3rd Quarter & 9 Mths Results

International Bus Mach Corp
18 October 2000


IBM ANNOUNCES THIRD-QUARTER 2000 RESULTS
3Q00 EPS increased 20%, excluding 1999 items 

ARMONK, N.Y., October 17, 2000 . . . IBM today announced third-quarter 2000
diluted earnings per common share of $1.08 compared with 1999 diluted earnings
per common share of $.93 (or $.90 after excluding the net benefit of $.03 in the
third quarter of last year from the gain on the sale of the IBM Global Network
and other actions). Excluding these 1999 items, IBM's third-quarter 2000 diluted
earnings per share increased 20 percent. Third-quarter 2000 net income totaled
$2.0 billion compared with $1.8 billion in 1999 (or net income of $1.7 billion
in 1999 after excluding the after-tax net benefit of $63 million from the Global
Network sale and the other 1999 actions). Third-quarter 2000 revenues grew 3
percent (6 percent at constant currency), to $21.8 billion, compared with the
year-earlier period.

Louis V. Gerstner, Jr., IBM chairman and chief executive officer, said: 'This
was a solid quarter, with earnings per share up 20 percent and an acceleration
of revenue growth relative to the first half of the year. We would like to have
seen more revenue in the quarter, but we were held back by three items. First,
demand for our microelectronics products -- from both outside customers and
internal IBM customers -- far outstripped our ability to supply components.
Second, the upcoming release of our new high-end server slowed demand for the
System/390 family of servers.  Finally, parts of our software business slowed
unexpectedly in September. 

'On a positive note, our services business continued to overtake the Y2K pause
that pressured the first half of the year. Our PC business rebounded strongly,
with particularly good demand for our server and ThinkPad products. In addition,
our business in Asia continued to grow strongly,' Mr. Gerstner said.

'This has turned out to be an unusual year for the information technology
industry, with many ups and downs. Through it all, the breadth of our portfolio
and the strength of our global position have allowed us to produce consistently
good earnings. We expect our broad portfolio will be even more important as we
go forward, especially compared to the single-segment companies in our
industry.'

Third-quarter revenues from the Americas totaled $9.7 billion, an increase of 1
percent (1 percent at constant currency) compared with the same period of last
year. Revenues from Europe/Middle East/Africa were $5.6 billion, down 3 percent
(up 8 percent at constant currency). Asia/Pacific revenues grew 18 percent (17
percent at constant currency) to $4.3 billion. OEM revenues totaled $2.1
billion, a 4 percent increase (5 percent at constant currency) compared with the
third quarter of 1999. 

Hardware revenues were $9.5 billion in the third quarter, an increase of 4
percent (6 percent at constant currency) compared with last year's third
quarter. Personal computer revenues increased, and the unit was profitable in
the quarter. Web server revenues also increased, with demand far exceeding
supply for certain RS/6000 models. AS/400 revenues declined due to supply
shortages. System/390 revenues fell as a result of the major product transition
in this area combined with year-over-year price declines. Storage revenues were
mixed, with high-end disk drive revenues, led by Shark, up strongly year over
year while hard disk drive revenues declined. Microelectronics revenues grew
strongly.

Revenues from IBM Global Services, including maintenance, grew 4 percent (8
percent at constant currency) in the third quarter to $8.2 billion, with
continued strength in the Asia/Pacific region, particularly in strategic
outsourcing.

Revenue comparisons for IBM Global Services were adversely affected by the sale
of the IBM Global Network to AT&T in 1999 and by a year-over-year decline in Y2K
services business. After adjusting for these factors, Global Services revenues
(excluding maintenance) increased 9 percent (12 percent at constant currency).
IBM signed $13.3 billion in services contracts and concluded the quarter with a
total Services contract backlog of approximately $81.0 billion. The Services
business is continuing to hire aggressively to meet demand. 

Software revenues declined 3 percent in the quarter (up 1 percent at constant
currency) to $2.9 billion. Quarterly results in this sector reflect sales
execution issues late in the quarter as well as an industry-wide transition in
the systems management software marketplace, which had an adverse effect on the
company's Tivoli products. Revenues from IBM's database and WebSphere products
grew strongly in the quarter, while operating system revenues declined overall.

Revenues from Global Financing increased 11 percent (14 percent at constant
currency) in the third quarter to $859 million.

Revenues from the Enterprise Investments/Other area, which includes custom
hardware and software products for specialized customer uses, decreased 19
percent (15 percent at constant currency) year over year to $323 million. 

The company's overall gross profit margin of 35.8 percent in the third quarter
was the same as in the third quarter of last year (or 36.4 percent excluding the
1999 actions).

