Welcome and thank you for standing by. At this time, all participants are in a listen-only mode. Today's conference is being recorded. If you have any objections, you may disconnect at this time. Now, I will turn the meeting over to Ms. Patricia Murphy, Vice President of Investor Relations. Ma'am, you may begin.

Thank you. This is Patricia Murphy, Vice President of Investor Relations for IBM. I'm here with Mark Loughridge, IBM's Senior Vice President and CFO, Finance and Enterprise Transformation. Thank you for joining our first quarter earnings presentation. The prepared remarks will be available in roughly an hour and a replay of this webcast will be posted to our Investor Relations website by this time tomorrow. Our presentation includes certain non-GAAP financial measures in an effort to provide additional information to investors. All non-GAAP measures have been reconciled to their related GAAP measures in accordance with SEC rules. You will find reconciliation charts at the end, and in the Form 8-K submitted to the SEC. Let me remind you that certain comments made in this presentation may be characterized as forward-looking under the Private Securities Litigation Reform Act of 1995. Those statements involve a number of factors that could cause actual results to differ materially. Additional information concerning these factors is contained in the Company's filings with the SEC. Copies are available from the SEC, from the IBM website, or from us in Investor Relations. Now, I'll turn the call over to Mark Loughridge.

Thank you for joining us today. In the first quarter, we reported $23.4 billion in revenue, expanded gross pretax and net operating margins and delivered operating earnings per share of $3 which is up 8% year-to-year. But this quarter certainly didn’t close the way it started. We had solid profit performance in January, but as the quarter ended hundreds of millions of dollars of very profitable software and System z mainframe deals fell short of the goal line. This impacted the first quarter close, but the rollover of these deals positions us for a strong start in our software and mainframe business in the second quarter. Taking full consideration of our first quarter performance and the number of actions to improve this performance, we continue to expect operating EPS of at least $16.70 for the year. Now let me make four points about what we saw in our business this quarter. First, our total services business performed as expected with year-to-year constant currency revenue growth in line with last quarter and pretax profit up 10%. Our backlog was up 1% year-to-year or 5% constant currency driven by a lot of new business in the quarter. Second, we had a shortfall in sales execution in our software and mainframe businesses, but with a good list of rollover transactions coupled with improved execution, we’ve got a strong hand going into the second quarter in these businesses. Third, in our growth initiatives, Smarter Planet was up over 25% and Cloud over 70%. Business Analytics was up 7% led by double-digit growth in GBS. But our growth markets revenue was up 1% at constant currency, clearly not what we expected or what we needed. Across IBM we delivered strong growth in several of our offerings to address market trends like SaaS and mobile where…

Thank you, Mark. Before we begin the Q&A, I'd like to remind you of a couple of items. First, we have supplemental charts at the end of the deck that complement our prepared remarks. And second, I’d ask you to refrain from multipart questions. When we conclude the Q&A, I'll turn the call back to Mark for final comments. Operator, please open it up for questions.

Thank you. At this time, we would like to begin the question-and-answer session of the conference. (Operator Instructions) The first question comes from Toni Sacconaghi with Sanford Bernstein. You may ask your question. Toni M. Sacconaghi – Sanford C. Bernstein & Co. LLC: Yes, thank you. Mark, I just wanted to make sure I understood what you are commenting for Q2 and how that relates to the rollover impact that you have also mentioned, so I think you said that operating EPS growth would be similar in Q2 to Q1, which I think was about 3.5%. I am surprised that that’s not dramatically higher than it was in Q1, because you have a much easier comparison. And also because you’re suggesting that you had several $100 million in pushed out revenues that’s high margin. In fact, I think if you work backwards from consensus, you miss revenues by $1.4 billion, if you take our currency you miss by almost a $1 billion. If you really were on plan other than flip deals that would suggest that, you should have a $1 billion of high margin incremental deals next quarter. And I’m not sure why your pretax, why your EPS growth wouldn’t be a lot higher? And related to that, are you expecting any EPS growth after your restructuring charges in fiscal Q2?

