Final Results

IBM
                  

                IBM Reports 2005 Fourth-Quarter Results

    --  Total diluted earnings per common share of $2.01, including $.10 per
        diluted share for a one-time pretax charge for pension changes; without
        the charge, IBM diluted earnings per share were $2.11, up 26 percent
        from fourth-quarter 2004.

    --  Total revenue of $24.4 billion, down 12 percent versus the fourth
        quarter of 2004, up 3 percent without the impact of the divested PC
        business and adjusting for currency.

IBM today announced fourth-quarter 2005 diluted earnings per common share of
$2.01 from continuing operations, including 10 cents per share for a one-time
pretax curtailment charge of $267 million relating to changes to the U.S.
defined benefit pension plans, effective January 1, 2008. Diluted earnings per
share for the fourth-quarter 2005 were $2.11, excluding this one-time charge.
Fourth-quarter income from continuing operations was $3.2 billion, including the
one-time charge for pension changes. This compares with $2.8 billion in the
fourth quarter of 2004. Without the one-time charge, income from continuing
operations of $3.4 billion in the fourth quarter of 2005 increased $541 million,
or 19 percent versus the comparable period last year.

Total revenues for the fourth quarter of 2005 of $24.4 billion decreased 12
percent (8 percent, adjusting for currency) from the fourth quarter of 2004,
which includes revenue from the divested PC business. Excluding the PC revenue,
revenues decreased 1 percent (up 3 percent, adjusting for currency) compared
with the fourth quarter of 2004.

Samuel J. Palmisano, IBM chairman and chief executive officer, said: 'IBM
finished the year with another strong quarter. We had solid performance in
systems, middleware and business transformation services, which grew over 25
percent for the year. Our cash position remains very strong, and we saw
impressive growth in important parts of our business. We continued to make gains
in emerging markets and in important sectors such as healthcare and
transportation, and our microprocessors are powering the fast-growing home
entertainment market.

'Gross profit margin improvement in the quarter of more than 5 points
demonstrates the benefit of our strategic focus on more profitable, high-value
segments of the IT industry, as well as our continued emphasis on productivity
and global integration. IBM's business model is much more balanced and
profitable than it was just a few years ago.

'IBM is ready for 2006, as we continue to deliver on our agenda of driving
innovation and transformation for our clients and their businesses.'

Fourth-quarter revenue was a decrease of 12 percent (up 3 percent, adjusting for
currency and the divested PC business). From a geographic perspective, the
Americas fourth-quarter revenues were $10.5 billion, down 6 percent as reported
(up 3 percent, adjusting for currency and PCs) from the 2004 period. Revenues
from Europe/Middle East/Africa were $8.3 billion, down 16 percent (up 2 percent,
adjusting for currency and PCs). Asia-Pacific revenues decreased 22 percent
(down 3 percent, adjusting for currency and PCs) to $4.5 billion. OEM revenues
were $1.1 billion, up 35 percent compared with the 2004 fourth quarter.

Revenues from Global Services, including maintenance, decreased 5 percent (1
percent, adjusting for currency) to $12.0 billion in the fourth quarter. IBM
signed services contracts totaling $11.5 billion and ended the quarter with an
estimated services backlog, including Strategic Outsourcing, Business Consulting
Services, Integrated Technology Services and Maintenance, of $111 billion.

Hardware revenues decreased 27 percent (25 percent, adjusting for currency) to
$6.9 billion in the fourth-quarter 2005 compared to $9.5 billion in the year-ago
period, which includes revenue from the divested PC business. Hardware revenues
without the PC business increased 6 percent (9 percent, adjusting for currency).

Hardware revenues for the Systems and Technology Group totaled $6.8 billion for
the quarter, up 6 percent. Revenues from the zSeries mainframe product increased
5 percent compared with the year-ago period. Total delivery of zSeries computing
power, which is measured in MIPS (millions of instructions per second),
increased 28 percent. Revenues from the pSeries UNIX servers increased 4
percent; however, revenues from the iSeries midrange servers decreased 18
percent and xSeries servers were flat. In addition to the eServers, revenues
from Storage Systems increased 24 percent and Microelectronics increased 48
percent.