Third-quarter expenses were $5.0 billion and the expense-to-revenue ratio was
22.9 percent, compared to 23.3 percent in the year-earlier period (or 24.9
percent excluding the 1999 actions). 

IBM's tax rate in the third quarter was 30.0 percent compared with 33.0 percent
in the third quarter of last year (or 30.0 percent excluding the 1999 actions). 

IBM spent approximately $1.4 billion on common share repurchases in the third
quarter. The average number of basic common shares outstanding in the quarter
was 1,758 million compared with 1,805 million in the third quarter of 1999.
There were 1,754 million basic common shares outstanding at September 30, 2000. 

Debt in support of operations, excluding global financing, increased $264
million from year-end 1999 to $1.8 billion, resulting in a
debt-to-capitalization ratio of 11 percent. Global financing debt grew $753
million from the end of 1999 to a total of $27.6 billion, resulting in a
debt-to-equity ratio of 6.1 to 1. 

Net income for the nine months ended September 30, 2000 was $5.4 billion, or
$2.97 per diluted common share compared with net income of $5.6 billion, or
$2.99 per diluted common share, in the year-earlier period (or net income of
$4.9 billion, or $2.59 per diluted share, in 1999 after excluding the after-tax
net benefit from the sale of the Global Network and other 1999 actions).
Revenues for the nine months ended September 30, 2000 were $62.8 billion, a
decrease of 1 percent (up 1 percent at constant currency) compared with $63.4
billion for the nine months of 1999.

Effective in the first quarter of this year, results reflect changes the company
made in the organization of its business segments, including the transfer of the
system-level product businesses from the Technology segment to the Enterprise
Systems segment and the transfer of point-of-sale products from the Enterprise
Investments segment to the Personal Systems segment. Also reflected are changes
the company made in its expense allocation methodology, allocating expense items
previously unallocated and enhancing shared expense allocation. Third-quarter
and year-to-date 1999 results have been reclassified to conform with the 2000
presentation.

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, as discussed in the company's
filings with the Securities and Exchange Commission. 


             INTERNATIONAL BUSINESS MACHINES CORPORATION 
                   COMPARATIVE FINANCIAL RESULTS
 
      (Unaudited; Dollars in millions except per share amounts)
 
                       Three Months               Nine Months
                    Ended September 30,       Ended September 30,
 
                                   Percent                   Percent
                     2000  1999(a)  Change     2000  1999(a)  Change
                  -------  ------- -------  -------  ------- -------
REVENUE
 
 Hardware          $9,451   $9,065     4.2% $26,314  $27,438    -4.1%
  Gross profit 
   margin            27.9%    25.5%            27.6%    27.3%
 
 Global Services    8,230    7,898     4.2%  23,966   23,436     2.3%
  Gross profit
   margin            26.6%    27.6%            26.5%    27.5%
 
 Software           2,918    3,010    -3.0%   9,027    9,056    -0.3%
  Gross profit
   margin            81.2%    81.2%            81.3%    81.9%
 
 Global Financing     859      774    11.0%   2,494    2,222    12.2%
  Gross profit
   margin            53.0%    56.7%            53.6%    56.0%
 
 Enterprise Investments/
 Other                323      397   -18.7%     979    1,214   -19.3%
  Gross profit
   margin            47.5%    46.2%            47.6%    38.6%
 
 
TOTAL REVENUE      21,781   21,144     3.0%  62,780   63,366    -0.9%
 
 
GROSS PROFIT        7,801    7,564     3.1%  22,755   23,046    -1.3%
  Gross profit
   margin            35.8%    35.8%            36.2%    36.4%
 
 
EXPENSE
 
 S,G&A              3,726    3,501     6.4%  11,299   10,284     9.9%
  Expense to
   revenue           17.1%    16.6%            18.0%    16.2%
 
 R,D&E              1,261    1,383    -8.8%   3,702    3,857    -4.0%
  Expense to
   revenue            5.8%     6.5%             5.9%     6.1%
 
 Other income         173      134    29.1%     492      423    16.3%
 Interest expense     183      185    -1.1%     499      556   -10.3%
 
TOTAL EXPENSE       4,997    4,935     1.3%  15,008   14,274     5.1%
  Expense to
   revenue           22.9%    23.3%            23.9%    22.5%
 
INCOME BEFORE
INCOME TAXES (1,2)  2,804    2,629     6.7%   7,747    8,772   -11.7%
  Pre-tax margin     12.9%    12.4%            12.3%    13.8%
 
Provision for
income taxes          841      867    -3.0%   2,324    3,149   -26.2%
  Effective tax
  rate               30.0%    33.0%            30.0%    35.9%
 
