reclassified to reflect adoption of the FASB guidance on
stock-based compensation.
                                                                                                                                                                                                                                      
                                                                                            INTERNATIONAL BUSINESS MACHINES CORPORATION
                                                                                                             CASH FLOW
                                                                                                            (Unaudited)
                                                      
                                                                                           Three Months Ended                                          Twelve Months Ended
(Dollars in Millions)                                                                         December 31,                                                                   December 31,
                                                                          -----------------------------------------------------                         ------------------------------------------------------
                                                                                2017              2016                                     2017              2016
                                                                          ----------------                     ----------------                         ----------------                     -----------------
                                                                                                                                                                                                               
Net Income from Operations                                                    ($1,054 )                          $   4,501                                $   5,753                            $   11,872
    Depreciation/Amortization of Intangibles                                    1,150                                1,127                                    4,541                                 4,381
    Stock-based Compensation                                                      146                                  141                                      534                                   544
    Working Capital / Other                                                     7,540                                 (113 )   *                              5,476                                (1,371 )   *
    Global Financing A/R                                                       (2,049 )                             (1,678 )                                    419                                 1,658
Net Cash Provided by Operating Activities                                   $   5,733                            $   3,979     *                          $  16,724                            $   17,084     *
    Capital Expenditures, net of payments & proceeds                             (965 )                               (925 )                                 (3,312 )                              (3,726 )
    Divestitures, net of cash transferred                                        (240 )                               (490 )                                   (205 )                                (454 )
    Acquisitions, net of cash acquired                                            (53 )                               (235 )                                   (496 )                              (5,679 )
    Marketable Securities / Other Investments, net                             (2,559 )                             (2,038 )                                 (3,083 )                              (1,116 )
Net Cash Used in Investing Activities                                         ($3,818 )                            ($3,687 )                                ($7,096 )                            ($10,976 )
    Debt, net of payments & proceeds                                            1,137                                  875                                    3,446                                 2,763
    Dividends                                                                  (1,387 )                             (1,329 )                                 (5,506 )                              (5,256 )
    Common Stock Repurchases                                                     (666 )                               (871 )                                 (4,340 )                              (3,502 )
    Common Stock Transactions - Other                                              (3 )                                 26     *                                (18 )                                  78     *
Net Cash Used in Financing Activities                                           ($919 )                            ($1,298 )   *                            ($6,418 )                             ($5,917 )   *
Effect of Exchange Rate changes on Cash                                            62                                 (206 )                                    937                                   (51 )
Net Change in Cash & Cash Equivalents                                       $   1,057                              ($1,213 )                              $   4,146                            $      140
                                                                                                                                                                                                               
* Reclassified to reflect adoption of the FASB guidance on
stock-based compensation.
                                                                                                                                                                                                               
                                                                                                                                                                                INTERNATIONAL BUSINESS MACHINES CORPORATION
                                                                                                                                                                                               SEGMENT DATA
                                                                                                                                                                                                (Unaudited)
                                                  
                                                                                                                                                                                                                              FOURTH - QUARTER 2017
                                                                      ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                      Cognitive Solutions &                                                                                                                                                     
                                                                                                                        Industry Services
                                                                      ---------------------------------------------------------------------------------------------------------------------
                                                                                                                                                                                                                Technology
                                                                                                                                                                Global                                                             Services &
(Dollars in Millions)                                                                     Cognitive                                                            Business                                                               Cloud                                                                                                                                    Global
                                                                                          Solutions                                         Services                                          Platforms                                          Systems                                          Financing
                                                                      -------------------------------------------------------------------- -------------------------------------------------------------------- -------------------------------------------------------------------- -------------------------------------------------------------------- -------------------------------------------------
Revenue
External                                                                                 $ 5,432                                                              $ 4,152                                                              $ 9,198                                                              $ 3,332                                                              $    450
Internal                                                                  646          92         160         179          546  
                                                                      -------------------- ----- -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- ------ --------------------
Total Segment Revenue                                                                    $ 6,078                                                              $ 4,244                                                              $ 9,358                                                              $ 3,511                                                              $    997
                                                                                                                                                                                                                                                                                                                                                           
Pre-tax Income from Continuing Operations                                                  2,279                                                                  337                                                                1,456                                                                  908                                                                   443
                                                                                                                                                                                                                                                                                                                                                           
