Final Results

International Bus Mach Corp
17 January 2002



( BW)(NY-IBM)(IBM) IBM Announces Fourth-Quarter 2001 Results


    Business Editors


    ARMONK, N.Y.--(BUSINESS WIRE)--January 17, 2002--IBM today

announced fourth-quarter 2001 diluted earnings per common share of

$1.33, a 10 percent decrease compared with diluted earnings per common

share of $1.48 in the fourth quarter of 2000. Fourth-quarter 2001 net

income was $2.3 billion, a 13 percent decrease from $2.7 billion in

the year-earlier period. IBM's fourth-quarter 2001 revenues totaled

$22.8 billion, down 11 percent (8 percent at constant currency)

compared with the fourth quarter of 2000.

    Louis V. Gerstner, Jr., IBM chairman and chief executive officer,

said: 'This was a solid finish to a demanding year. We achieved strong

profitability and we continued to gain market share in high- priority

segments of our software, storage and server businesses. For example,

our new 'Regatta' UNIX servers, which didn't begin shipping until late

in the quarter, are sold out. On a full-year basis, our mainframe

revenues grew for the first time since 1989. Our services business

also had over $15 billion in new signings, although many of these

signings also came very late in the quarter, reflecting the tough

business environment. We also once again demonstrated exceptional

management of our cost and expense structure, and we ended the year

with very powerful free cash flow.

    'We had our share of challenges, too, but these were largely

expected: slow PC sales and ongoing weakness in our OEM business. Our

overall revenue decline came principally from these two units, and

we've taken a number of actions to improve our long-term

competitiveness in these areas. As we have demonstrated time after

time, our diverse business portfolio allows us to overcome weakness in

certain areas and still deliver strong results.

    'Business conditions remain difficult as we enter the new year,

although we believe that our business will strengthen as we move

through the year,' Mr. Gerstner said. 'Further, and most important, we

have absolutely no doubt that customer buying patterns throughout the

world are continuing to shift in IBM's favor. Customers increasingly

are demanding fully integrated technology -- not the latest single-

function offerings from the piece-part makers -- and that plays

directly to IBM's strengths in e-business software, in powerful,

secure servers, and in our unparalleled global services capabilities.'

    In the Americas, fourth-quarter revenues were $9.8 billion, a

decrease of 9 percent (8 percent at constant currency) from the 2000

period. Revenues from Europe/Middle East/Africa were $6.9 billion,

down 6 percent (6 percent at constant currency). Asia-Pacific revenues

declined 10 percent (1 percent at constant currency) to $4.5 billion.

OEM revenues decreased 34 percent (33 percent at constant currency) to

$1.6 billion compared with the fourth quarter of 2000.

    Revenues from Global Services, including maintenance, declined 1

percent (up 1 percent at constant currency) in the fourth quarter to

$9.1 billion. Global Services revenues, excluding maintenance,

declined 2 percent (up 1 percent at constant currency). New contract

signings for Global Services in the fourth quarter were approximately

$15 billion. IBM's total services backlog at year-end 2001 was $102

billion. Overall, the gross profit margin for Global Services improved

1.2 points year over year to 28.2 percent.

    Hardware revenues decreased 24 percent (21 percent at constant

currency) to $8.7 billion from the 2000 fourth quarter. Revenues from

z900 mainframe servers were essentially flat, reflecting a difficult

year-over-year comparison. Mainframe computing capacity grew 12

percent in the fourth quarter as measured in MIPS (millions of

instructions per second). Revenues from IBM's UNIX-based pSeries

declined, in large part because of a transition to IBM's new 'Regatta'

family of UNIX servers, which began shipping on December 14. Personal

computer and microelectronics revenues decreased substantially over

the prior year's quarter, principally due to price pressures in PCs

and an ongoing downturn affecting the worldwide semiconductor and OEM

markets. Revenues from IBM's high-end storage product line -- Shark --

grew in a declining market.

    Software revenues increased 6 percent (8 percent at constant

currency) to $3.8 billion compared to the prior year's fourth quarter.

Overall, IBM's middleware software revenues grew 10 percent at

constant currency. IBM's premier data management and WebSphere

products grew 48 percent and 43 percent, respectively. Operating

system revenues fell 2 percent. The company's total gross profit

margin in software improved 1.8 points, to 85.2 percent.

    Global Financing revenues decreased 5 percent (4 percent at

constant currency) in the fourth quarter to $927 million. As expected,

revenues from the Enterprise Investments/Other area, which includes

products for specialized customer uses, declined 20 percent (18

percent at constant currency) compared to the fourth quarter of 2000

to $340 million. IBM has been consistently shifting development and

distribution of products in this segment to third-party companies.

