IBM Reports 2007 Second-Quarter Results

IBM
                  
    --  Total revenues of $23.8 billion, up 9 percent as reported;

    --  Global Services revenues up 10 percent, Software revenues up 13 percent;

    --  Diluted earnings of $1.55 per share, including a gain from sale of
        Printing Systems; earnings per share were $1.50, up 15 percent without
        the gain;

    --  Gross profit margin increased year to year for the 12th consecutive
        quarter.

IBM (NYSE: IBM) today announced second-quarter 2007 diluted earnings of $1.55
per share from continuing operations, including 5 cents per share for a pre-tax
gain of $81 million relating to the sale of the Printing Systems Division (PSD),
an increase of 19 percent as reported, compared with diluted earnings of $1.30
per share in the second quarter of 2006. Diluted earnings for the second-quarter
2007 were $1.50 per share, excluding this gain, an increase of 15 percent year
over year.

Second-quarter income from continuing operations was $2.3 billion, including the
gain from the sale of PSD, compared with $2.0 billion in the second quarter of
2006, an increase of 12 percent. Without the gain, income from continuing
operations of $2.2 billion in the second quarter of 2007 increased $167 million,
or 8 percent versus the comparable period last year. Total revenues for the
second quarter of 2007 of $23.8 billion increased 9 percent (6 percent,
adjusting for currency) from the second quarter of 2006.

'This quarter's strong revenue growth --- our best since 2001 --- underscores
IBM's global capabilities, as well as the higher value that clients place on our
expanding software product line and wide range of services offerings that are
helping them transform their businesses,' said Samuel J. Palmisano, IBM
chairman, president and chief executive officer. 'Our overall results again
demonstrate the strength of our business model and our ability to achieve
profitable growth and strong cash generation. Earlier this year we described to
our investors IBM's objective for earnings per share growth through 2010. While
this is a long-term goal, our first-half results represent solid progress on
major elements of this roadmap, including earnings growth, margin expansion, and
revenue growth in key areas: emerging markets, acquisitions and service oriented
architecture opportunities.'

From a geographic perspective, the Americas' second-quarter revenues were $10.1
billion, an increase of 6 percent as reported (5 percent, adjusting for
currency) from the 2006 period. Revenues from Europe/Middle East/Africa were
$8.2 billion, up 13 percent (6 percent, adjusting for currency). Asia-Pacific
revenues increased 10 percent (10 percent, adjusting for currency) to $4.6
billion. OEM revenues were $852 million, down 9 percent compared with the 2006
second quarter.

Total Global Services revenues grew 10 percent (7 percent, adjusting for
currency), led by growth in Asia Pacific. Global Business Services segment
revenues, which benefited from strong client demand for SOA offerings and global
delivery capabilities, increased 10 percent (8 percent, adjusting for currency)
to $4.3 billion. Global Technology Services segment revenues increased 10
percent (7 percent, adjusting for currency) to $8.8 billion, with significant
growth from existing clients. IBM signed services contracts totaling $11.7
billion, up 22 percent year over year, and ended the second quarter with an
estimated services backlog, including Strategic Outsourcing, Business
Transformation Outsourcing, Integrated Technology Services, Global Business
Services and Maintenance, of $116 billion, an increase of $7 billion year to
year.

Revenues from the Systems and Technology segment totaled $5.1 billion for the
quarter, up 2 percent (flat, adjusting for currency). Systems and Technology
revenues from the System p UNIX server products increased 7 percent compared
with the 2006 period and revenues from the System x servers increased 16
percent. Revenues from System z server products increased 4 percent compared
with the year-ago period. Total delivery of System z computing power, which is
measured in MIPS (millions of instructions per second), increased 45 percent,
marking eight consecutive quarters of year-to-year MIPS growth. Revenues from
the System i servers decreased 15 percent. Revenues from System Storage
increased 6 percent and revenues from Microelectronics decreased 9 percent.

Revenues from the Software segment were $4.8 billion, an increase of 13 percent
(9 percent, adjusting for currency) compared with the second quarter of 2006.
Revenues from IBM's middleware products, which primarily include WebSphere,
Information Management, Tivoli, Lotus and Rational products, were $3.7 billion,
up 16 percent versus the second quarter of 2006. Operating systems revenues of
$568 million increased 2 percent compared with the prior-year quarter.

