3rd Quarter & 9 Mths Results - Revenues Up 5%

INTERNATIONAL BUSINESS MACHINES CORPORATION
21 October 1999


               IBM Announces Third-quarter 1999 Results
 
 
     ARMONK, N.Y.--(BUSINESS WIRE)--October 20, 1999--IBM today
announced third-quarter 1999 diluted earnings per common share of $.93
compared with diluted earnings per common share of $.78 in the third
quarter of 1998. Third-quarter 1999 revenues increased 5 percent as
reported and in constant currency to $21.1 billion. Third-quarter 1999
net income totaled $1.8 billion compared with $1.5 billion in the
third quarter of last year.
     IBM's third-quarter 1999 results include an after-tax benefit of
$63 million, or $.03 per diluted common share, resulting from several
actions that occurred in the quarter. Specifically, IBM closed the
sale of its Global Network in a number of additional geographic areas.
The company completed three acquisitions, resulting in charges for
in-process research and development. IBM also took additional actions
in the quarter to improve the competitiveness of the company's
Technology Group.
     Louis V. Gerstner, Jr., IBM chairman and chief executive officer,
said: 'It was a decidedly mixed quarter. On the negative side, we saw
a Y2K slowdown toward the end of the quarter, particularly in our
large servers, and to a lesser extent in services and operating
systems software. Additionally, we were hurt by shortages of
flat-panel displays, margin pressure in our hard disk drive business,
and sales disruptions related to our sale of certain networking
hardware assets. On the positive side, our growth businesses --
services, software other than operating systems, and OEM -- all
performed very well. Combined with strong expense management, they
enabled us to grow our pre-tax earnings and earnings per share
significantly, once again underscoring the strength of our broad
business portfolio.
     'Looking forward, we believe we will continue to feel the effects
of the Y2K slowdown in the fourth quarter and into early next year,'
Mr. Gerstner said. 'However, even though it is difficult to make
predictions, next year has the potential to be a very good year for
IBM, once we get past any lingering Y2K effects. As our third-quarter
results demonstrate, our business portfolio has great breadth and
resiliency. We remain confident about our fundamental business
strategies, the value of our products and services, and our overall
momentum.'
     Third-quarter revenues from the Americas totaled $9.6 billion, a
decrease of 1 percent (up 1 percent at constant currency) compared
with the third quarter of 1998. Revenues from Europe/Middle
East/Africa were $5.8 billion, down 2 percent (up 4 percent at
constant currency). Asia-Pacific revenues grew 28 percent (10 percent
at constant currency) to $3.7 billion. OEM revenues totaled $2.0
billion, an increase of 24 percent (22 percent at constant currency).
     Hardware revenues were $8.8 billion in the third quarter, a
decrease of 1 percent (2 percent at constant currency) compared with
the same period of last year. Personal computer revenues increased,
with particularly strong growth in the Netfinity server line.
Microelectronics revenues also increased, while RS/6000 revenues
declined slightly. The Y2K issue adversely affected AS/400 revenues to
a significant degree and System/390 revenues -- which faced a
difficult year-over-year comparison -- also fell due to the Y2K
slowdown and ongoing price reductions. Storage revenues were flat and
networking hardware revenues declined significantly from the same
period of last year.
     Revenues from IBM Global Services, after normalizing for the
Global Network sale, increased 19 percent in the quarter (excluding
maintenance). Including maintenance, and without normalizing for the
Global Network sale, Global Services revenues grew 12 percent (11
percent at constant currency) to $7.9 billion. IBM signed $9.2 billion
in services contracts in the quarter and concluded the period with a
total services contract backlog of approximately $57.5 billion. The
Global Services gross margin improved 1.7 points year over year.
     Software revenues increased 7 percent (8 percent at constant
currency) in the third quarter to $3.0 billion. Revenues from the
'middleware' category -- software that is critical for e-business --
increased 13 percent (14 percent at constant currency), with
particularly strong results in Tivoli systems management, transaction
processing and database products. IBM also posted record shipments of
the company's Lotus Notes/Domino groupware products in the third
quarter. In addition, IBM acquired DASCOM, Inc., a leader in the
Web-security market.
     Revenues from Global Financing increased 14 percent (14 percent
at constant currency) in the third quarter to $774 million.
     Revenues from the Enterprise Investments/Other area, which
comprises custom applications and other products designed to meet
specialized customer requirements, declined 3 percent (3 percent at
constant currency) year over year to $622 million.
     IBM's overall gross profit margin was 35.8 percent in the third
quarter compared with 37.2 percent in the third quarter of 1998. The
transition in the networking hardware business negatively affected the
company's overall gross margin by .7 of a point and the hardware
margin by 1.6 points.
     IBM's third-quarter expenses of $4.9 billion also include the
effect of the various actions mentioned earlier, totaling $345
million, that occurred during the quarter. The company improved its
expense-to-revenue ratio by 3.2 points, of which 1.6 points are
attributable to the third-quarter actions.
     IBM's tax rate in the quarter, including the third-quarter
actions, was 33.0 percent compared with 30.0 percent in the third
quarter of 1998. IBM's tax rate increased by approximately 3 points in
the quarter, primarily as a result of the third-quarter actions.
     IBM spent approximately $1.5 billion on share repurchases in the
third quarter. The average number of basic common shares outstanding
in the quarter was 1,805 million compared with 1,857 million in the
year-earlier period. There were 1,803 million basic common shares
outstanding at September 30, 1999.
     Debt in support of operations, excluding global financing,
decreased $1.1 billion from year-end 1998 to $568 million, resulting
in a debt-to-capitalization ratio of 4 percent. Global financing debt
declined $418 million from the end of 1998 to a total of $27.3
billion, resulting in a debt-to-equity ratio of 5.7 to 1.
     Despite spending $1.5 billion on share repurchases and reducing
debt by $1.1 billion, IBM completed the quarter with $6 billion in
cash.
     Net income for the nine months ended September 30, 1999,
including the effect of actions taken in the second and third
quarters, was $5.6 billion, or $2.99 per diluted common share,
compared with net income of $4.0 billion, or $2.05 per diluted common
share, in the year-earlier period. Through the first nine months of
1999, IBM's diluted earnings per share grew 46 percent, with 20 points
of that growth attributable to actions taken in the second and third
quarters. Revenues for the nine months ended September 30, 1999 were
$63.4 billion, an increase of 12 percent (12 percent at constant
currency) compared with $56.5 billion in the same period of 1998.
 
