® 1Q 2010 Earnings Presentation April 19, 2010 www.ibm.com/investor Forward Looking Statements Certain comments made in this presentation may be characterized as forward looking under the Private Securities Litigation Reform Act of 1995. Those statements involve a number of factors that could cause actual results to differ materially. Additional information concerning these factors is contained in the Company's filings with the SEC. Copies are available from the SEC, from the IBM web site, or from IBM Investor Relations. These charts and the associated remarks and comments are integrally related, and are intended to be presented and understood together. www.ibm.com/investor 2 1Q 2010 Highlights Pre-Tax Income $3.5B +13% yr/yr EPS $1.97 +16% yr/yr Free Cash Flow* $1.4B +$400M yr/yr ¾ Significant improvements in revenue growth rates across the segments and geographies ¾ Continued margin expansion through improving mix and ongoing focus on productivity ¾ Strong cash flow performance, supporting ongoing investments and shareholder returns Increasing EPS expectations to at least $11.20 in 2010 * Excluding GF Receivables www.ibm.com/investor 3 Revenue Growth Rate Improvement @ Constant Currency Segment Revenue Global Technology Services 1Q10 Yr/Yr vs. 4Q09 Yr/Yr 3 pts Global Business Services 4 pts Software 9 pts Systems & Technology 11 pts Global Financing (1 pts) Total Revenue 5 pts Geo Revenue Americas EMEA Asia Major Markets Growth Markets BRIC 1Q10 Yr/Yr vs. 4Q09 Yr/Yr 6 pts 5 pts 4 pts 5 pts 6 pts 7 pts Total Revenue 5 pts Broad-based improvements in revenue growth rates www.ibm.com/investor 4 Financial Summary $ in Billions, except EPS Revenue 1Q10 B/(W) Yr/Yr $22.9 5% @CC GP % Flat 43.6% 0.2 pts Expense $6.5 (2%) Pre-Tax Income $3.5 13% PTI Margin 15.4% 1.0 pts Tax Rate 26.0% 0.5 pts Net Income Shares (Diluted) (M) EPS $2.6 1,321.6 $1.97 13% 2% 16% Improving revenue growth and margin expansion drive profit performance www.ibm.com/investor 5 Revenue by Geography $ in Billions 1Q10 Americas B/(W) Yr/Yr Rptd @CC $9.5 2% Flat Europe/ME/A 7.6 5% (2%) Asia Pacific 5.3 10% 1% Total Geographies $22.3 5% Flat IBM $22.9 5% Flat Major Markets Growth Markets BRIC Countries 2% (2%) 20% 8% 23% 14% Canada/ LA U.S. -1% EMEA APac Japan +7% -3% @CC @CC OEM +18% Growth markets outpace major markets by 10 points www.ibm.com/investor 6 Revenue and Gross Margin by Segment Revenue $ in Billions 1Q10 Global Technology Services Gross Profit Margin B/(W) Yr/Yr Rptd @CC 1Q10 B/(W) Yr/Yr Pts Flat 34.4% 0.5 pts $9.3 6% Global Business Services 4.4 Flat (5%) 27.3% 0.7 pts Software 5.0 11% 5% 84.6% 0.4 pts Systems & Technology 3.4 5% 2% 33.6% (0.4 pts) Global Financing 0.5 (7%) (12%) 49.8% 3.9 pts Total Segments $22.7 5% Flat 44.3% 1.0 pts Total IBM $22.9 5% Flat 43.6% 0.2 pts Performance led by Software www.ibm.com/investor 7 Expense Summary B/(W) Yr/Yr Drivers $ in Billions 1Q10 B/(W) Yr/Yr SG&A $5.7 (8%) (7 pts) (1 pts) 0 pts 1.5 (2%) (3 pts) (1 pts) 2 pts IP and Development Income (0.3) (2%) Other (Income)/Expense (0.5) 80% 0.1 40% (7 pts) (1 pts) 5 pts (2) RD&E (3) Interest Expense Total Expense & Other Income $6.5 Currency (2%) Acq. (1) Ops (1) Includes acquisitions made in the last twelve months (2) Includes yr/yr increase of $293M in workforce rebalancing (3) Includes PLM gain of $591M in 1Q10 and Geodis gain of $298M in 1Q09 Improving operating leverage through productivity www.ibm.com/investor 8 Pre-Tax Income by Segment $ in Billions