 
NET INCOME (1,2)   $1,963   $1,762    11.4%  $5,423   $5,623    -3.6%
  Net margin          9.0%     8.3%             8.6%     8.9%
 
 
Preferred stock
dividends               5        5               15       15
 
NET INCOME
APPLICABLE TO COMMON
SHAREHOLDERS       $1,958   $1,757    11.4%  $5,408   $5,608    -3.6%
                   ======   ======           ======   ======
 
EARNINGS PER
SHARE OF COMMON
STOCK - ASSUMING
DILUTION            $1.08    $0.93    16.1%   $2.97    $2.99    -0.7%
                   ======   ======           ======   ======
 
EARNINGS PER
SHARE OF COMMON
STOCK - BASIC       $1.11    $0.97    14.4%   $3.06    $3.09    -1.0%
                   ======   ======           ======   ======
 
AVERAGE NUMBER OF
COMMON SHARES OUT-
STANDING (M's)
  DILUTED         1,809.8  1,869.6          1,819.3  1,874.7
  BASIC           1,758.1  1,805.2          1,767.6  1,813.7
 

(a) Reclassified to conform with 2000 presentation.
 
1) Third-quarter 1999 results include a pre-tax benefit of $201 
million (after-tax benefit of $63 million, or $.03 per diluted common 
share) due to a gain from the sale of the IBM Global Network in a 
number of geographic areas, charges for acquired in-process research 
and development related to acquisitions, as well as a charge for 
other actions. 
 
2) Nine-month 1999 results include a pre-tax benefit of $1.8 billion 
(after-tax benefit of $750 million, or $.40 per diluted common share) 
due to a gain from the sale of the IBM Global Network, charges for 
acquired in-process research and development related to acquisitions, 
a charge for other actions, as well as a change in PC depreciable 
lives. 


             INTERNATIONAL BUSINESS MACHINES CORPORATION 
             CONSOLIDATED STATEMENT OF FINANCIAL POSITION 
                   (Unaudited; Dollars in millions) 
 
                                        At           At
                              September 30, December 31,  Percent
                                      2000         1999    Change
                               -----------  -----------   -------
ASSETS
 
 Cash, cash equivalents,
 and marketable securities          $3,033       $5,831    -48.0%
 
 Receivables - net, inventories,
 and prepaid expenses               37,004       37,324     -0.9%
 
 Plant, rental machines,
 and other property - net           16,329       17,590     -7.2%
 
 Investments and other assets       27,510       26,750      2.8%
                                  --------     --------
 
TOTAL ASSETS                       $83,876      $87,495     -4.1%
                                  ========     ========
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
 Short-term debt                   $10,695      $14,230    -24.8%
 Long-term debt                     18,676       14,124     32.2%
                                  --------     --------
 Total debt                         29,371       28,354      3.6%
 
 Accounts payable, taxes,
 and accruals                       22,117       25,348    -12.7%
 
 Other liabilities                  12,841       13,282     -3.3%
                                  --------     --------
TOTAL LIABILITIES                   64,329       66,984     -4.0%
 
STOCKHOLDERS' EQUITY                19,547       20,511     -4.7%
                                  --------     --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY               $83,876      $87,495     -4.1%
                                  ========     ========



               INTERNATIONAL BUSINESS MACHINES CORPORATION 
 
                             SEGMENT DATA 

 
                                     THIRD QUARTER 2000
                       ----------------------------------------------
                                                              Pre-tax
(Dollars in millions)  ------- Revenue ----------  Pre-tax     Income
                       External Internal     Total  Income     Margin
                       -------- --------   ------- -------    -------
SEGMENTS
 
Technology              $2,632     $675    $3,307    $185        5.6%
          % change         4.7%   -23.9%     -2.8%  -41.6%
 
Personal Systems         4,395       24     4,419      65        1.5%
          % change        11.6%   100.0%     11.9%  641.7%
 
Enterprise Systems       2,358      133     2,491     293       11.8%
          % change        -7.0%     0.8%     -6.6%   -1.7%
 
Global Services          8,230      654     8,884   1,147       12.9%
          % change         4.2%    -4.9%      3.5%   -2.4%
 
Software                 2,918      211     3,129     515       16.5%
          % change        -3.0%    25.6%     -1.5%  -23.0% 
 
Global Financing           868      225     1,093     294       26.9%
          % change        10.4%    16.0%     11.5%   10.1%
 
Enterprise Investments     277        1       278     (55)     -19.8%
          % change       -29.5%   -75.0%    -30.0%   72.2%
 
TOTAL SEGMENTS          21,678    1,923    23,601   2,444       10.4%
          % change         2.9%    -7.8%      1.9%   -2.9%
 