Pre-tax margin                                                                              37.5 %                                                                7.9 %                                                               15.6 %                                                               25.9 %                                                                44.4 %
                                                                                                                                                                                                                                                                                                                                                           
Change YTY Revenue - External                                                                2.5 %                                                                0.7 %                                                               (1.2 )%                                                              31.7 %                                                                 0.8 %
Change YTY Revenue - External @constant currency                                             0.0 %                                                               (1.5 )%                                                              (4.0 )%                                                              28.5 %                                                                (1.8 )%
                                                                                                                                                                                                                                                                                                                                                           
                                                                                                                                                                                                                                                                                                                                                           
                                                                                                                                                                                                                              FOURTH - QUARTER 2016
                                                                      ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                      Cognitive Solutions &
                                                                                                                        Industry Services
                                                                      ---------------------------------------------------------------------------------------------------------------------
                                                                                                                                                                                                                                   Technology
                                                                                                                                                                Global                                                             Services &
(Dollars in Millions)                                                                     Cognitive                                                            Business                                                               Cloud                                                                                                                                    Global
                                                                                          Solutions                                         Services                                          Platforms                                          Systems                                          Financing
                                                                      -------------------------------------------------------------------- -------------------------------------------------------------------- -------------------------------------------------------------------- -------------------------------------------------------------------- -------------------------------------------------
Revenue
External                                                                                 $ 5,297                                                              $ 4,121                                                              $ 9,308                                                              $ 2,530                                                              $    447
Internal                                                                  701         100         214         156          462  
                                                                      -------------------- ----- -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- ----- -------------------- -------------------- -------------------- ------ --------------------
Total Segment Revenue                                                                    $ 5,999                                                              $ 4,221                                                              $ 9,522                                                              $ 2,686                                                              $    909
                                                                                                                                                                                                                                                                                                                                                           
Pre-tax Income from Continuing Operations                                                  2,313                                                                  522                                                                1,882                                                                  579                                                                   448
                                                                                                                                                                                                                                                                                                                                                           
Pre-tax margin                                                                              38.6 %                                                               12.4 %                                                               19.8 %                                                               21.6 %                                                                49.3 %
 
                                                                                                                                                                                  INTERNATIONAL BUSINESS MACHINES CORPORATION
                                                                                                                                                                                                 SEGMENT DATA
                                                                                                                                                                                                  (Unaudited)
                                                  
                                                                                                                                                                                                                                TWELVE - MONTHS 2017
                                                                      ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                       Cognitive Solutions &                                                                                                                                                       
                                                                                                                         Industry Services
                                                                      -----------------------------------------------------------------------------------------------------------------------
                                                                                                                                                                                                                  Technology
                                                                                                                                                                 Global                                                              Services &
(Dollars in Millions)                                                                     Cognitive                                                             Business                                                                Cloud                                                                                                                                     Global
                                                                                          Solutions                                                             Services                                                              Platforms                                                              Systems                                                             Financing
                                                                      -------------------------------------------------                     -------------------------------------------------                     -------------------------------------------------                     ------------------------------------------------                     -------------------------------------------------
Revenue
External                                                                                 $ 18,453                                                              $ 16,348                                                              $ 34,277                                                              $ 8,194                                                              $  1,696
Internal                                                                 2,647                             363                             657                            750                           1,471  
                                                                      -------------------- ------ --------------------                      -------------------- ------ --------------------                      -------------------- ------ --------------------                      -------------------- ----- --------------------                      -------------------- ------ --------------------
Total Segment Revenue                                                                    $ 21,100                                                              $ 16,711                                                              $ 34,934                                                              $ 8,945                                                              $  3,168
                                                                                                                                                                                                                                                                                                                                                              
Pre-tax Income from Continuing Operations                                                   6,817                                                                 1,401                                                                 4,344                                                                1,135                                                                 1,279
                                                                                                                                                                                                                                                                                                                                                              
Pre-tax margin                                                                               32.3 %                                                                 8.4 %                                                                12.4 %                                                               12.7 %                                                                40.4 %
                                                                                                                                                                                                                                                                                                                                                              
Change YTY Revenue - External                                                                 1.5 %                                                                (2.1 )%                                                               (3.0 )%                                                               6.2 %                                                                 0.3 %
Change YTY Revenue - External @constant currency                                              1.0 %                                                                (1.8 )%                                                               (3.4 )%                                                               5.4 %                                                                (0.7 )%
                                                                       