B/(W) Yr/Yr w/o Unique Items* Segment PTI % B/(W) Yr/Yr B/(W) Yr/Yr w/o Unique Items* 10.0% (2.1 pts) 0.3 pts 9.7% (1.6 pts) (0.5 pts) 9.6 pts 2.8 pts (5.6 pts) (2.2 pts) 45.4% 8.2 pts 7.9 pts 11% 15.2% 0.8 pts 0.8 pts 13% 15.4% 1.0 pts 1.0 pts Segment PTI $ B/(W) Yr/Yr $1.0 (13%) 9% Global Business Services 0.4 (15%) (4%) Software 2.1 54% 25% (0.2) nm nm 0.4 19% 18% Total Segments $3.7 11% Total IBM $3.5 13% Global Technology Services Systems & Technology Global Financing 35.5% (4.8%) * 1Q10: PLM gain of $591M and Workforce Rebalancing charge of $559M 1Q09: Geodis gain of $298M and Workforce Rebalancing charge of $265M www.ibm.com/investor 9 Services Segments Global Technology Services (GTS) $ in Billions Global Business Services (GBS) 1Q10 B/(W) Yr/Yr Rptd @CC $9.3 6% Gross Margin (External) 34.4% 0.5 pts PTI Margin 10.0% (2.1 pts) PTI Margin excl Unique Items 12.8% 0.3 pts Revenue (External) Flat 1Q10 Outsourcing - GTS O/S, Appl. O/S (AMS) Transactional - ITS, Consulting, AMS SI Total Signings Total Signings w/o AMS Revenue (External) Gross Margin (External) PTI Margin PTI Margin excl Unique Items Global Services Signings $ in Billions $ in Billions B/(W) Yr/Yr Rptd @CC $6.8 (3%) (8%) 5.5 (1%) (6%) $12.3 (2%) (7%) 4% (1%) 1Q10 Revenues (% of Total Services) (Growth @CC) 1% Yr/Yr 1Q10 B/(W) Yr/Yr Rptd @CC $4.4 Flat 27.3% 0.7 pts 9.7% (1.6 pts) 12.4% (0.5 pts) (5%) (4%) Yr/Yr Integrated Technology Services 1% 15% Maint. Yr/Yr GTS 13% Outsourcing 40% Global Business Services 32% (5%) Yr/Yr Improving revenue performance in both GTS and GBS www.ibm.com/investor 10 Software Segment 1Q10 B/(W) Yr/Yr Rptd @CC $5.0 11% Gross Margin (External) 84.6% 0.4 pts PTI Margin 35.5% 9.6 pts PTI Margin excl Unique Items 27.0% 2.8 pts $ in Billions Revenue (External) 1Q10 Revenue Yr/Yr Rptd @CC WebSphere Family 13% 8% Information Management 11% 6% Tivoli 23% 18% Lotus 1% (3%) Rational 7% 2% Key Branded Middleware 13% 8% Total Middleware 12% 7% Total Software 11% 5% 5% 1Q10 Revenue (% of Total Software) Key Branded Middleware 56% Other Middleware 24% Operating Systems Other 10% 10% Gained share in Branded Middleware and each of the five key brands www.ibm.com/investor 11 Systems & Technology Segment 1Q10 B/(W) Yr/Yr Rptd @CC $3.4 5% Gross Margin (External) 33.6% (0.4 pts) PTI Margin (4.8%) (5.6 pts) PTI Margin excl Unique Items (3.2%) (2.2 pts) $ in Billions Revenue (External) 1Q10 Revenue Yr/Yr Rptd @CC System z (17%) (18%) POWER Systems (17%) (20%) System x 36% 31% Storage 11% 7% Retail Store Solutions 38% 35% 4% 1% 16% 16% 5% 2% Total Systems Microelectronics OEM Total Systems & Technology 2% 1Q10 Revenue (% of Total Sys & Tech) Storage 20% Servers 63% RSS Micr o OE 12% M Gained share in Storage, System x, RSS, and Mid-range Power www.ibm.com/investor 12 Cash Flow Analysis $ in Billions Net Cash from Operations Less: Global Financing Receivables 1Q10 B/(W) Yr/Yr FY09 $4.4 $0.1 $20.8 2.1 (0.5) 2.3 0.5 (0.9) (0.1) 1.4 0.4 Acquisitions (0.8) (0.8) (1.2) Divestitures 0.0 (0.4) 0.4 Dividends (0.7) 0.0 (2.9) Share Repurchases (4.0) (2.3) (7.4) Non-GF Debt 0.3 2.3 (4.7) Other (includes GF A/R & GF Debt) 3.8 1.4 1.7 $0.0 $0.6 $1.1 Net Cash from Operations (excluding GF Receivables) Net Capital Expenditures Free Cash Flow (excluding GF Receivables) Change in Cash & Marketable Securities www.ibm.com/investor 1.9 18.9 (3.7) 15.1 13 Balance Sheet Summary Dec. 09 Mar.10 $12.3 $14.0 $14.0 Non-GF Assets* 59.1 61.7 61.3 Global Financing Assets 30.5 