Eliminations / Other       103   (1,923)   (1,820)    360
 
TOTAL IBM              $21,781       $0   $21,781  $2,804       12.9%
          % change         3.0%               3.0%    6.7%
 
 
                                     THIRD QUARTER 1999(a)
                       ----------------------------------------------
                                                              Pre-tax
(Dollars in millions)  ------- Revenue ----------  Pre-tax     Income
                       External Internal     Total  Income     Margin
                       -------- --------   ------- -------    -------
SEGMENTS
 
Technology              $2,515     $887    $3,402    $317        9.3%
 
Personal Systems         3,937       12     3,949     (12)      -0.3%
 
Enterprise Systems       2,536      132     2,668     298       11.2%
 
Global Services          7,898      688     8,586   1,175       13.7%
 
Software                 3,010      168     3,178     669       21.1%
 
Global Financing           786      194       980     267       27.2%
 
Enterprise Investments     393        4       397    (198)     -49.9%
 
TOTAL SEGMENTS          21,075    2,085    23,160   2,516       10.9%
 
Eliminations / Other        69   (2,085)   (2,016)    113 (1)
 
TOTAL IBM              $21,144       $0   $21,144  $2,629       12.4%
 

(a) Reclassified to conform with 2000 presentation.
 
1) Pre-tax income includes a net benefit of $201 million due to a 
gain from the sale of the IBM Global Network in a number of 
geographic areas, charges for acquired in-process research and
development related to acquisitions, as well as a charge for other
actions.
 
 
                 INTERNATIONAL BUSINESS MACHINES CORPORATION
 
                                SEGMENT DATA
 
                                     NINE MONTHS 2000 
                       ----------------------------------------------
                                                              Pre-tax
(Dollars in millions)  ------- Revenue ----------  Pre-tax     Income
                       External Internal     Total  Income     Margin
                       -------- --------   ------- -------    -------
SEGMENTS
 
Technology              $7,028   $2,178    $9,206    $431        4.7%
          % change        -0.6%   -21.3%     -6.4%    6.4%
 
Personal Systems        11,570       55    11,625    (182)      -1.6%
          % change        -1.9%   111.5%     -1.7%   -9.0% 
 
Enterprise Systems       7,548      458     8,006   1,180       14.7%
          % change        -9.5%     9.8%     -8.6%  -18.1%
 
Global Services         23,966    1,849    25,815   3,214       12.5%
          % change         2.3%    -6.9%      1.5%   -0.7%
 
Software                 9,027      595     9,622   1,832       19.0%
          % change        -0.3%     6.1%      0.1%  -14.0%
 
Global Financing         2,525      695     3,220     888       27.6%
          % change        11.0%    16.0%     12.1%   15.5%
 
Enterprise Investments     939        3       942    (210)     -22.3%
          % change       -21.3%   -83.3%    -22.2%   60.8%
 
TOTAL SEGMENTS          62,603    5,833    68,436   7,153       10.5%
          % change        -0.9%    -8.5%     -1.6%   -1.7%
 
Eliminations / Other       177   (5,833)   (5,656)    594
 
TOTAL IBM              $62,780       $0   $62,780  $7,747       12.3%
          % change        -0.9%              -0.9%  -11.7%
 
 
                                     NINE MONTHS 1999(a) 
                       ----------------------------------------------
                                                              Pre-tax
(Dollars in millions)  ------- Revenue ----------  Pre-tax     Income
                       External Internal     Total  Income     Margin
                       -------- --------   ------- -------    -------
SEGMENTS
 
Technology              $7,072   $2,767    $9,839    $405        4.1%
 
Personal Systems        11,799       26    11,825    (167)      -1.4%
 
Enterprise Systems       8,343      417     8,760   1,440       16.4%
 
Global Services         23,436    1,985    25,421   3,236       12.7%
 
Software                 9,056      561     9,617   2,131       22.2%
 
Global Financing         2,274      599     2,873     769       26.8%
 
Enterprise Investments   1,193       18     1,211    (536)     -44.3%
 
TOTAL SEGMENTS          63,173    6,373    69,546   7,278       10.5%
 
Eliminations / Other       193   (6,373)   (6,180)  1,494 (1)
 
TOTAL IBM              $63,366       $0   $63,366  $8,772       13.8%
 

(a) Reclassified to conform with 2000 presentation.
 
1) Pre-tax income includes a net benefit of $1.8 billion due to a 
gain from the sale of the IBM Global Network, charges for acquired 
in-process research and development related to acquisitions, a charge
for other actions, as well as a change in PC depreciable lives.