For the WebSphere family of software products, which facilitate customers'
ability to manage a wide variety of business processes using open standards to
interconnect applications, data and operating systems, revenues increased 28
percent. Revenues for Information Management software, which enables clients to
leverage information on demand, increased 21 percent. Revenues from Tivoli
software, infrastructure software that enables clients to centrally manage
networks including security and storage capability, increased 33 percent, and
revenues for Lotus software, which allows collaborating and messaging by clients
in real-time communication and knowledge management, increased 12 percent year
over year. Revenues from Rational software, integrated tools to improve the
processes of software development, increased 11 percent compared with the
year-ago quarter.

Global Financing segment revenues increased 4 percent (1 percent, adjusting for
currency) in the second quarter to $597 million.

The company's total gross profit margin was 41.8 percent in the 2007 second
quarter compared with 41.2 percent in the 2006 period -- the 12th consecutive
quarter of year-to-year increase.

Total expense and other income increased 11 percent to $6.8 billion compared
with the prior-year period, and increased 12 percent without the gain from the
PSD sale. SG&A expense increased 15 percent to $5.6 billion. RD&E expense
increased 1 percent compared with the year-ago period. Intellectual property and
custom development income increased to $246 million compared with $188 million a
year ago. Other (income) and expense contributed income of $253 million in the
second quarter of 2007, including the gain from the PSD sale, versus income of
$196 million in the second quarter of 2006. Without the benefit, other (income)
and expense contributed income of $172 million in the quarter.

IBM's effective tax rate in the second-quarter 2007 was 28.0 percent compared
with 30.0 percent in the second quarter of 2006. Excluding the impact of the
gain from the PSD sale, the second- quarter 2007 tax rate was 28.5 percent
compared with 30.0 percent in the year-ago quarter.

Shares repurchased in the second quarter were approximately $14.6 billion,
including $12.5 billion executed through accelerated share repurchase agreements
in May. The repurchases are part of the $15 billion authorization for the
company's stock repurchase program approved by the IBM board of directors on
April 24.

The weighted-average number of diluted common shares outstanding in the
second-quarter 2007 was 1.46 billion compared with 1.56 billion shares in the
same period of 2006. As of June 30, 2007, there were 1.36 billion basic common
shares outstanding.

Debt, including Global Financing, totaled $34.7 billion, compared with $22.7
billion at year-end 2006. From a management segment view, the non-global
financing debt-to-capitalization ratio was 46.7 percent at the end of June 30,
2007, reflecting increased financial leverage associated with the accelerated
share repurchase agreements. Global Financing debt increased $658 million from
year-end 2006 to a total of $22.9 billion, resulting in a debt-to-equity ratio
of 7.0 to 1.

Year-To-Date 2007 Results

Income from continuing operations for the six months ended June 30, 2007 was
$4.1 billion, including the gain for the sale of PSD, compared with $3.7 billion
in the year-ago period. Diluted earnings per share from continuing operations
were $2.75 compared with $2.37 per diluted share for the 2006 period. Without
the gain, income from continuing operations for the six months ended June 30,
2007 was $4.0 billion, or $2.70 per diluted share. Revenues from continuing
operations for the six-month period totaled $45.8 billion, an increase of 8
percent (5 percent, adjusting for currency) compared with $42.5 billion for the
six months of 2006.

Forward-Looking and Cautionary Statements

Except for the historical information and discussions contained herein,
statements contained in this release may constitute forward- looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
These statements involve a number of risks, uncertainties and other factors that
could cause actual results to differ materially, including the company's failure
to continue to develop and market new and innovative products and services and
to keep pace with technological change; competitive pressures; failure to obtain
or protect intellectual property rights; quarterly fluctuations in revenues and
volatility of stock prices; the company's ability to attract and retain key
personnel; adverse affects from tax matters; currency fluctuations and customer
financing risks; customer credit risk on trade receivables; the company's
failure to maintain the adequacy of its internal controls; the company's use of
certain estimates and assumptions; dependence on certain suppliers; changes in
the financial or business condition of the company's distributors or resellers;
the company's ability to successfully manage acquisitions and alliances; failure
to have sufficient insurance; legal, political, health and economic conditions;
risk factors related to IBM securities; and other risks, uncertainties and
factors discussed in the company's Form 10-Q, Form 10-K and in the company's
other filings with the U.S. Securities and Exchange Commission (SEC) or in
materials incorporated therein by reference. The company assumes no obligation
to update or revise any forward-looking statements.