33.3 29.9 101.9 109.0 105.2 Other Liabilities 57.3 60.2 56.7 Non-GF Debt* 7.6 3.7 4.1 23.4 22.4 22.2 31.0 26.1 26.3 Total Liabilities 88.3 86.3 83.1 Equity 13.7 22.8 22.1 $ in Billions Cash & Marketable Securities Total Assets Global Financing Debt Total Debt Non-GF Debt / Capital Global Financing Leverage Mar. 09 42% 16% 18% 7.0 7.1 7.0 * Includes eliminations of inter-company activity www.ibm.com/investor 14 EPS Bridge – 1Q09 to 1Q10 $0.10 $0.04 $1.97 Share Repurchases 1Q10 EPS $0.01 $0.03 $0.09 $1.70 1Q09 EPS Revenue Growth @ Actual Gross Margin Expense Productivity Tax Rate www.ibm.com/investor 15 2010 $11.20+ 2009 $10.01 2008 $8.89 2007 $7.15 2006 $6.05 1Q 2010 Summary ¾ Broad-based improvement in revenue performance ¾ Margin expansion through shift to higher value and focus on productivity ¾ Strong profit and cash performance ¾ Continued IBM’s transformation: • • • • EPS Acquired high value capabilities Divested of lower value operations Introduced new technology Continued productivity initiatives Increasing EPS expectations to at least $11.20 in 2010 Note: 2006-2008 EPS reflects the adoption of amendments to ASC 260, “Earnings Per Share” www.ibm.com/investor 16 www.ibm.com/investor 17 Supplemental Materials Some columns and rows in these materials, including the supplemental exhibits, may not add due to rounding ¾ ¾ ¾ ¾ ¾ ¾ ¾ ¾ ¾ Currency – Year/Year Comparison Supplemental Segment Information – Global Services Supplemental Segment Information – Systems & Technology, Software Global Financing Portfolio Revenue by Key Industry Sales Unit Cash Flow (FAS 95) Revenue Growth Rate Improvement @CC Supplemental EPS Information – Acquisition-Related Activity Non-GAAP Supplementary Materials • Constant Currency, Cash Flow • Debt-to-Capital Ratio, Unique Items • Reconciliation of Segment Revenue Growth Rates • Reconciliation of Geography Revenue Growth, Reconciliation of Services Segment Revenue Growth Rates • Reconciliation of Pre-Tax Income • Reconciliation of Debt-to-Capital Ratio www.ibm.com/investor 18 Currency – Year/Year Comparison Quarterly Averages per US $ Yr/Yr @ 4/16 Spot 2Q10 3Q10 4Q10 1Q10 Yr/Yr 4/16 Spot Euro 0.72 6% 0.74 (1%) (6%) (9%) Pound 0.64 8% 0.65 0% (6%) (6%) 91 3% 93 5% 1% (3%) 5 pts 2-3 pts ~(1)-0 pts ~(2-3 pts) ~6-7 pts ~4-5 pts ~1-2 pts ~(1)-0 pts Yen IBM Revenue Impact January 19 View Revenue As Reported Currency Impact Revenue @CC (US$B) Yr/Yr Negative Yr/Yr growth signifies a translation hurt $22.9 5% IBM hedges its major cross-border cash flows. The impact of these hedging programs is principally reflected in Other Income and Expense, as well as Cost of Goods Sold. 1.2 5 pts $21.7 Flat www.ibm.com/investor 19 Supplemental Segment Information – 1Q 2010 Revenue Growth Global Services Backlog Yr/Yr @CC Global Services 1Q10 GTS Outsourcing 8% 1% Backlog $134B Integrated Tech Services 2% (4%) Maintenance 7% 1% Quarter-to-Quarter Global Technology Services 6% Flat Year-to-Year Global Business Services Flat (5%) Change in Backlog due to Currency www.ibm.com/investor ($2B) $7B 20 Supplemental Segment Information – 1Q 2010 Revenue Growth Revenue Growth Systems & Technology Yr/Yr @CC System z (17%) (18%) POWER Systems (17%) (20%) System x 36% 31% Storage 11% 7% Retail Store Solutions 38% 35% 4% 1% 16% 16% 5% 2% Total Systems Microelectronics OEM Total Systems & Technology GP% Share = = Software Yr/Yr @CC WebSphere Family 13% 8% Information Management 11% 6% Tivoli 23% 18% Lotus 1% (3%) Rational 7% 