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MANAGEMENT DISCUSSION
INTERNATIONAL BUSINESS MACHIN ES CORPORATION AND SUBSI DIARY COMPANIES
18 2006 Annual Report
Microelectronics. Semiconductor design and manufacturing of cus-
tomized products including microprocessors, application specific
integrated circuits and standard products for IBM systems and exter-
nal clients.
Engineering and Technology Services (E&TS). System and compo-
nent design services, strategic outsourcing of clients’ design teams,
and technology and manufacturing consulting services.
Printing Systems. Production print solutions, on demand print-related
solutions, enterprise workgroup print technologies, print management
software, services and maintenance.
Retail Store Solutions. Point-of-sale retail systems, software and
solutions.
FINANCING
Commercial Financing. Short-term inventory and accounts receiv-
able financing to dealers and remarketers of IT products.
Client Financing. Lease and loan financing to external and internal
clients for terms generally between two and seven years.
Remarketing. The sale and lease of used equipment (primarily sourced
from the conclusion of lease transactions) to new or existing clients.
Software
Information Management Software. Advanced database, content
management and information integration software that helps compa-
nies integrate, manage and gain value from their business information.
Lotus Software. Collaboration, messaging and social networking
software that enables businesses to communicate, collaborate and
increase productivity.
Rational Software. Software and process automation tools that help
clients manage the business process of software and systems delivery.
Tivoli Software. Software for infrastructure management, including
security and storage management that will help organizations better
manage their IT infrastructure to more effectively deliver IT services.
WebSphere Software. Provides the foundation for Web-enabled
applications and is a key product set in deploying a Service Oriented
Architecture. Management of a wide variety of business processes
using open standards to interconnect applications, data and operat-
ing systems.
Product Lifecycle Management (PLM). Software that enables clients
to improve their product development processes and their ability to
use product-related information across their businesses.
Operating Systems. Software engines that manage the fundamental
processes that make computers run.
Services
Business Process Services (BPS). A range of offerings from stan-
dardized processing platforms and Business Process Outsourcing
(BPO) through Business Transformation Outsourcing (BTO) that
delivers improved business results to clients through the strategic
change and/or operation of the client’s business processes, applications
and infrastructure.
Consulting and Systems Integration (C&SI). Delivery of value to
clients through consulting services for client-relationship manage-
ment, financial management, human capital, business strategy and
change and supply-chain management.
Strategic Outsourcing Services (SO). Comprehensive IT services
integrated with business insight working with clients to reduce
costs and improve productivity through the outsourcing of processes
and operations.
Integrated Technology Services (ITS). Services offerings that help
clients access, manage and support their technology infrastructures,
through a combination of skilled resources, software and IBM’s knowl-
edge of business processes.
Maintenance. A number of support services from product maintenance
through solution support to maintain and improve the availability of
clients’ IT infrastructure.
Application Management Services (AMS). Application develop-
ment, management, maintenance and support services for packaged
software, as well as custom and legacy applications.
Applications on Demand (AoD). Solutions for the management of
clients’ Web-based infrastructure and business applications, as well as
a growing portfolio of industry-specific independent software vendor
(ISV) solutions that are delivered as a service.
Management Discussion ........................................................
Road Map ............................................................................. 
Forward-Looking and Cautionary Statements ..................... 
Management Discussion Snapshot ...................................... 
Description of Business ....................................................... 
Year in Review...................................................................... 
Prior Year in Review ............................................................. 
Discontinued Operations ..................................................... 
Other Information ................................................................ 
Global Financing .................................................................. 
Report of Management .........................................................
Report of Independent Registered Public Accounting Firm ....
Consolidated Statements .......................................................
Black
MAC
2718 CG10