                         Third-Quarter Actions
 
     -- In December 1998, IBM announced that it would sell its Global
Network business to AT&T for $5 billion. In the third quarter of 1999,
IBM completed the sales of the Global Network in 34 countries for
approximately $730 million, bringing the year-to-date total to 38
countries and $4.9 billion. In the third quarter, IBM recognized a
pre-tax gain of $586 million ($366 million after tax, or $.19 per
diluted common share) related to this transaction.
 
     -- In the third quarter of 1999, IBM completed the acquisitions
of Sequent Computer Systems, Inc. and the Mylex Corporation in
addition to DASCOM, Inc. These actions are intended to improve IBM's
long-term competitiveness in the server, storage, and Web-security
markets, respectively. As a result of these acquisitions, IBM recorded
a pre-tax charge of $111 million ($111 million after tax, or $.06 per
diluted common share) for in-process research and development.
 
     -- During the third quarter of 1999, IBM took a number of
additional actions to improve the competitiveness of its Technology
Group. These actions principally involved two divisions within the
Technology Group, the Networking Hardware Division and the Storage
Systems Division. In the networking area, IBM entered into a strategic
agreement with Cisco Systems under which the two companies will offer
a full spectrum of services and solutions for customers' e-business
and networking needs. In the storage area, IBM continued to take steps
in the third quarter to consolidate certain development operations. As
a result of these third-quarter actions, IBM recognized pre-tax
writedowns totaling $274 million ($192 million after tax, or $.10 per
diluted common share).
 
     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.
 
     Financial Results Attached


             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
                      1999     1998  Change     1999    1998  Change
                   -------  ------- -------  ------- ------- -------
REVENUE
 
 Hardware           $8,840   $8,920    -0.9% $26,803 $23,952    11.9%
  Gross margin        25.2%    31.6%            27.0%   30.4%
 
 Global Services     7,898    7,046    12.1%  23,436  20,356    15.1%
  Gross margin        27.6%    25.9%            27.5%   26.7%
 
 Software            3,010    2,808     7.2%   9,056   8,318     8.9%
  Gross margin        81.2%    80.6%            81.9%   80.4%
 
 Global Financing      774      679    13.9%   2,222   2,110     5.3%
  Gross margin        56.7%    48.1%            56.0%   47.5%
 
 Enterprise Investments/
 Other                 622      642    -3.1%   1,849   1,800     2.8%
  Gross margin        43.1%    36.1%            38.4%   36.2%
 
 
TOTAL REVENUE       21,144   20,095     5.2%  63,366  56,536    12.1%
 
 
GROSS PROFIT         7,564    7,467     1.3%  23,046  21,063     9.4%
  Gross margin        35.8%    37.2%            36.4%   37.3%
 
 
OPERATING EXPENSES
 
 S,G&A               3,501    4,057   -13.7%  10,284  11,588   -11.2%
  % of revenue        16.6%    20.2%            16.2%   20.5%
 