Okay, let me talk through that. First of all, when you look at the second quarter, in your comments on the second quarter, we have a very good set of rollover transactions going into the second as you correctly pointed out and if you look at that composite that rolled over the deadline for us. We’re talking about more than $400 million of mainframe software and intellectual property. Now, so that does give us confidence in the second quarter. But Toni, I did not mean to indicate that all else would also be on the original performance track. So, in fact, I still believe there are parts of our business that are in transition or have been underperforming that also were disappointing that are going to take some time to recover. So, let me do a couple of things to help clarify that. If we look at the first quarter, I think our total services business did perform as expected on an I&E basis. Revenue was about what we saw in the fourth quarter, pretax profit was up 10%. The real positive news out the services business in the first was in fact backlog performance. So backlog was up 5% at constant currency, and I am sure you’ve looked at all the supplementals. We’ve really had a great quarter for bookings, up almost 50%. So that drove a lot of new business in the quarter. That backlog performance is well distributed. Major markets backlog is up 3%, growth markets backlog is up 10%. If you look at the other elements through the different axis, outsourcing backlog up 4%, transactional up 9%. So I think the teams in services delivered on their objectives on profit and they did sign a lot of new business and I would tell you, when you…

Thanks Toni, can we go to the next question please?

The next question comes from Steven Milunovich with UBS. You may ask your question. Steven M. Milunovich – UBS Securities LLC : Thanks Mark. First I wanted to clarify the employee workforce charges in the second quarter, are you excluding that from your operating earnings guidance or is that somehow in there? In the past, you have often been able to find gains to offset that. But it sounds like you’re kind of excluding that. Now, I just wonder if you comment on the environment, you have some execution problems in the third quarter last year. You have currently got some at the first quarter, it sounds like either you need to maybe swap out some managers or more likely everybody is missing enterprise numbers this quarter. What do you think is going on? Is it macro or is it people looking at their cloud architectures, and just delaying things and why particular at the end of the quarter.

Okay, let me take both of those questions. I’m going to start with your first; first of all let me put this in context. So, when we gave our original guidance in January this year, we said that this year would be like other years in that we are going to buy and sell businesses. We’re going to record gains and charges, we are going to invest in innovation, and continue to rebalance our workforce to future opportunities. And we said that in an all-in basis we feel confident with an at least $16.70 of operating EPS for the full-year and that is still the case. Now, in the first quarter, we recorded 8% EPS growth and as we look at our book of business especially the strength of the rollover deals for software mainframe, we should see similar year-to-year EPS growth in the second quarter, just as we had the conversation around Toni’s question. However, this will be further impacted by workforce rebalancing charges, which I will come back to, so in the second half of the year, we would expect our EPS growth to improve in the third quarter and further improve in the fourth quarter to double-digits. So, even excluding the second quarter workforce rebalancing charge and second half gains we feel that very confident we can achieve the 9.5% EPS growth for the year to drive at least $16.70 of EPS. Now, remember last year we had about $800 million in workforce rebalancing charges spread across the year. This year we expect the workforce rebalancing charges to be closer to $1 billion and concentrated in the second quarter. So we really haven’t finished the work for a specific action yet. Like last year, we expect the bulk of that charge to be outside the U.S., and…

Thank you, Steve. Operator, can we take the next question please?

The next question comes from Ben Reitzes with Barclays. You may ask your question Benjamin A. Reitzes – Barclays Capital, Inc.: Yeah. Hi, Mark. I wanted to ask about your cash usage in the second quarter, if you had such good bookings, in the second half it is going to be so much better. It would seem that it would be prudent to accelerate your buyback and you have the $6 billion left. And then, I also wanted to sneak in another and ask, there are some speculation that you might sell the x86 server business on the tape and maybe you mentioned divestitures in your prepared remarks, just wondering if you could elaborate on that and clarify what we’re hearing?