    The company's total gross profit margin improved to 38.3 percent

in the 2001 fourth quarter from 37.3 percent in the 2000 fourth

quarter.

    Despite absorbing workforce-balancing actions and writedowns of

certain equity investments, IBM's total expenses improved 6 percent

year over year to $5.4 billion. The improvement came from each of the

company's two main expense categories: selling, general and

administrative expenses as well as research and development expenses.

IBM continued to reduce its expenses and improve operating

efficiencies through the use of electronic procurement, sales,

education and customer support systems. These systems -- known as

e-procurement, IBM.com, e-learning and e-Care -- have resulted in

substantial productivity improvements.

    IBM's tax rate in the fourth quarter was 29.3 percent compared

with 29.5 percent in the fourth quarter of 2000.

    IBM spent approximately $1.0 billion on share repurchases in the

fourth quarter. The average number of basic common shares outstanding

in the quarter was 1.72 billion compared with 1.75 billion shares in

the same period of 2000.


                        Full-year 2001 Results


    Net income for the year ended December 31, 2001 was $7.7 billion,

or $4.35 per diluted common share, compared with net income of $8.1

billion, or $4.44 per diluted common share, in 2000. Revenues in 2001

totaled $85.9 billion, a decline of 3 percent (up 1 percent at

constant currency) compared with revenues of $88.4 billion in the

year-earlier period.

    In the Americas, full-year revenues were $37.4 billion, down 3

percent (2 percent at constant currency) from the 2000 period.

Revenues from Europe/Middle East/Africa were $24.0 billion, a decrease

of 1 percent (up 3 percent at constant currency). Asia-Pacific

revenues fell 2 percent (up 8 percent at constant currency) to $17.2

billion. OEM revenues decreased 7 percent (6 percent at constant

currency) to $7.2 billion.

    Revenues from Global Services totaled $35.0 billion, an increase

of 5 percent (10 percent at constant currency). Hardware revenues in

2001 were $33.4 billion, a decrease of 12 percent (8 percent at

constant currency). Software revenues totaled $12.9 billion, an

increase of 3 percent (7 percent at constant currency). Global

Financing revenues totaled $3.4 billion, a decrease of 1 percent (up 1

percent at constant currency). Revenues from the Enterprise

Investments/Other area declined 18 percent (14 percent at constant

currency) to $1.2 billion.

    Common share repurchases totaled approximately $5.3 billion in

2001. The average number of basic shares outstanding was 1.73 billion

in 2001 compared with 1.76 billion in 2000. There were 1.72 billion

basic common shares outstanding at December 31, 2001.

    IBM completed 2001 with $6.4 billion in cash, after major

expenditures which included the share repurchases, capital investments

of $5.6 billion and an 8 percent dividend increase.

    The company's debt in support of operations, excluding global

financing, increased $543 million from year-end 2000 to $1.6 billion,

resulting in a debt-to-capitalization ratio of 7 percent at the end of

2001. Global financing debt declined $2.0 billion from year-end 2000

to a total of $25.5 billion, resulting in a debt-to-equity ratio of

6.8 to 1.



    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

            (Dollars in millions except per share amounts)