Presentation of Information in this Press Release

In an effort to provide investors with additional information regarding the
company's results as determined by generally accepted accounting principles
(GAAP), the company has also disclosed in this press release the following
non-GAAP information which management believes provides useful information to
investors:

IBM Results -

    --  certain financial results adjusted for the gain associated with the
        divestiture of the Printing Systems business,

    --  adjusting for currency (i.e., at constant currency).

The rationale for management's use of non-GAAP measures is included as part of
the supplementary materials presented within the second- quarter earnings
materials. These materials are available on the IBM investor relations Web site
at www.ibm.com/investor and are being included in Attachment II ('Non-GAAP
Supplementary Materials') to the Form 8-K that includes this press release and
is being submitted today to the SEC.

Conference Call and Webcast

IBM's regular quarterly earnings conference call is scheduled to begin at 4:30
p.m. EDT, today. Investors may participate by viewing the Webcast at
www.ibm.com/investor/2q07. Presentation charts will be available on the Web site
prior to the Webcast.

Financial Results Attached (certain amounts may not add due to use of rounded
numbers; percentages presented are calculated from the underlying whole-dollar
amounts).

-0-
*T
             INTERNATIONAL BUSINESS MACHINES CORPORATION
                    COMPARATIVE FINANCIAL RESULTS
      (Unaudited; Dollars in millions except per share amounts)

                             Three Months               Six Months
                           Ended June 30,            Ended June 30,
                                     Percent                   Percent
                      2007    2006   Change     2007     2006  Change
                    -------  ------- -------  -------  ------- -------
REVENUE

 Global Technology
 Services           $8,756   $7,955    10.1% $17,013  $15,674     8.5%
  Gross margin        29.8%    29.8%            29.5%    29.5%

 Global Business
 Services            4,338    3,939    10.1%   8,521    7,787     9.4%
  Gross margin        24.3%    23.4%            24.1%    22.4%

 Systems and
 Technology          5,102    5,014     1.8%   9,622    9,433     2.0%
  Gross margin        37.3%    36.5%            36.1%    34.4%

 Software            4,777    4,241    12.7%   9,028    8,147    10.8%
  Gross margin        84.9%    84.2%            84.3%    84.2%

 Global Financing      597      576     3.6%   1,211    1,158     4.6%
  Gross margin        46.0%    51.1%            48.5%    52.0%

 Other                 201      165    22.3%     404      349    15.8%
  Gross margin        19.8%    14.9%            15.9%     7.7%

TOTAL REVENUE       23,772   21,890     8.6%  45,801   42,549     7.6%


GROSS PROFIT         9,938    9,014    10.3%  18,804   17,102    10.0%
  Gross margin        41.8%    41.2%            41.1%    40.2%


EXPENSE AND OTHER INCOME

 S,G&A               5,631    4,916    14.5%  10,720    9,518    12.6%
  % of revenue        23.7%    22.5%            23.4%    22.4%

 R,D&E               1,534    1,522     0.8%   3,044    2,977     2.2%
  % of revenue         6.5%     7.0%             6.6%     7.0%

 Intellectual property
  and custom development
  income              (246)    (188)   30.9%    (451)    (418)    8.1%
 Other (income)
   and expense        (253)    (196)   29.1%    (432)    (442)   -2.2%
 Interest expense      130       72    82.1%     203      138    47.3%

TOTAL EXPENSE AND
OTHER INCOME         6,796    6,125    11.0%  13,083   11,774    11.1%
  % of revenue        28.6%    28.0%            28.6%    27.7%