Sure. First of all, let’s talk about the cash and the implication for cash. So, if you look at the first quarter, our free cash flow was $1.7 billion and as we pointed out that’s down $200 million. Now there were two very distinct implications to that that I will cover now. But first is the impact of cash taxes; the second, sale cycle working capital. So let’s take cash taxes first. If you look at cash taxes, in fact on a year-to-year basis in the first quarter, cash taxes were an impact about $200 million, and as we phase the second quarter there will be an impact of about $900 million and for the year, as much as $2.4 billion. So if you look at our free cash flow performance in the year, excluding that cash tax implication, I feel confident that we’ll be growing our free cash flow outside of that, but we’re not going to overcome $2.4 billion of additional taxes in the year. If you look at that as a percentage against the booked tax rate in the first quarter of about 17% on an operating basis, actually our cash tax rate was about 30%. And if you roll that out through the quarters for the year, this year it would be cash tax rate and the book tax rate we expect to relatively converge on a full year basis. Now, let’s talk about sales cycle working capital. That too was an impact of about $200 million in the quarter. Against that what we did see is a growing propensity for late payments on customers’ growth and frankly our receivables clearance rate, the rate at which we clear them was not as good as we had expected either. And then lastly, in the negotiations on deals a lot of attention on our customer side on Ts and Cs affecting the cash flow elements, receivable payables, in some respect even more than price. So what we saw, what we took from that is lot of attention to their cash balance and holding on to that cash balance. Now all of this content however I want to reassure you what’s considered as we went through the view of free cash flow across the roadmap in that range of $90 billion to $100 billion. And so very, very confident that we’re going to complete the $50 billion of share buyback. If you look at it, we’ve done almost $30 billion to date, $20 billion of acquisition is a very realistic number both from cash availability and opportunities and $20 billion in dividend for a total of $90 billion and with that we should still have good financial flexibility at the end of 2015. Secondly, on speculation and rumors I’m obviously not going to comment on rumors Ben.

Thanks, Ben. Can we go to the next question please.

The next question comes from Katie Huberty with Morgan Stanley. You may ask your question. Kathryn Huberty – Morgan Stanley: Thanks. Hi, Mark. First how much of the $400 million Intel 8 deals have you closed so far in April. And then just curious if you think there is a reasonable explanation for why, IBM was able to close so many large services deals in the quarter, but customers at the same time are delaying the existence in software purchases, could we be seeing customers taking a step back and reconsidering their IT infrastructure, and maybe looking more at the cloud and needing services for that that’s delaying their infrastructure purchases? Thanks.

So if you look at the $400 million in deals, my experience in this area is when you close that baseline you kind of reset to a skew across the quarter, it does all close if you go into the next month period. Now that said we have closed some substantial deals in that category, but we’ll see those, I think kind of generally feathering across the quarter based on our customer buying patterns, not just ours. Secondly, when you look at the services content, they just had a great pipeline of deals teed up right from the beginning. And so, if you looked at their performance on a week by week by week basis they just had a head esteem the entire quarter. If you look at the software mainframe content, I still think mainframe did a reasonable job of 8%, but compared to a more typical z series cycle, I think they could have done by our math another 100, 150 and that kind of is the quantification of the deals crossing the date line into the second quarter. On the software side of the house they had a very good listed deals and I think this was just pure execution. We should have closed those on a sales side. We got to get off to a good start as we go into the second quarter. We had tremendous number of views with the management team and software and the financial team and software and they felt very confident in our position going into the second quarter.

Thanks, Katie. Can we got to the next question please?

The next question comes from Bill Shope with Goldman Sachs. You may ask your question. Bill Shope – Goldman Sachs: Okay. Great. Thanks. I have a question on the guidance as well. Mark, can you clarify the effective tax rate you’re assuming for the full year? I know you talked about the next three quarters, but your previous guidance coming into this year was for 25% rate for the full year and obviously this quarter the tax rate was a fairly healthy benefit for EPS. So including that does your full year guidance imply pre-tax performance that was quite a bit below what you previously expected, and given the incremental restructuring you’re talking about as well as the closing of some of these slip deals, can you talk about that shortfall relative to your previous pre-tax expectations?

