# Industry Segment and Geographic Area Information

For purposes of segment reporting requirements, financial information by industry segment and geographic area for the years 1978 and 1977 is summarized below.

It should be recognized in connection with the industry segment and geographic area information, that there exist material interdependencies and overlaps among IBM's operating units. The reported information follows IBM's administrative support centers, and does not take into account significant intercenter dependencies and overlaps with respect to engineering, manufacturing, components, technologies and know-how, business expertise, products and customers, to the extent such activities are not reasonably quantifiable or measurable. In addition, the allocations made of indirect and common costs, and jointly used assets, involved the extensive use of estimation techniques. Accordingly, the information is provided for purposes of achieving an understanding of IBM's operations, but may not be indicative of the financial results of, or investments in, the reported segments and areas were they independent organizations, nor useful for comparisons with operations of other companies.

## Industry Segments

| Year 1978 | Data Processing | Office Products | Federal Systems | Other Business | Eliminations | Consolidated |
|-----------|----------------|-----------------|----------------|---------------|--------------|--------------|
| Gross income—Customers | $17,074 | $3,390 | $549 | $63 | $(101) | $21,076 |
| Intersegment transfers | 80 | 21 | — | — | — | — |
| Total | $17,154 | $3,411 | $549 | $63 | $(101) | $21,076 |
| Operating income | $5,113 | $381 | $32 | $4 | — | $5,530 |
| General corporate expenses | — | — | — | — | (89) | — |
| Interest on debt | — | — | — | — | (55) | — |
| Other income, principally interest | — | — | — | — | 412 | — |
| Earnings before income taxes | — | — | — | — | $5,798 | — |
| Assets identified to segments | $13,598 | $3,061 | $316 | $39 | — | $17,014 |
| Marketable securities | — | — | — | — | 3,757 | — |
| Total assets at Dec. 31, 1978 | $1,552 | $260 | $11 | $1 | — | $20,771 |
| Depreciation expense | — | — | — | — | $1,824 | — |
| Capital expenditures | $3,438 | $591 | $16 | $1 | — | $4,046 |

| Year 1977 | Data Processing | Office Products | Federal Systems | Other Business | Eliminations | Consolidated |
|-----------|----------------|-----------------|----------------|---------------|--------------|--------------|
| Gross income—Customers | $14,765 | $2,824 | $486 | $58 | $(88) | $18,133 |
| Intersegment transfers | 73 | 15 | — | — | — | — |
| Total | $14,838 | $2,839 | $486 | $58 | $(88) | $18,133 |
| Operating income | $4,402† | $297† | $27 | $8 | — | $4,734 |
| General corporate expenses | — | — | — | — | (77) | — |
| Interest on debt | — | — | — | — | (40) | — |
| Other income, principally interest | — | — | — | — | 475 | — |
| Earnings before income taxes | — | — | — | — | $5,092 | — |
| Assets identified to segments | $10,995† | $2,509† | $286 | $33 | — | $13,823 |
| Marketable securities | — | — | — | — | 5,155 | — |
| Total assets at Dec. 31, 1977 | — | — | — | — | $18,978 | — |
| Depreciation expense | $1,521† | $273† | $11 | $1 | — | $1,806 |
| Capital expenditures | $2,811† | $566† | $17 | $1 | — | $3,395 |
| †Restated for reassignment of certain product development projects. |

IBM's operations, with very minor exceptions, are in the field of information-handling systems, equipment and services. However, for purposes of complying with segment reporting requirements, IBM's information-handling business has been reported as three segments.

The above segments are comprised as follows:

* **Data Processing:** consists of information-handling products and services such as data processing machines and systems, computer programming, systems engineering, education and related services and supplies for commercial and government customers.
* **Office Products:** consists of information-handling products, systems and services such as electric typewriters, magnetic media typewriters and systems, information processors, document printers, copiers, and related supplies and services for commercial and government customers.
* **Federal Systems:** consists of specialized information-handling products and services for United States space, defense and other agencies and, in some instances, other customers.
* **Other:** consists of educational, training and testing materials and services for school, home and industrial use.

Intersegment transfers, reported above, consist of products and services similar to those offered to unaffiliated customers and are accounted for on the basis of cost.