2% 13% 8% 9% 4% 12% 7% Key Branded Middleware = Other Middleware Total Middleware Operating Systems 1% (3%) Other Software/Services 10% 4% Total Software 11% 5% www.ibm.com/investor 21 Global Financing Portfolio 1Q10 – $22.0B Net External Receivables Investment Grade 60% Non-Investment Grade 40% 40% 35% 30% 25% 20% 15% 10% 35% 25% 21% 5% 11% 5% 3% Ba3-B1 B2-B3 Caa-D 0% Aaa-A3 Baa1-Baa3 Ba1-Ba2 Identified Loss Rate Anticipated Loss Rate Reserve Coverage Client Days Delinquent Outstanding Commercial A/R > 30 Days 1Q10 1.9% 0.4% 2.3% 4Q09 1.6% 0.5% 2.1% 1Q09 1.7% 0.6% 2.3% 3.3 $49M 2.4 $28M 3.8 $63M www.ibm.com/investor 22 Revenue by Key Industry Sales Unit $ in Billions Financial Services 1Q10 B/(W) Yr/Yr Rptd @CC $6.4 5% (1%) Public 3.7 5% Flat Industrial 2.5 3% (2%) Distribution 2.3 10% Communications 2.2 (1%) General Business 4.4 10% 4% All Sectors $22.4 5% Flat Total IBM $22.9 5% Flat 5% (7%) www.ibm.com/investor Public Financial Services Industrial Distribution Comms General Business 23 Cash Flow (FAS 95) $ in Billions 1Q10 1Q09 Net Income from Operations $2.6 $2.3 Depreciation / Amortization of Intangibles 1.2 1.2 Stock-based Compensation 0.2 0.1 (1.6) (1.9) 2.1 2.6 4.4 4.4 (0.9) (0.8) 0.0 0.4 (0.8) 0.0 1.0 0.4 (0.7) 0.0 0.5 (2.4) Dividends (0.7) (0.7) Common Stock Repurchases (4.0) (1.8) 0.9 0.2 Net Cash used in Financing Activities (3.4) (4.6) Effect of Exchange Rate changes on Cash (0.1) (0.2) Net Change in Cash & Cash Equivalents $0.3 Working Capital / Other Global Financing A/R Net Cash provided by Operating Activities Capital Expenditures, net of payments & proceeds Divestitures, net of cash transferred Acquisitions, net of cash acquired Marketable Securities / Other Investments, net Net Cash used in Investing Activities Debt, net of payments & proceeds Common Stock Transactions - Other www.ibm.com/investor ($0.4) 24 Revenue Growth Rate Improvement @CC 1Q10 Yr/Yr vs. 4Q09 Yr/Yr Segment Revenue 4Q09 Yr/Yr 1Q10 Yr/Yr Growth Rate Improvement Geo Revenue 4Q09 Yr/Yr 1Q10 Yr/Yr Growth Rate Improvement Global Tech Svcs (3%) Flat 3 pts Americas (6%) Flat 6 pts Global Business Svcs (9%) (5%) 4 pts EMEA (7%) (2%) 5 pts Software (4%) 5% 9 pts Asia (3%) 1% 4 pts Systems & Tech (9%) 2% 11 pts Major Mkts (7%) (2%) 5 pts Global Financing (12%) Growth Mkts 2% 8% 6 pts BRIC 7% 14% 7 pts (5%) Flat 5 pts Total Revenue (5%) (12%) (1 pts) Flat 5 pts Total Revenue www.ibm.com/investor 25 Supplemental EPS Information – Acquisition-Related Activity The company is including a view of the impact of certain acquisitionrelated charges on IBM’s earnings results. Management’s view is that this supplemental information provides additional insight into the company’s ongoing operations and enables a more meaningful comparison to other companies in the technology sector who present similar information. www.ibm.com/investor 26 Supplemental EPS Information – Acquisition-Related Activity - 2010 1Q10 $ in Millions, except EPS As Reported Pre-Tax Income $3,515 Net Income $2,601 EPS $1.97 Adjustments Pre-Tax Income Total $116 Amortization of Acquired Intangibles 115 In Process R&D 0 Acquisition-Related Charges 2 Net Income $86 EPS $0.06 Results excluding Acquisition-Related Activity * Pre-Tax Income $3,631 Net Income $2,687 EPS $2.03 * Non-GAAP financial measure www.ibm.com/investor 27 Non-GAAP Supplementary Materials In an effort to provide investors with additional information regarding the company's results as determined by generally accepted