                                                                       
                                                                                                                                                                                                                                TWELVE - MONTHS 2016
                                                                      ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                       Cognitive Solutions &
                                                                                                                         Industry Services
                                                                      -----------------------------------------------------------------------------------------------------------------------
                                                                                                                                                                                                                                     Technology
                                                                                                                                                                 Global                                                              Services &
(Dollars in Millions)                                                                     Cognitive                                                             Business                                                                Cloud                                                                                                                                     Global
                                                                                          Solutions                                                             Services                                                              Platforms                                                              Systems                                                             Financing
                                                                      -------------------------------------------------                     -------------------------------------------------                     -------------------------------------------------                     ------------------------------------------------                     -------------------------------------------------
Revenue
External                                                                                 $ 18,187                                                              $ 16,700                                                              $ 35,337                                                              $ 7,714                                                              $  1,692
Internal                                                                 2,630                             409                             715                            750                           1,802  
                                                                      -------------------- ------ --------------------                      -------------------- ------ --------------------                      -------------------- ------ --------------------                      -------------------- ----- --------------------                      -------------------- ------ --------------------
Total Segment Revenue                                                                    $ 20,817                                                              $ 17,109                                                              $ 36,052                                                              $ 8,464                                                              $  3,494
                                                                                                                                                                                                                                                                                                                                                              
Pre-tax Income from Continuing Operations                                                   6,352                                                                 1,732                                                                 4,707                                                                  933                                                                 1,656
                                                                                                                                                                                                                                                                                                                                                              
Pre-tax margin                                                                               30.5 %                                                                10.1 %                                                                13.1 %                                                               11.0 %                                                                47.4 %
 
                                                                                                    INTERNATIONAL BUSINESS MACHINES CORPORATION
                                                                                             U.S. GAAP TO OPERATING (Non-GAAP) RESULTS RECONCILIATION
                                                                                             (Unaudited; Dollars in millions except per share amounts)
                                                            
                                                                                                                                                       FOURTH - QUARTER 2017
                                                                                                                                                       CONTINUING OPERATIONS
                                                                                -------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                Acquisition-      Retirement-      Tax Reform    
                                                                                                                      Related                             Related                            One-Time                               Operating
                                                                                    GAAP        Adjustments*     Adjustments**     Charge (1)          (Non-GAAP)
                                                                                --------------------------------- ----------------------------------- ----------------------------------- ----------------------------------- ---------------------
                                                                                                                                                                                                                               
Gross Profit                                                                     $ 10,862                            $   99                              $  209                                    -                               $ 11,170
                                                                                                                                                                                                                               
Gross Profit Margin                                                                  48.2 %                               0.4Pts                              0.9Pts                               -                                   49.5 %
                                                                                                                                                                                                                               
S,G&A                                                                               5,147                              (116 )                              (145 )                                  -                                  4,886
                                                                                                                                                                                                                               
R,D&E                                                                               1,427                                 -                                 (50 )                                  -                                  1,378
                                                                                                                                                                                                                               
Other (Income) & Expense                                                                2                               (32 )                                 -                                    -                                    (30 )
                                                                                                                                                                                                                               
Total Expense & Other (Income)                                                      6,393                              (148 )                              (195 )                                  -                                  6,050
                                                                                                                                                                                                                               
Pre-tax Income from Continuing Operations                                           4,469                               247                                 404                                    -                                  5,120
                                                                                                                                                                                                                               
Pre-tax Income Margin from Continuing Operations                                     19.8 %                               1.1Pts                              1.8Pts                               -                                   22.7 %
                                                                                                                                                                                                                               
Provision for Income Taxes***                                                       5,522                                67                                 197                               (5,475 )                                  310
                                                                                                                                                                                                                               
Effective Tax Rate                                                                  123.6 %                              -4.7Pts                             -5.9Pts                           -106.9Pts                                6.1 %
                                                                                                                                                                                                                               
Income / (Loss) from Continuing Operations                                         (1,053 )                             181                                 206                                5,475                                  4,809
                                                                                                                                                                                                                               
Income / (Loss) Margin from Continuing Operations                                    (4.7 )%                              0.8Pts                              0.9Pts                             24.3Pts                               21.3 %
                                                                                                                                                                                                                               
Diluted Earnings / (Loss) Per Share: Continuing Operations                         ($1.14 )                          $ 0.19                              $ 0.22                             $   5.91                               $   5.18
(1)   Operating (non-GAAP) earnings excludes a one-time charge of
                         $5.5 billion associated with the enactment of U.S. tax reform due
                         to its unique non-recurring nature.
                               
