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3Q05		IBM Income Statement						Oct-05
			- FORECAST/ACTUAL -
		3Q05	% of	Annual	3Q04	% of	3Q03	% of
	(Forecast)	($ mill)	Total	Change	($ mill)	Total	($ mill)	Total
_	_	_	_	_	_	_	_	_
Revenue (Gross Income):
Hardware*	5,011	5,121	23.8%	-31.7%	7,501	32.1%	6,697	31.1%
Services	10,698	10,299	47.8%	3%	9,978	42.7%	9,060	42.1%
Maintenance	1,321	1,388	6.4%	4%	1,334	5.7%	1,323	6.1%
Software	3,802	3,819	17.7%	5%	3,621	15.5%	3,461	16.1%
Enterprise Investments	280	302	1.4%	9%	277	1.2%	266	1.2%
Global Financing	670	600	2.8%	-6%	638	2.7%	715	3.3%
Total	21,782	21,530	100.0%	-8%	23,349	100.0%	21,522	100.0%
Costs	GP Margin
Cost of Hardware	37.1%	3,219	15.0%	-40.1%	5,371	23.0%	5,016	23.3%
Cost of Services	24.3%	7,794	36.2%	1.0%	7,718	33.1%	6,996	32.5%
Cost of Maintenance	38.4%	855	4.0%	8.6%	787	3.4%	781	3.6%
Cost of Software	87.4%	480	2.2%	4.3%	460	2.0%	492	2.3%
Enterprise Investments	42.8%	173	0.8%	12.1%	154	0.7%	124	0.6%
Global Financing	54.5%	273	1.3%	7.0%	255	1.1%	303	1.4%
Total Cost of Rev.		12,793	59.4%	-13.2%	14,744	63.1%	13,712	63.7%
Gross Profit	8,530	8,738	40.6%	2.4%	8,533	36.5%	7,810	36.3%
SG&A Expenses*		4,632	21.5%	-10.3%	5,162	22.1%	4,302	20.0%
One-time Charges
RD&E Expenses		1,447	6.7%	-1.4%	1,468	6.3%	1,307	6.1%
Total Costs & Exp.		18,872	87.7%	-11.7%	21,374	91.5%	19,321	89.8%
Operating Income	2,397	2,658	12.3%	39.7%	1,903	8.2%	2,201	10.2%
Intellectual Property Income		(213)	-1.0%	-17.8%	(259)	-1.1%	(406)	-1.9%
Other Income		(99)	-0.5%	80.0%	(55)	-0.2%	26	0.1%
Interest Expense		56	0.3%	75.0%	32	0.1%	33	0.2%
Earnings (Loss) Before Tax		2,915	13.5%	33.4%	2,185	9.4%	2,549	11.8%
Tax/Rate		1,399	48.0%	121.7%	631	28.9%	764	30.0%
Net Earn(Loss)		1,516	252.5%	-2.5%	1,554	243.4%	1,786	249.8%
Disco'd Operations (loss)
Net Earnings	1,905	1,516	7.0%	-2.5%	1,554	6.7%	1,786	8.3%
Shares # (basic)		1,591.1		-4.7%	1,669.6		1,722.6
Net Earnings/Share	1.18	0.95		2.3%	0.93		1.04
EPS adj. for 37.3% tax		0.78		-18%	0.59		0.68
rate, share buybacks; currency		2,340	(1995 # shares, adjusted for splits)
Gross Profit:		GP	GM		GP	GM	GP	GM
Hardware*	1,704	1,903	37.1%	-10.7%	2,130	28.4%	1,681	25.1%
Services	2,463	2,506	24.3%	10.9%	2,260	22.7%	2,064	22.8%
Software	3,307	3,340	87.4%	5.7%	3,161	87.3%	2,969	85.8%
Maintenance	542	533	38.4%	-2.7%	547	41.0%	542	41.0%
Enterprise Investments	112	129	42.8%	5.2%	123	44.4%	142	53.4%
Global Financing	402	327	54.5%	-14.6%	383	60.1%	412	57.6%
	Source: Annex Research			*PC/Lenovo results removed