                       Three Months             Twelve Months

                    Ended December 31,        Ended December 31,



                                   Percent                   Percent

                     2001   2000(a) Change     2001   2000(a) Change

                  -------  ------- -------  -------  ------- -------

REVENUE


 Global Services   $9,061   $9,186    -1.4% $34,956  $33,152     5.4%

  Gross margin       28.2%    27.0%            27.5%    26.7%


 Hardware           8,714   11,463   -24.0%  33,392   37,777   -11.6%

  Gross margin       26.3%    30.4%            27.7%    28.4%


 Software           3,784    3,571     6.0%  12,939   12,598     2.7%

  Gross margin       85.2%    83.4%            82.5%    81.9%


 Global Financing     927      971    -4.6%   3,426    3,465    -1.1%

  Gross margin       55.4%    42.9%            50.6%    43.3%


 Enterprise Investments/

 Other                340      425   -20.0%   1,153    1,404   -17.9%

  Gross margin       45.8%    44.9%            45.0%    46.8%



TOTAL REVENUE      22,826   25,616   -10.9%  85,866   88,396    -2.9%



GROSS PROFIT        8,745    9,553    -8.4%  31,782   32,054    -0.9%

  Gross margin       38.3%    37.3%            37.0%    36.3%



EXPENSE

 S,G&A              4,176    4,340    -3.8%  15,490   15,639    -1.0%

  % of revenue       18.3%    16.9%            18.0%    17.7%


 R,D&E              1,263    1,449   -12.8%   5,006    5,151    -2.8%

  % of revenue        5.5%     5.7%             5.8%     5.8%


 Other income         (48)    (125)  -62.4%      95     (617) -115.4%

 Interest expense      54      102   -47.3%     238      347   -31.4%


TOTAL EXPENSE       5,445    5,766    -5.6%  20,829   20,520     1.5%

  % of revenue       23.9%    22.5%            24.3%    23.2%



INCOME BEFORE

INCOME TAXES        3,300    3,787   -12.9%  10,953   11,534    -5.0%

  Pre-tax margin     14.5%    14.8%            12.8%    13.0%



Provision for
income taxes          967    1,117   -13.4%   3,230    3,441    -6.1%

  Effective tax
  rate               29.3%    29.5%            29.5%    29.8%


NET INCOME         $2,333   $2,670   -12.7%  $7,723   $8,093    -4.6%

  Net margin         10.2%    10.4%             9.0%     9.2%


Preferred stock
dividends               0        5               10       20


NET INCOME
APPLICABLE TO COMMON
STOCKHOLDERS       $2,333   $2,665   -12.5%  $7,713   $8,073    -4.5%

                   ======   ======           ======   ======



EARNINGS PER
SHARE OF COMMON
STOCK - ASSUMING
DILUTION            $1.33    $1.48   -10.1%   $4.35    $4.44    -2.0%

                   ======   ======           ======   ======


EARNINGS PER
SHARE OF COMMON
STOCK - BASIC       $1.35    $1.52   -11.2%   $4.45    $4.58    -2.8%

                   ======   ======           ======   ======

AVERAGE NUMBER OF
COMMON SHARES OUT-
STANDING (M's)

  DILUTED         1,758.0  1,790.6          1,771.2  1,812.1

  BASIC           1,722.4  1,749.2          1,733.3  1,763.0



(a)  Reclassified to conform with 2001 presentation.



               INTERNATIONAL BUSINESS MACHINES CORPORATION

              CONSOLIDATED STATEMENT OF FINANCIAL POSITION


                                        At           At

(Dollars in millions)          December 31, December 31,  Percent

                                      2001         2000    Change

                               -----------  -----------   -------

ASSETS

 Cash, cash equivalents,
 and marketable securities          $6,393       $3,722     71.8%

 Receivables - net, inventories,
 and prepaid expenses               36,068       40,158    -10.2%

 Plant, rental machines,
 and other property - net           16,504       16,714     -1.3%

 Investments and other assets       29,348       27,755      5.7%
                                  --------     --------

TOTAL ASSETS                       $88,313      $88,349     -0.0%

                                  ========     ========


LIABILITIES AND STOCKHOLDERS' EQUITY

 Short-term debt                   $11,188      $10,205      9.6%

 Long-term debt                     15,963       18,371    -13.1%

                                  --------     --------

 Total debt                         27,151       28,576     -5.0%


 Accounts payable, taxes,
 and accruals                       23,931       26,201     -8.7%


 Other liabilities                  13,617       12,948      5.2%

                                  --------     --------

TOTAL LIABILITIES                   64,699       67,725     -4.5%


STOCKHOLDERS' EQUITY                23,614       20,624     14.5%

                                  --------     --------

TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY               $88,313      $88,349     -0.0%

                                  ========     ========



                 INTERNATIONAL BUSINESS MACHINES CORPORATION

                             SEGMENT DATA

                                     FOURTH QUARTER 2001

                         --------------------------------------------

                                                               Pre-tax

(Dollars in millions)    --------- Revenue --------- Pre-tax   Income

                         External Internal     Total  Income   Margin

                         -------- --------  -------- -------  -------

SEGMENTS


Global Services           $9,061     $724    $9,785  $1,413     14.4%

          % change          -1.4%    22.7%      0.1%    8.4%


Technology                 1,879      530     2,409    (293)   -12.2%

          % change         -30.2%   -36.5%    -31.7% -200.7%


Personal and Printing
Systems                    2,910       23     2,933     (17)    -0.6%