accounting principles (GAAP), the company also discusses, in its earnings press release and/or earnings presentation materials, the following Non-GAAP information which management believes provides useful information to investors. Constant Currency Management refers to growth rates at constant currency or adjusting for currency so that the business results can be viewed without the impact of fluctuations in foreign currency exchange rates, thereby facilitating period-to-period comparisons of the company's business performance. Constant currency revenue results are calculated by translating current period revenue in local currency using the prior year's currency conversion rate. This consistent approach is based on the pricing currency for each country which is typically the functional currency. Generally, when the dollar either strengthens or weakens against other currencies, the growth at constant currency rates or adjusting for currency will be higher or lower than growth reported at actual exchange rates. Cash Flow Management includes presentations of both cash flow from operations and free cash flow that exclude the effect of Global Financing Receivables. For a financing business, increasing receivables is the basis for growth. Receivables are viewed as an investment and an income-producing asset. Therefore, management presents financing receivables as an investing activity. Management’s view is that this presentation gives the investor the best perspective of cash available for new investment or for distribution to shareholders. www.ibm.com/investor 28 Non-GAAP Supplementary Materials Debt-to-Capital Ratio Management presents its debt-to-capital ratio excluding the Global Financing business. A financing business is managed on a leveraged basis. The company funds its Global Financing segment using a debt-to-equity ratio target of approximately 7 to 1. Given this significant leverage, the company presents a debt-to-capital ratio which excludes the Global Financing segment debt and equity because the company believes this is more representative of the company’s core business operations. Unique Items Management presents certain segment financial results excluding the effects of the following items: (1) PLM gain in 2010, (2) Geodis gain in 2009 and (3) Workforce Rebalancing in both 2009 and 2010. Given the unique nature of these items, management believes that presenting certain segment financial information without these items is more representative of the segment’s operational performance and provides additional insight into, and clarifies the basis for, historical and/or future performance, which may be more useful for investors. www.ibm.com/investor 29 Non-GAAP Supplementary Materials Reconciliation of Segment Revenue Growth Rates 1Q10 Yr/Yr vs. 4Q09 Yr/Yr 4Q09 Yr/Yr As Rptd @CC Global Technology Services 2 pts 3 pts 4% (3%) Global Business Services 3 pts 4 pt (3%) (9%) Software 8 pts 9 pts 2% (4%) Systems & Technology 9 pts 11 pts (4%) (9%) (1 pts) (1 pts) (6%) (12%) Total Revenue 4 pts 5 pts 1% (5%) Americas 5 pts 6 pts (3%) (6%) EMEA 3 pts 5 pts 2% (7%) Asia 4 pts 4 pts 6% (3%) Major Markets 4 pts 5 pts (2%) (7%) Growth Markets 6 pts 6 pts 14% 2% BRIC 5 pts 7 pts 18% 7% Global Financing As Rptd @CC The above serves to reconcile the Non-GAAP financial information contained in the “Revenue Growth Rate Improvement @ Constant Currency” discussion regarding segment revenue growth in the company’s earnings presentation. The