                                                                                                        FOURTH - QUARTER 2016
                                                                                                                           CONTINUING OPERATIONS
                                                                       -----------------------------------------------------------------------------------------------------------------------------
                                                                                     Acquisition-      Retirement-   
                                                                                                           Related                             Related                               Operating
                                                                          GAAP       Adjustments*     Adjustments**        (Non-GAAP)
                                                                       ------------------------------- ----------------------------------- ----------------------------------- ---------------------
                                                                                                                                                                                
Gross Profit                                                           $ 10,893                           $  124                              $   78                                $ 11,095
                                                                                                                                                                                
Gross Profit Margin                                                        50.0 %                              0.6Pts                              0.4Pts                               51.0 %
                                                                                                                                                                                
S,G&A                                                                     4,976                             (136 )                               (69 )                                 4,771
                                                                                                                                                                                
R,D&E                                                                     1,431                                -                                  (6 )                                 1,425
                                                                                                                                                                                
Other (Income) & Expense                                                   (136 )                              0                                   -                                    (136 )
                                                                                                                                                                                
Total Expense & Other (Income)                                            5,907                             (136 )                               (76 )                                 5,696
                                                                                                                                                                                
Pre-tax Income from Continuing Operations                                 4,986                              260                                 154                                   5,399
                                                                                                                                                                                
Pre-tax Income Margin from Continuing Operations                           22.9 %                              1.2Pts                              0.7Pts                               24.8 %
                                                                                                                                                                                
Provision for Income Taxes***                                               480                               66                                  77                                     623
                                                                                                                                                                                
Effective Tax Rate                                                          9.6 %                              0.8Pts                              1.1Pts                               11.5 %
                                                                                                                                                                                
Income from Continuing Operations                                         4,505                              193                                  77                                   4,776
                                                                                                                                                                                
Income Margin from Continuing Operations                                   20.7 %                              0.9Pts                              0.4Pts                               21.9 %
                                                                                                                                                                                
Diluted Earnings Per Share: Continuing Operations                      $   4.73                           $ 0.20                              $ 0.08                                $   5.01
*     Includes amortization of purchased intangible assets, in
                         process R&D, severance cost for acquired employees, vacant space
                         for acquired companies, deal costs and acquisition integration tax
                         charges.
**                       Includes retirement-related interest cost, expected return on
                         plan assets, recognized actuarial losses or gains, amortization of
                         transition assets, other settlements, curtailments, multi-employer
                         plans and insolvency insurance.
***                      Tax impact on operating (non-GAAP) pre-tax income from
                         continuing operations is calculated under the same accounting
                         principles applied to the As Reported pre-tax income under ASC
                         740, which employs an annual effective tax rate method to the
                         results.
                               
                                                                                                INTERNATIONAL BUSINESS MACHINES CORPORATION
                                                                                         U.S. GAAP TO OPERATING (Non-GAAP) RESULTS RECONCILIATION
                                                                                         (Unaudited; Dollars in millions except per share amounts)
                                                   
                                                                                                                                               TWELVE - MONTHS 2017
                                                                                                                                               CONTINUING OPERATIONS
                                                                       --------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                       Acquisition-       Retirement-      Tax Reform    
                                                                                                             Related                              Related                            One-Time                               Operating
                                                                           GAAP        Adjustments*      Adjustments**     Charge (1)          (Non-GAAP)
                                                                       --------------------------------- ----------------------------------- ------------------------------------ ----------------------------------- ---------------------
                                                                                                                                                                                                                       
Gross Profit                                                            $ 36,227                            $  449                              $   799                                    -                               $ 37,475
                                                                                                                                                                                                                       
Gross Profit Margin                                                         45.8 %                               0.6Pts                               1.0Pts                               -                                   47.4 %
                                                                                                                                                                                                                       
S,G&A                                                                     20,107                              (509 )                               (472 )                                  -                                 19,126
                                                                                                                                                                                                                       
R,D&E                                                                      5,787                                 -                                 (197 )                                  -                                  5,590
                                                                                                                                                                                                                       
Other (Income) & Expense                                                    (216 )                             (39 )                                  -                                    -                                   (255 )
                                                                                                                                                                                                                       
Total Expense & Other (Income)                                            24,827                              (548 )                               (669 )                                  -                                 23,609
                                                                                                                                                                                                                       