Yeah. We would see the balance of the three quarters per year at a book rate of relatively 0.5% and putting everything into those categories and any unique events that we might have, we think that full year is probably going to be in the range of about 24%. So going through a first quarter that full year view of the business being within about 1% as I think pretty reasonable. Now when you look at the tax rate, there are really two things that really drove that. You got to recognize when we get an event within the quarter, we have to recognize that on our tax rate, our book tax rate within the quarter. Like many that are reporting, we took advantage as we were required to. The tax extenders that was excluding the investment tax credit was in a sense the retrospect of reinstatement and that affected our tax rate, but the results so within the quarter change in tax law within New York state that also had an effect. So, really that change in the tax rate was due to change in tax law within the quarter, and the change in New York state was like March 29.

Thanks Bill. Let’s go to the next question.

The next question comes from David Grossman with Stifel Nicolaus. You may ask your question. David Grossman – Stifel Nicolaus: Thank you. Mark, you have mentioned comments about the growth markets and it sounds like if I heard you correctly that the rollover was primarily in the U.S. and Europe and I know you mentioned China is being a surprise initiative in the quarter, but were there any other things that you can talk about that impacted growth in the growth markets and help us understand what kind of visibility if any you have on improvement as we go into the second half of the year?

Yeah. So if you look at the content within the growth market and you look at it by the business categories, about 20% of the business in the growth market is the hardware STG content, slightly over 20%. So if you look at about a fifth of it and look at the balance of the business, the balance of the business in the software services content really performed in that kind of mid-single digit framework that we discussed. Now, underneath that we certainly weren’t satisfied with that hardware content, but I think outside of the hardware content they did come through in that mid-single digit category that was consistent with their objective. Now if you look at GMU from kind of a category, really Latin America did a great job, up 14%. When we look at Central Europe and Russia, they tend to be transactional deals more volatile. We had in the CE or Russia, it was pretty broad swings in the quarter. So the issue that we saw really was the growth market content in Asia, and with Asia it was pretty much specifically China. So China needs to do a good job responding from that going into the second quarter. They do have tough comparison rearview mirror for the second and third quarter. They were up mid-20s and 19% in the third. But I think they too have had a good record on hardware content. We’re not solely dependent on that hardware content and if you look at even from a services standpoint, the backlog growth in growth markets was up 10%, which should give them some opportunity there as well.

Thanks David. Operator can we take the next question.

The next question comes from Peter J. Misek with Jefferies LLC. You may ask your question. Peter J. Misek – Jefferies LLC: Thank you. Just a question on Smarter Planet Watson pipe initiatives, can you walk through how much of hardware revenue was tied into that and how we should be modeling that going forward? You reported that some of the Smarter growth initiatives were outstanding, but correspondingly we had weakness on the hardware side. Seems to be bit of a disconnect there. Maybe you can help reconcile that?

Well, when you look at the business analytics content and you look at the Smarter Planet content, really the key in them is the relationship between the GBS content that lead those engagement, and frankly, the more important linkage there is the software content. That’s why when we look at the margin along those key initiatives access, they tend to be really high because that mix in software tend to be about 50%. So when you look Smarter Planet and Business Analytics, the missing ingredient there was the software content. Again that kind of got hung up at the end of the quarter. Actually the GBS team did a very, very good job on both. And frankly, if you look underneath the GBS profile and break it down to the components parts, they did a great job in the parts of their business aligned with those growth initiatives. They were still some impact and some categories on those traditional packaged apps. Those traditional packaged apps tend to have been more a rapid turnover, but the content and the backlog that they are building along these growth initiatives should be sustaining and long-term with, I think, good margin performance. But when I look at the growth initiatives in the first quarter, the impact that was a more material I think was the software performance, the services performance did very very well, it’s that software performance that drive the margin content within them.

Thank Peter. Can we take the next question please?

The next question comes from Keith Bachman with Bank of Montreal. You may ask your question. Keith F. Bachman – BMO Capital Markets: Hi Mark could you talk a little about your confidence for the services more broadly. In the past you’ve been reluctant to provide top line expectations and you’ve indicated that you thought both GTS and GBS would have positive growth in the second half of the year, I think you even called out kind of 2% constant currency. Could you just tell that a little bit because the signings were very strong, but particularly in outsourcing so I’d be surprised if that really helped as early as the September quarter, was there other things like, you are not loosing share in the market as you, I think have been over the last couple of quarters as you get more selective, is there something going on there. In addition if you could just talk about what the pipeline looks like after the $17 billion in signings this quarter. Thank you.

