This is a summary of the second quarter fiscal 2008 earnings call conducted by International Business Machines Corp. (IBM: chart) on July 17, 2008

Management:

- Senior Vice President, Chief Financial Officer: Mark Loughridge
- Vice President of Investor Relations: Patricia Murphy

Key Investors Issues:

-Total revenues of $26.8 billion increased 13% percent from 2007.
-Income from continuing operations was $2.8 billion or $1.98 a share, an increase of 22%, compared with $2.3 billion or $1.57 a share in the prior year,
- Shares repurchased amounted to $4.7 billion on a cash-paid basis.

Half-Year Financial Highlights:

- Income from continuing operations was $5.1 billion or $3.63 a share, an increase of 24%, compared with $4.1 billion or $2.75 a share in 2007.
- Revenues totaled $51.3 billion, an increase of 12% (5%, adjusting for currency) compared with $45.8 billion in 2007.
- The company bought back 62 million shares for $7.2 billion and had $8.9 billion remaining from board authorization.

Second Quarter Financial Highlights:

Total revenues of $26.8 billion increased 13% from the second quarter of 2007, Americas'' revenues of $10.9 billion, up 8%.

- Revenues from Europe/Middle East/Africa were $9.8 billion, up 20%(7%, adjusting for currency).
- Asia-Pacific revenues increased 16% (6%, adjusting for currency) to $5.3 billion.
- OEM revenues were $706 million, down 17% compared with the 2007 second quarter.
- Revenues from the company''s new growth markets organization increased 21% (14%, adjusting for currency) and represented 18% of geographic revenues.
- The company''s gross profit margin was 43.2% compared with 41.8% in the 2007 period.

Global Technology Services segment revenues increased 15% percent to $10.1 billion, with significant growth from existing clients.

- Global Business Services segment revenues, which benefited from strength in consulting services, increased 18% (9%, adjusting for currency) to $5.1 billion.
- Revenues from the Systems and Technology segment totaled $5.2 billion for the quarter, up 2% (down 3%, adjusting for currency).
- Revenues from the Software segment were $5.6 billion, an increase of 17% compared with 2007.
- Global Financing segment revenues increased 6% (down 2%, adjusting for currency) in the second quarter to $634 million.

Total expense and other income increased 15% to $7.8 billion compared with the prior-year period as SG&A expense increased 12% to $6.3 billion and RD&E expense increased 8%.

- Intellectual property and custom development income increased to $285 million compared with $246 million a year ago.
- Other (income) and expense was income of $24 million, down $228 million as a result of hedging and the year-to-year impact of the gain on the sale of PSD in 2007.
- Interest expense increased to $145 million compared with $130 million, primarily due to the increase in debt to finance the company''s accelerated share repurchase agreements.
- Compensation, salary, bonus, equity awards, retirement-related plans, is up about $800 million year to year.

Income from continuing operations was $2.8 billion or $1.98 a share, an increase of 22% from $2.3 billion or $1.57 a share in the prior year due to revenue growth:

-Global Technology Services pre-tax profit was up 26% and margin was 9.5%, up nine-tenths of a point year to year.
- Pre-tax income dollars grew 21%, and PTI margin expanded 1 point.
- Total Services signings of $14.7 billion, were up 12%; $12.2 billion at constant currency, up 4%.
-Short-term services signings were up 18% percent or up 9% at constant currency.

Debt, including Global Financing, totaled $34.2 billion, compared with $35.3 billion at year-end 2007.

- Global Financing debt increased $639 million from year-end 2007 to a total of $25.2 billion at June 30, 2008, resulting in a debt-to-equity ratio of 6.8 to 1.
- Non-global financing debt, which reflects financial leverage associated with accelerated share repurchase agreements, totaled $9.1 billion, a decrease of $1.7 billion since year-end 2007, resulting in a debt-to-capitalization ratio of 26.9%.
- The cash balance was $9.8 billion and the company invested $2.4 billion in net capital expenditures and $5.9 billion in acquisitions to acquire 13 companies, including Cognos and Telelogic.
- A total of $8.4 billion was spent through a combination of dividends and share repurchases.

Outlook Fiscal 2008:

–The company is expecting full year 2008 earnings per share of at least $8.50.

Key questions and answers for the second quarter fiscal 2008 earnings call, conducted by International Business Machines Corp. (IBM: chart) on July 17, 2008