above reconciles the sequential change from 4Q09 to 1Q10. See Slide 28 of this presentation for additional information on the use of these Non-GAAP financial measures. www.ibm.com/investor 30 Non-GAAP Supplementary Materials Reconciliation of Geography Revenue Growth 1Q10 Yr/Yr As Rptd @CC Asia Pacific, other than Japan 21% 7% Japan Flat (3%) UK 17% 8% Reconciliation of Services Segment Revenue Growth Rates 1Q10 Yr/Yr vs. 4Q09 Yr/Yr Global Services As Rptd @CC 2 pts 3 pts The above serves to reconcile the Non-GAAP financial information contained in the “Revenue by Geography” and “Services Segment” discussion regarding revenue growth in certain geographies/countries/segments in the company’s earnings presentation. The above “Services Segment” section reconciles the sequential change from 4Q09 to 1Q10. See Slide 28 of this presentation for additional information on the use of these Non-GAAP financial measures. www.ibm.com/investor 31 Non-GAAP Supplementary Materials Reconciliation of Pre-Tax Income Workforce Geodis Gain Rebalancing 1Q09 1Q09 1Q10 w/o Unique Items* 1Q09 w/o Unique Items* B/(W) Yr/Yr w/o Unique Items* 1Q10 1Q09 B/(W) Yr/Yr Global Technology Services $1.0 $1.1 (13%) $ - $0.3 ($0.1) $0.1 $1.2 $1.1 9% Global Business Services 0.4 0.5 (15%) - 0.1 (0.0) 0.1 0.6 0.6 (4%) Pre-Tax Income Software PLM Gain 1Q10 Workforce Rebalancing 1Q10 2.1 1.3 54% (0.6) 0.1 (0.1) 0.0 1.6 1.2 25% (0.2) 0.0 nm - 0.1 (0.1) 0.0 (0.1) (0.0) nm Global Financing 0.4 0.4 19% - 0.0 - 0.0 0.4 0.4 18% Total Segments $3.7 $3.3 11% ($0.6) $0.6 ($0.3) $0.3 $3.7 $3.3 11% Total IBM $3.5 $3.1 13% ($0.6) $0.6 ($0.3) $0.3 PLM Gain 1Q10 Workforce Rebalancing 1Q10 $3.5 1Q10 w/o Unique Items* $3.1 1Q09 w/o Unique Items* 13% B/(W) Yr/Yr w/o Unique Items* - 2.8 pts (0.9 pts) 1.3 pts 12.8% 12.5% 0.3 pts Systems & Technology Workforce Geodis Gain Rebalancing 1Q09 1Q09 Pre-Tax Income Margin 1Q10 1Q09 B/(W) Yr/Yr Global Technology Services 10.0% 12.1% (2.1 pts) Global Business Services 9.7% 11.3% (1.6 pts) - 2.8 pts (1.0 pts) 2.7 pts 12.4% 12.9% (0.5 pts) Software 35.5% 25.9% 9.6 pts (10.2 pts) 1.7 pts (2.1 pts) 0.3 pts 27.0% 24.2% 2.8 pts Systems & Technology (4.8%) 0.8% (5.6 pts) - 1.6 pts (1.9 pts) 0.1 pts (3.2%) (0.9%) (2.2 pts) Global Financing 45.4% 37.2% 8.2 pts - 0.2 pts - 0.5 pts 45.7% 37.7% 7.9 pts Total Segments 15.2% 14.4% 0.8 pts (2.4 pts) 2.3 pts (1.3 pts) 1.1 pts 15.0% 14.3% 0.8 pts Total IBM 15.4% 14.4% 1.0 pts (2.6 pts) 2.4 pts (1.4 pts) 1.2 pts 15.2% 14.2% 1.0 pts * 1Q10: PLM gain of $591M and W orkforce Rebalancing charge of $559M 1Q09: Geodis gain of $298M and Workforce Rebalancing charge of $265M The above serves to reconcile the Non-GAAP financial information contained in the “Pre-Tax Income by Segment” discussion in the company’s earnings presentation. See Slide 29 of this presentation for additional information on the use of these Non-GAAP financial measures. www.ibm.com/investor 32 Non-GAAP Supplementary Materials Reconciliation of Debt-to-Capital Ratio 1Q10 FY09 1Q09 Non-Global Financing Debt / Capital 18% 16% 42% IBM Consolidated Debt / Capital 54% 53% 69% The above serves to reconcile the Non-GAAP financial information contained in the “Balance Sheet Summary” discussion regarding the non-Global Financing debt to capital ratio in the company’s earnings presentation. See Slide 29 of this presentation for additional information on the use of these Non-GAAP financial measures. www.ibm.com/investor 33 www.ibm.com/investor 34