Pre-tax Income from Continuing Operations                                 11,400                               997                                1,468                                    -                                 13,866
                                                                                                                                                                                                                       
Pre-tax Income Margin from Continuing Operations                            14.4 %                               1.3Pts                               1.9Pts                               -                                   17.5 %
                                                                                                                                                                                                                       
Provision for Income Taxes***                                              5,642                               279                                  485                               (5,475 )                                  931
                                                                                                                                                                                                                       
Effective Tax Rate                                                          49.5 %                              -1.5Pts                              -1.7Pts                            -39.5Pts                                6.7 %
                                                                                                                                                                                                                       
Income from Continuing Operations                                          5,758                               718                                  983                                5,475                                 12,935
                                                                                                                                                                                                                       
Income Margin from Continuing Operations                                     7.3 %                               0.9Pts                               1.2Pts                              6.9Pts                               16.3 %
                                                                                                                                                                                                                       
Diluted Earnings Per Share: Continuing Operations                       $   6.14                            $ 0.77                              $  1.05                             $   5.84                               $  13.80
(1)   Operating (non-GAAP) earnings excludes a one-time charge of
                         $5.5 billion associated with the enactment of U.S. tax reform due
                         to its unique non-recurring nature.
                               
                                                                                                     TWELVE - MONTHS 2016
                                                                                                                        CONTINUING OPERATIONS
                                                                       -----------------------------------------------------------------------------------------------------------------------
                                                                                 Acquisition-     Retirement-  
                                                                                                       Related                            Related                              Operating
                                                                         GAAP    Adjustments*    Adjustments**       (Non-GAAP)
                                                                       ------- -------------------- ------------ -------------------- ------------- -------------------- --------------------
                                                                                                                                                                          
Gross Profit                                                           $38,294                              $494                               $316                                   $39,104
                                                                                                                                                                          
Gross Profit Margin                                                      47.9%                            0.6Pts                             0.4Pts                                     48.9%
                                                                                                                                                                          
S,G&A                                                                   21,069                             (501)                              (253)                                    20,315
                                                                                                                                                                          
R,D&E                                                                    5,751                                 -                               (29)                                     5,722
                                                                                                                                                                          
Other (Income) & Expense                                                   145                               (7)                                  -                                       138
                                                                                                                                                                          
Total Expense & Other (Income)                                          25,964                             (508)                              (282)                                    25,174
                                                                                                                                                                          
Pre-Tax Income from Continuing Operations                               12,330                             1,003                                598                                    13,931
                                                                                                                                                                          
Pre-tax Income Margin from Continuing Operations                         15.4%                            1.3Pts                             0.7Pts                                     17.4%
                                                                                                                                                                          
Provision for Income Taxes***                                              449                               268                                183                                       900
                                                                                                                                                                          
Effective Tax Rate                                                        3.6%                            1.7Pts                             1.2Pts                                      6.5%
                                                                                                                                                                          
Income from Continuing Operations                                       11,881                               735                                415                                    13,031
                                                                                                                                                                          
Income Margin from Continuing Operations                                 14.9%                            0.9Pts                             0.5Pts                                     16.3%
                                                                                                                                                                          
Diluted Earnings Per Share: Continuing Operations                       $12.39                             $0.77                              $0.43                                    $13.59
*     Includes amortization of purchased intangible assets, in
                         process R&D, severance cost for acquired employees, vacant space
                         for acquired companies, deal costs and acquisition integration tax
                         charges.
**                       Includes retirement-related interest cost, expected return on
                         plan assets, recognized actuarial losses or gains, amortization of
                         transition assets, other settlements, curtailments, multi-employer
                         plans and insolvency insurance.
***                      Tax impact on operating (non-GAAP) pre-tax income from
                         continuing operations is calculated under the same accounting
                         principles applied to the As Reported pre-tax income under ASC
                         740, which employs an annual effective tax rate method to the
                         results.
                               

http://cts.businesswire.com/ct/CT?id=bwnews&sty=20180118006371r1&sid=cmtx6&distro=nx&lang=en

View source version on businesswire.com: http://www.businesswire.com/news/home/20180118006371/en/

SOURCE: IBM"> <Property FormalName="PrimaryTwitterHandle" Value="@ibm

IBM 
Ian Colley, 914-434-3043 
colley@us.ibm.com 
or 
John Bukovinsky, 732-618-3531 
jbuko@us.ibm.com


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