International Business Machines Q2 2005 Earnings Conference Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Laura Conigliaro - Goldman Sachs - Analyst : Regarding all the changes that you have been making, how do you yourself dividing up the benefit from restructuring between pricing and margin enhancements? And also, given the likelihood of spillover that you saw in this current quarter, what makes you think that your execution can be strong enough in the seasonally weaker Q3 to show a solid second consecutive quarter of good results?

Question: Tony Sacconaghi - Sanford Bernstein - Analyst : I think the question was alluded to previously, but can you help us understand why investors shouldn't be skeptical that Q2 results were so strong, because this was kind of a catch-up or a push-out from Q1? Perhaps you can help us with what the services pipeline looks like sequentially versus last quarter and year-over-year. That's a number you provided at the end of Q1. And maybe you could talk a little bit about what your backlog looks like at the end of this quarter, again kind of relative to the end of last quarter.

Question: Andrew Neff - Bear Stearns - Analyst : Sort of a large (indiscernible) question, talking about the service business. You've taken some people out, but if you can sort of talk about how you see that business shaping up over time. In order to get to the type growth rate you need that's obviously going to be the driver. Where is that going to come from? Is this the sort of growth rate that we should expect? What areas are going to be growing; what areas are going to be shrinking? Just sort of take us through a longer-term view on the services business, if you could.

Question: Richard Gardner - Citigroup - Analyst : Just a quick question on the impact of the PC business. Just curious why you think that we should leave EPS estimates where they are given that it looks like the PC business was negatively affecting EPS on an annual basis to the tune of perhaps $0.15 to $0.20 in EPS. Obviously that impact is going away.

Question: Steve Milunovich - Merrill Lynch - Analyst : How significant do you think the new mainframe announcement is likely to be? As I understand it -- I know you can't preannounce it -- but it's probably going to be more for high-end customers. And I'm wondering if you can give us any sense of which quarter you think you'll

Question: Ben Reitzes - UBS - Analyst : With regard to Europe, when do you see that getting better? Is there any light at the end of the tunnel? And can you talk about the restructuring actions there too? Where are you exactly in the process there again? And what kind of benefits should we see maybe as early as the fourth quarter? Or what are you thinking?

Question: David Grossman - Thomas Weisel Partners - Analyst : I was wondering if you could just quickly summarize the known headwinds and tailwind on the servers businesses as we enter 2006. What I'm thinking is pension, anniversary of JPMorgan, among other things. LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Harry Blount - Lehman Brothers - Analyst : Just a quick question coming back to the software side of the equation. Could you give us a sense of what the software business would have grown if you would have taken just kind of the run rate revenue of Coria, Central and some of the other acquisitions going back about a year ago, if you were to back those out what the organic growth rate would look like? LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies.

Question: Rebecca Runkle - Morgan Stanley - Analyst : Kudos on the 80% SO signings number. But as I look at that, I think bears are quickly going to point to just pricing and aggressive Ps and Cs. And if you could provide more context and put some color around what drove in number and how we get comfortable that it's a high-quality number, that would be fabulous.

Question: Bill Shope - JPMorgan - Analyst : Can you comment on how the Lenovo transition might have impacted other areas of the business, particularly industry standard servers as you're actually separating the businesses and the related services stream? And then should we assume that all these transition issues are behind you now, or are there still some bumps in the road coming ahead?

Question: Steven Fortuna - Prudential Securities - Analyst : Most of my questions have been answered. I have one remaining one. You may not really want to comment on it, but if you look at the back half of the year for services PTI back half of '04, in the kind of mid-9s to mid-10s range, are we even in the same ballpark in terms of the back half of this year becoming kind of close to these kinds of levels, or is that really asking too much?