INCOME FROM CONTINUING
OPERATIONS BEFORE
INCOME TAXES         3,142    2,889     8.8%   5,721    5,328     7.4%
  Pre-tax margin      13.2%    13.2%            12.5%    12.5%

Provision for
income taxes           881      867     1.6%   1,616    1,598     1.1%
  Effective tax
  rate                28.0%    30.0%            28.2%    30.0%

INCOME FROM CONTINUING
OPERATIONS          $2,261   $2,022    11.8%  $4,105   $3,730    10.1%
  Net margin           9.5%     9.2%             9.0%     8.8%

DISCONTINUED OPERATIONS
Loss from discontinued
operations               1        0                0        0

NET INCOME          $2,260   $2,022    11.8%  $4,105   $3,730    10.0%
                    ======   ======           ======   ======

EARNINGS/(LOSS)PER SHARE
OF COMMON STOCK:

 ASSUMING DILUTION
  CONTINUING
   OPERATIONS        $1.55    $1.30    19.2%   $2.75    $2.37    16.0%
  DISCONTINUED
   OPERATIONS        (0.00)   (0.00)           (0.00)   (0.00)
                    ------   ------           ------   ------
  TOTAL              $1.55    $1.30    19.2%   $2.75    $2.37    16.0%
                    ======   ======           ======   ======
 BASIC
  CONTINUING
   OPERATIONS        $1.57    $1.31    19.8%   $2.80    $2.40    16.7%
  DISCONTINUED
   OPERATIONS        (0.00)   (0.00)           (0.00)   (0.00)
                    ------   ------           ------   ------
  TOTAL              $1.57    $1.31    19.8%   $2.80    $2.40    16.7%
                    ======   ======           ======   ======

WEIGHTED-AVERAGE NUMBER
OF COMMON SHARES
OUTSTANDING (M's)
  ASSUMING
   DILUTION        1,460.8  1,560.1          1,491.8  1,573.6
  BASIC            1,437.2  1,538.1          1,468.3  1,551.3


               INTERNATIONAL BUSINESS MACHINES CORPORATION
              CONSOLIDATED STATEMENT OF FINANCIAL POSITION
                              (Unaudited)

                                         At          At
(Dollars in millions)               June 30, December 31,  Percent
                                       2007         2006    Change
                                   --------  -----------   -------
ASSETS

 Cash, cash equivalents,
 and marketable securities          $10,190      $10,657     -4.4%

 Receivables - net, inventories,
 prepaid expenses                    32,103       34,003     -5.6%

 Plant, rental machines,
 and other property - net            14,479       14,440      0.3%

 Investments and other assets        45,777       44,134      3.7%
                                   --------     --------

TOTAL ASSETS                       $102,548     $103,234     -0.7%
                                   ========     ========


LIABILITIES AND STOCKHOLDERS' EQUITY

 Short-term debt                    $20,543       $8,902    130.8%
 Long-term debt                      14,179       13,780      2.9%
                                   --------     --------
 Total debt                          34,721       22,682     53.1%

 Accounts payable, taxes,
 and accruals                        27,541       31,189    -11.7%

 Other liabilities                   23,530       20,857     12.8%
                                    --------    --------
TOTAL LIABILITIES                    85,792       74,728     14.8%

STOCKHOLDERS' EQUITY                 16,756       28,506    -41.2%
                                   --------     --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY               $102,548     $103,234     -0.7%
                                   ========     ========


          International Business Machines Corporation
                          Segment Data
                          (Unaudited)

(Dollars in millions)
                                  SECOND QUARTER 2007
                     --------------------------------------------
                                                Pre-tax
                                                 Income
                                                 (Loss)
                                                  from
                     -------- Revenue -------  Continuing Pre-tax
                     External Internal  Total  Operations  Margin
                     -------- --------  -----  ---------- -------

Global Technology
Services               $8,756    $409  $9,165       $788     8.6%
     Y-T-Y Change       10.1%   -8.9%    9.1%       0.1%

Global Business
Services                4,338     329   4,667        486    10.4%
     Y-T-Y Change       10.1%   -6.2%    8.8%      19.2%