          % change         -32.0%   -11.5%    -31.9% -116.2%


Enterprise Systems         4,074      163     4,237     719     17.0%

          % change         -13.2%    -6.3%    -13.0%  -18.0%


Software                   3,784      295     4,079   1,167     28.6%

          % change           6.0%    26.6%      7.2%   21.4%


Global Financing             921      189     1,110     265     23.9%

          % change          -5.5%   -24.1%     -9.3%   -8.0%


Enterprise Investments       336        2       338     (74)   -21.9%

          % change         -21.9%             -21.4%   14.9%


TOTAL SEGMENTS            22,965    1,926    24,891   3,180     12.8%

          % change         -11.1%    -8.6%    -10.9%  -14.9%


Eliminations / Other        (139)  (1,926)   (2,065)    120


TOTAL IBM                $22,826       $0   $22,826  $3,300     14.5%

          % change         -10.9%             -10.9%  -12.9%



                                     FOURTH QUARTER 2000(a)

                         --------------------------------------------

                                                               Pre-tax

(Dollars in millions)    --------- Revenue --------- Pre-tax   Income

                         External Internal     Total  Income   Margin

                         -------- --------  -------- -------  -------

SEGMENTS

Global Services           $9,186     $590    $9,776  $1,303     13.3%


Technology                 2,693      835     3,528     291      8.2%


Personal and Printing

Systems                    4,278       26     4,304     105      2.4%


Enterprise Systems         4,694      174     4,868     877     18.0%


Software                   3,571      233     3,804     961     25.3%


Global Financing             975      249     1,224     288     23.5%


Enterprise Investments       430        0       430     (87)   -20.2%


TOTAL SEGMENTS            25,827    2,107    27,934   3,738     13.4%


Eliminations / Other        (211)  (2,107)   (2,318)     49


TOTAL IBM                $25,616       $0   $25,616  $3,787     14.8%


(a)  Reclassified to conform with 2001 presentation.



                 INTERNATIONAL BUSINESS MACHINES CORPORATION

                                SEGMENT DATA

                                     TWELVE MONTHS 2001

                         --------------------------------------------

                                                               Pre-tax

(Dollars in millions)    --------- Revenue --------- Pre-tax   Income

                         External Internal     Total  Income   Margin

                         -------- --------  -------- -------  -------

SEGMENTS



Global Services          $34,956   $2,647   $37,603  $5,161     13.7%

          % change           5.4%     8.5%      5.7%   14.3%


Technology                 7,970    2,325    10,295    (374)    -3.6%

          % change          -6.4%   -22.7%    -10.7% -155.1%


Personal and Printing
Systems                   11,982       73    12,055    (153)    -1.3%

          % change         -20.6%     4.3%    -20.5% -251.5%


Enterprise Systems        13,743      710    14,453   1,830     12.7%

          % change          -3.2%     9.4%     -2.6%   -4.8%


Software                  12,939      981    13,920   3,168     22.8%

          % change           2.7%    18.5%      3.7%   13.4%


Global Financing           3,407      836     4,243   1,143     26.9%

          % change          -2.7%   -11.4%     -4.5%   -2.8%



Enterprise Investments     1,118        4     1,122    (317)   -28.3%

          % change         -18.3%    33.3%    -18.2%   -6.7%



TOTAL SEGMENTS            86,115    7,576    93,691  10,458     11.2%

          % change          -2.6%    -4.6%     -2.8%   -4.0%



Eliminations / Other        (249)  (7,576)   (7,825)    495



TOTAL IBM                $85,866       $0   $85,866 $10,953     12.8%

          % change          -2.9%              -2.9%   -5.0%





                                     TWELVE MONTHS 2000(a)

                         --------------------------------------------

                                                               Pre-tax

(Dollars in millions)    --------- Revenue --------- Pre-tax   Income

                         External Internal     Total  Income   Margin

                         -------- --------  -------- -------  -------

SEGMENTS



Global Services          $33,152   $2,439   $35,591  $4,517     12.7%


Technology                 8,519    3,007    11,526     679      5.9%


Personal and Printing
Systems                   15,098       70    15,168     101      0.7%


Enterprise Systems        14,194      649    14,843   1,922     12.9%


Software                  12,598      828    13,426   2,793     20.8%


Global Financing           3,500      944     4,444   1,176     26.5%


Enterprise Investments     1,369        3     1,372    (297)   -21.6%


TOTAL SEGMENTS            88,430    7,940    96,370  10,891     11.3%


Eliminations / Other         (34)  (7,940)   (7,974)    643


TOTAL IBM                $88,396       $0   $88,396 $11,534     13.0%



(a) Reclassified to conform with 2001 presentation.



    --30--emb/ny*



    CONTACT:  IBM

              Rob Wilson, 914/499-6565

              [e-mail]

              Carol Makovich, 914/499-6212

              [e-mail]