Yeah, when you look at the content in the services performance again I would kind of steer the conversation to backlog and on a constant currency basis our outsourcing backlog was up 4%, but our transactional backlog was up 9%, so we’re now seeing the GBS business as an example that they’ve been piling up backlog growth now for four years and that is going to materialize, it just tended to be as we did further analysis, it was a longer term contract, but mathematically as we went through with the team, if they can continue this rate that we’ve seen and they do have a very good deal structure going into the second quarter. Simply the math would suggest that they should be able to get back to this low single digit kind of 2% constant currency revenue growth and with that with all of the work that they have done on their cost base, which they do so well they should get a lot of leverage of that capability in the second half.

Thanks, Keith. Let’s go to the next question please.

The next question comes from Joseph Foresi from Janney Montgomery Scott. You may ask your question. Joseph Foresi – Janney Montgomery Scott: Hi, I just wanted to kind of follow-up on that, the last question that was asked, in the services business do you feel like you fully turn the corner there, and do you expect the backlog to grow, I know you’ve given some commentary on the business growing, and then finally can you quantify or help us understand the margin impact as you become more profitable on the GTS side?

Well, I think when you look across those services business they have done a very good job of kind of delivering on the margin capability even through more challenging revenue quarters. So the key ingredient I think to continue that margin performance is getting back to revenue performance in the second half of the year. I don’t know if I’d say we turned the corner on growth I think we’ve got to get to the second half to see the growth, but it’s pretty encouraging if you can see, 5% growth in the constant currency backlog when you’re talking about $141 billion of that. I mean that’s a lot of backlog to move in a quarter. So that’s the number one point I would make on that. But number two, we had a lot of deals in the services side of the business across that date line as well end of the second. So they certainly did not believe the pie just establishing this level of performance at the first quarter, they should have based on the deals based on the trajectory, a lot of opportunities to have another very good quarter. Now, obviously within next quarter, mainframe or software or services, you have to close the deals, you go to win and you got to win in the customer office, so, that dimension of course, but within that the opportunity to do well in the second quarter I think is certainly there and that should drive second quarter revenue performance.

Thanks Joe. Operator, let’s take one more question, please.

Thank you. The last question comes from Jim Suva with Citi. You may ask you question. Jim Suva – Citigroup: Thank you very much. And Mark, just a quick follow-up; on the service side, where do we take a look at the backlog and or the signing, can you help us understand about, were those improvements that you saw, are they concentrated on a couple of customers that were larger in size or they’re just scattered amongst a lot of smaller ones and maybe what geographic locations that you saw on backlog and signings?

Well, I think the best answer, when you look at the content underneath that, I mean we had, it wasn’t like one content. We had 22 deals over 100 million, so there is a lot of flow in those deals and there was a lot of flow on the GTS side, there was lot of flow on the GBS side. This was not just one deal. It was well distributed. We had 22 deals over 100 million, there is a lot of deals over 100 and it was across the geography. So I think that was good performance. So now let me make a few comments to wrap up the call. We are clearly not immune from changes in the global economy. We have a good set of plans and actions to achieve our objective of at least $16.70 of operating EPS for the year. First, our sales team need to close those rollover transactions that we discussed. Second, we’re going to regain our position in the growth markets and the growth markets team need to lead that. I mean if you look at the metrics right now, it clearly points in GMU to that mid-single digit constant currency performance and mainly to get that back on track. Third, we’re going to rebalance our workforce to better align our resources to opportunity. Fourth, reposition Power to address the Linux space. And five, capitalize on our flash technologies and storage node. Clearly those last two will take some time, it’s not going to all prop back in the second quarter, but it should give us a better trajectory as we go through the year. We’re managing our business to be successful over the long-term. So not only did these actions support our view of the year, but they’re part of a model that continues transformation as we move towards the 2015 roadmap objective of at least $20 of operating EPS. So thanks again for joining us, and now as always get back to work.