 R,D&E               1,383    1,240    11.5%   3,857   3,639     6.0%
  % of revenue         6.5%     6.2%             6.1%    6.4%
 
OPERATING INCOME     2,680    2,170    23.4%   8,905   5,836    52.6%
 
Other income           134      122    10.2%     423     402     5.3%
Interest expense       185      160    15.0%     556     500    11.1%
 
INCOME BEFORE
INCOME TAXES (1,2)   2,629    2,132    23.3%   8,772   5,738    52.9%
  Pre-tax margin      12.4%    10.6%            13.8%   10.1%
 
Provision for
income taxes           867      638    35.9%   3,149   1,756    79.3%
  Effective tax
  rate                33.0%    30.0%            35.9%   30.6%
 
 
NET INCOME (1,2)    $1,762   $1,494    17.9%  $5,623  $3,982    41.2%
  Net margin           8.3%     7.4%             8.9%    7.0%
 
 
Preferred stock
dividends                5        5               15      15
 
NET INCOME
APPLICABLE TO COMMON
SHAREHOLDERS        $1,757   $1,489    18.0%  $5,608  $3,967    41.4%
                    ======   ======           ======  ======
 
EARNINGS PER
SHARE OF COMMON
STOCK - ASSUMING
DILUTION             $0.93    $0.78    19.2%   $2.99   $2.05    45.9%
                    ======   ======           ======  ======
 
EARNINGS PER
SHARE OF COMMON
STOCK - BASIC        $0.97    $0.80    21.3%   $3.09   $2.11    46.4%
                    ======   ======           ======  ======
 
AVERAGE NUMBER OF
COMMON SHARES OUT-
STANDING (M's)
  DILUTED          1,869.6  1,909.0          1,874.7 1,931.0
  BASIC            1,805.2  1,856.9          1,813.7 1,878.8
 
 
     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 sales of the IBM Global Network in a
number of geographic areas, charges for acquired in-process research
and development related to three acquisitions, as well as a charge for
actions in the company's Technology Group.
 
     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 three
acquisitions, a charge for actions in the company's Technology Group,
as well as a change in PC depreciable lives.
 
     Note: All references to the average number of common shares and
per common share data for all periods presented have been adjusted to
reflect a 2-for-1 stock split of the common stock effective May 10,
1999.
 
            INTERNATIONAL BUSINESS MACHINES CORPORATION
            CONSOLIDATED STATEMENT OF FINANCIAL POSITION
 
                   (Unaudited; Dollars in millions)
 
                                        At           At
                              September 30, December 31,  Percent
                                      1999         1998    Change
                              ------------  -----------   -------
ASSETS
 
 Cash, cash equivalents,
 and marketable securities          $6,026       $5,768      4.5%
 
 Receivables - net, inventories,
 and prepaid expenses               36,851       36,592      0.7%
 
 Plant, rental machines,
 and other property - net           17,463       19,631    -11.0%
 
 Investments and other assets       25,035       24,109      3.8%
                                  --------     --------
 
TOTAL ASSETS                       $85,375      $86,100     -0.8%
                                  ========     ========
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
 Short-term debt                   $14,096      $13,905      1.4%
 Long-term debt                     13,807       15,508    -11.0%
                                  --------     --------
 Total debt                         27,903       29,413     -5.1%
 
 Accounts payable, taxes,
 and accruals                       23,682       22,922      3.3%
 
 Other liabilities                  13,722       14,332     -4.3%
                                  --------     --------
TOTAL LIABILITIES                   65,307       66,667     -2.0%
 
STOCKHOLDERS' EQUITY                20,068       19,433      3.3%
                                  --------     --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY               $85,375      $86,100     -0.8%
                                  ========     ========
 
                   INTERNATIONAL BUSINESS MACHINES CORPORATION
 
                             SEGMENT DATA
 
                                   THIRD QUARTER 1999
                       --------------------------------------------
(Dollars in millions)                                       Pre-tax
                       -------- Revenue --------- Pre-tax    Income
                       External Internal    Total  Income    Margin
                       -------- --------  ------- -------   -------
SEGMENTS
 
Technology              $3,100     $883   $3,983    $285       7.2%
          % change         9.8%   -26.4%    -1.0%  108.0%
 
Personal Systems         3,716       12    3,728     (69)     -1.9%
          % change        11.2%    50.0%    11.3%   43.4%
 
Server                   1,946       72    2,018     295      14.6%
          % change       -29.3%   -40.0%   -29.7%  -59.6%
 
Global Services          7,898      688    8,586   1,174      13.7%
          % change        12.1%    -7.3%    10.2%   38.1%
 
Software                 3,010      168    3,178     597      18.8%
          % change         7.2%   -12.0%     6.0%    8.0%
 