Systems and
Technology              5,102     255   5,357        332     6.2%
     Y-T-Y Change        1.8%   -6.0%    1.4%      77.0%

Software                4,777     549   5,326      1,250    23.5%
     Y-T-Y Change       12.7%    1.0%   11.3%       8.2%

Global Financing          597     341     938        332    35.4%
     Y-T-Y Change        3.6%    0.9%    2.6%       4.2%

Total Reportable
Segments               23,571   1,883  25,453      3,187    12.5%
     Y-T-Y Change        8.5%   -3.6%    7.5%      11.6%

Eliminations / Other      201  (1,883) (1,681)       (46)

Total IBM
Consolidated          $23,772      $0 $23,772     $3,142    13.2%
     Y-T-Y Change        8.6%            8.6%       8.8%


(Dollars in millions)
                                  SECOND QUARTER 2006
                     --------------------------------------------
                                                Pre-tax
                                                 Income
                                                 (Loss)
                                                  from
                     -------- Revenue -------  Continuing Pre-tax
                     External Internal  Total  Operations  Margin
                     -------- --------  -----  ---------- -------

Global Technology
Services               $7,955    $449  $8,404       $787     9.4%

Global Business
Services                3,939     351   4,290        407     9.5%

Systems and
Technology              5,014     271   5,286        187     3.5%

Software                4,241     543   4,784      1,156    24.2%

Global Financing          576     338     914        319    34.9%

Total Reportable
Segments               21,725   1,952  23,677      2,856    12.1%

Eliminations / Other      165  (1,952) (1,787)        32

Total IBM
Consolidated          $21,890      $0 $21,890     $2,889    13.2%


          International Business Machines Corporation
                          Segment Data
                          (Unaudited)

(Dollars in millions)
                                    SIX MONTHS 2007
                     --------------------------------------------
                                                Pre-tax
                                                 Income
                                                 (Loss)
                                                  from
                     -------- Revenue -------  Continuing Pre-tax
                     External Internal  Total  Operations  Margin
                     -------- --------  -----  ---------- -------

Global Technology
Services              $17,013    $834 $17,848     $1,469     8.2%
     Y-T-Y Change        8.5%   -7.3%    7.7%     -10.0%

Global Business
Services                8,521     630   9,152        955    10.4%
     Y-T-Y Change        9.4%   -8.2%    8.0%      25.2%

Systems and
Technology              9,622     523  10,145        428     4.2%
     Y-T-Y Change        2.0%   -5.3%    1.6%     153.0%

Software                9,028   1,134  10,162      2,286    22.5%
     Y-T-Y Change       10.8%    7.2%   10.4%       5.0%

Global Financing        1,211     689   1,901        706    37.1%
     Y-T-Y Change        4.6%   -1.8%    2.2%      -3.7%

Total Reportable
Segments               45,397   3,810  49,207      5,844    11.9%
     Y-T-Y Change        7.6%   -2.3%    6.7%       6.8%

Eliminations / Other      404  (3,810) (3,406)      (124)

Total IBM
Consolidated          $45,801      $0 $45,801     $5,721    12.5%
     Y-T-Y Change        7.6%            7.6%       7.4%


(Dollars in millions)
                                    SIX MONTHS 2006
                     --------------------------------------------
                                                Pre-tax
                                                 Income
                                                 (Loss)
                                                  from
                     -------- Revenue -------  Continuing Pre-tax
                     External Internal  Total  Operations  Margin
                     -------- --------  -----  ---------- -------

Global Technology
Services              $15,674    $900 $16,575     $1,631     9.8%

Global Business
Services                7,787     687   8,474        763     9.0%

Systems and
Technology              9,433     552   9,985        169     1.7%

Software                8,147   1,057   9,205      2,177    23.6%

Global Financing        1,158     702   1,860        733    39.4%

Total Reportable
Segments               42,200   3,898  46,098      5,473    11.9%

Eliminations / Other      349  (3,898) (3,549)      (145)

Total IBM
Consolidated          $42,549      $0 $42,549     $5,328    12.5%
*T

IBM
John Bukovinsky, 914/499-6212
[e-mail]