IBM today announced second-quarter 2005 diluted earnings per common share of $1.14 from continuing operations, including a $.72 per share of incremental charges related to workforce reductions, a $.45 per share gain on the sale of its Personal Computing business, and $.29 per share of other income due to a settlement agreement entered into with Microsoft.

Without these non-recurring items, diluted earnings per share were $1.12 compared with diluted earnings in the second quarter of 2004 of $1.01 per share.
Second-quarter income from continuing operations was $1.85 billion, including the non-recurring pretax items for incremental restructuring charges of $1.7 billion, offset by a $1.1 billion gain on the sale of the PC business, and a $775 million settlement received from Microsoft.

Without these non-recurring items, income from continuing operations was $1.82 billion as compared to $1.74 billion in the second quarter of 2004. Total revenues for the second quarter of 2005 of $22.3 billion, which includes $557 million of PC revenue for April 2005, decreased 4 percent (6 percent, adjusting for currency) from the second quarter of 2004. Excluding the revenue from the divested PC business, second-quarter revenues increased 6 percent (4 percent, adjusting for currency) compared with the second quarter of 2004.

As previously announced, IBM completed an agreement on April 30, 2005 to sell its PC business. As a result, the company's second-quarter 2005 results include the operational performance of the PC business for the month of April 2005 only. The segment results included in the press release reflect the new segment structure under which the company will operate as of the second quarter of 2005. PC results are identified on a standalone basis. In the second quarter of 2005, external PC revenue was $557 million and the pretax loss was $149 million, including a loss on intercompany sales and charges of $13 million.

Additional detail regarding the incremental restructuring charges, the gain on the PC sale, the Microsoft settlement, and the PC operation performance in the company's second-quarter results will be provided during IBM's regular quarterly earnings conference call.

Revenues from Global Services, including maintenance, increased 6 percent (4 percent, adjusting for currency) to $12.0 billion in the second quarter. Global Services revenues, excluding maintenance, increased 6 percent (4 percent, adjusting for currency) as well. IBM signed services contracts totaling $14.6 billion and ended the quarter with an estimated services backlog, including Strategic Outsourcing, Business Consulting Services, Integrated Technology Services and Maintenance, of $113 billion.

IBM ended the second quarter of 2005 with $8.7 billion of cash on hand. The balance sheet remains strong, and the company is well positioned to take advantage of opportunities.

Debt, including Global Financing, totaled $23.7 billion, compared with $22.9 billion at year-end 2004. From a management segment view, the non-global financing debt-to-capitalization ratio was 9.5 percent at the end of June 30, 2005, and Global Financing debt declined $1.4 billion from year-end 2004 to a total of $20.9 billion, resulting in a debt-to-equity ratio of 6.7 to 1.