Global Financing           786      194      980     322      32.9%
          % change        11.3%     9.6%    11.0%   14.2%
 
Enterprise Investments     619        4      623     (89)    -14.3%
          % change         5.8%   -75.0%     3.7%   45.7%
 
TOTAL SEGMENTS          21,075    2,021   23,096   2,515      10.9%
          % change         5.0%   -17.6%     2.6%   10.9%
 
Eliminations / Other        69   (2,021)  (1,952)    114 (a)
 
TOTAL IBM              $21,144       $0  $21,144  $2,629      12.4%
          % change         5.2%              5.2%   23.3%
 
                                   THIRD QUARTER 1998
                       --------------------------------------------
(Dollars in millions)                                       Pre-tax
                       -------- Revenue --------- Pre-tax    Income
                       External Internal    Total  Income    Margin
                       -------- --------  ------- -------   -------
SEGMENTS
 
Technology              $2,824   $1,200   $4,024    $137       3.4%
 
Personal Systems         3,343        8    3,351    (122)     -3.6%
 
Server                   2,751      120    2,871     731      25.5%
 
Global Services          7,046      742    7,788     850      10.9%
 
Software                 2,808      191    2,999     553      18.4%
 
Global Financing           706      177      883     282      31.9%
 
Enterprise Investments     585       16      601    (164)    -27.3%
 
TOTAL SEGMENTS          20,063    2,454   22,517   2,267      10.1%
 
Eliminations / Other        32   (2,454)  (2,422)   (135)
 
TOTAL IBM              $20,095       $0  $20,095  $2,132      10.6%
 
     (a) Pre-tax income includes a benefit of $201 million due to a gain
from the sales of the IBM Global Network in a number of geographic
areas, charges for acquired in-process research and development
related to three acquisitions, as well as a charge for actions in the
company's Technology Group.
 
                    INTERNATIONAL BUSINESS MACHINES CORPORATION
 
                             SEGMENT DATA
 
                                    NINE MONTHS 1999
                       --------------------------------------------
(Dollars in millions)                                       Pre-tax
                       -------- Revenue --------- Pre-tax    Income
                       External Internal    Total  Income    Margin
                       -------- --------  ------- -------   -------
SEGMENTS
 
Technology              $9,032   $2,794  $11,826    $485       4.1%
          % change         7.9%   -15.5%     1.3%  -26.1%
 
Personal Systems        11,178       26   11,204    (311)     -2.8%
          % change        34.1%    23.8%    34.1%   69.4%
 
Server                   6,368      237    6,605   1,309      19.8%
          % change       -11.0%   -20.5%   -11.4%  -26.9%
 
Global Services         23,436    1,985   25,421   3,284      12.9%
          % change        15.1%    -2.4%    13.5%   30.0%
 
Software                 9,056      561    9,617   1,954      20.3%
          % change         8.9%     1.6%     8.4%   10.1%
 
Global Financing         2,274      599    2,873     947      33.0%
          % change         4.7%    18.8%     7.4%   11.4%
 
Enterprise Investments   1,829       18    1,847    (262)    -14.2%
          % change        11.3%   -55.0%     9.7%   44.8%
 
TOTAL SEGMENTS          63,173    6,220   69,393   7,406      10.7%
          % change        12.1%    -7.9%    10.0%   21.3%
 
Eliminations / Other       193   (6,220)  (6,027)  1,366 (a)
 
TOTAL IBM              $63,366       $0  $63,366  $8,772      13.8%
          % change        12.1%             12.1%   52.9%
 
 
                                    NINE MONTHS 1998
                       --------------------------------------------
(Dollars in millions)                                       Pre-tax
                       -------- Revenue --------- Pre-tax    Income
                       External Internal    Total  Income    Margin
                       -------- --------  ------- -------   -------
SEGMENTS
 
Technology              $8,369   $3,306  $11,675    $656       5.6%
 
Personal Systems         8,335       21    8,356  (1,016)    -12.2%
 
Server                   7,159      298    7,457   1,790      24.0%
 
Global Services         20,356    2,033   22,389   2,526      11.3%
 
Software                 8,318      552    8,870   1,774      20.0%
 
Global Financing         2,172      504    2,676     850      31.8%
 
Enterprise Investments   1,643       40    1,683    (475)    -28.2%
 
TOTAL SEGMENTS          56,352    6,754   63,106   6,105       9.7%
 
Eliminations / Other       184   (6,754)  (6,570)   (367)
 
TOTAL IBM              $56,536       $0  $56,536  $5,738      10.1%
 
     (a) Pre-tax income includes a 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 three acquisitions,
charges for actions in the company's Technology Group, as well as a
change in PC depreciable lives.
 
     
     CONTACT: Rob Wilson
              [phone]