Revenues from Software were $4.6 billion, flat (up 3 percent, adjusting for
currency) compared with the fourth quarter of 2004. Revenues from IBM's
middleware brands, which include WebSphere, DB2, Tivoli, Lotus and Rational
products, were $3.7 billion, up 1 percent versus the fourth quarter of 2004.
Operating systems revenues decreased 6 percent to $656 million 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 4
percent. Revenues for Information Management software, which enables clients to
leverage information on demand, increased 4 percent. Revenues from Tivoli
software, infrastructure software that enables customers to centrally manage
networks and storage, increased 3 percent, and revenues for Lotus software,
which allows collaborating and messaging by customers in real- time
communication and knowledge management, increased 2 percent. Revenues from
Rational software, integrated tools to improve the processes of software
development, decreased 2 percent compared with the year-ago quarter.

IBM expects to hold or gain market share for the fourth quarter in each of the
five key middleware brands.

Global Financing revenues declined 8 percent (6 percent, adjusting for currency)
in the fourth quarter to $605 million. Revenues from the Enterprise
Investments/Other area, which includes industry-specific IT solutions such as
product life-cycle management software, increased 5 percent (11 percent,
adjusting for currency) to $383 million versus the prior-year fourth quarter.

The company's total gross profit margin was 44.1 percent in the 2005 fourth
quarter compared with 38.8 percent in the 2004 period, which includes the
divested PC business. Excluding the PC business, the fourth-quarter 2004 gross
profit margin was 41.9 percent.

Total expense and other income decreased 7 percent to $6.2 billion compared with
the prior-year period, and decreased 11 percent without the current-period
pension charge. SG&A expense of $5.3 billion decreased 3 percent year over year.
Excluding the current-year pension charge, SG&A expense decreased 8 percent
principally as a result of the sale of the PC business. RD&E expense was $1.5
billion, a decrease of 4 percent compared with the year-ago period. Intellectual
property and custom development income decreased to $228 million compared with
$298 million a year ago. Other (income) and expense was $334 million of income
in the fourth quarter of 2005, versus $4 million of income in the same period
last year. The year-over-year improvement includes $182 million of real estate
gains, compared to the previous estimate of $75 million as set forth in the
Company's SEC Form 10-Q for the quarter ended September 30, 2005. The
improvement also includes gains from foreign currency hedging transactions of
approximately $150 million.

IBM's effective tax rate in the fourth-quarter 2005 was 29.5 percent, compared
with 29.8 percent in the fourth quarter of 2004. Excluding the one-time item,
the fourth-quarter 2005 tax rate was 30.0 percent compared with 29.8 percent in
the year-ago quarter.

Share repurchases totaled approximately $1.0 billion in the fourth quarter. The
weighted-average number of diluted common shares outstanding in the
fourth-quarter 2005 was 1.60 billion compared with 1.69 billion shares in the
same period of 2004.

In the fourth quarter, IBM recorded a $36 million charge, net of tax, to reflect
the cumulative effect of a change in accounting principle related to the
adoption of FASB Interpretation No. 47 (FIN 47), 'Accounting for Conditional
Asset Retirement Obligations - an interpretation of FASB Statement No. 143.'

Full-Year 2005 Results

Income from continuing operations for the year ended December 31, 2005 was $8.0
billion compared with $7.5 billion for the same period of 2004, including the
following nonrecurring items in the respective periods:
  --  2005:
      - pretax curtailment charge of $267 million relating to changes
        to the U.S. defined benefit pension plans, effective
        January 1, 2008,
      - charge of $525 million for taxes in connection with the
        repatriation of foreign earnings under the American Jobs
        Creation Act of 2004,
      - incremental pretax charges of $1.7 billion for restructuring,
      - gain of $1.1 billion before tax on the sale of the PC
        business,
      - other income of $775 million before tax due to a settlement
        agreement entered into with Microsoft.
  --  2004:
      - pretax charge of $320 million for the partial settlement of
        legal claims against IBM's pension plan.

Diluted earnings per share from continuing operations for 2005 were $4.91
compared with $4.39 per diluted share for the 2004 period. Excluding these
nonrecurring items from both periods, diluted earnings per share were $5.32
compared with diluted earnings per share of $4.50 for the 2004 period, an
increase of 18 percent. Revenues from continuing operations for 2005, which
includes PC revenues of $2.9 billion for the first four months of 2005 only,
totaled $91.1 billion, down 5 percent (6 percent, adjusting for currency)
compared with $96.3 billion for 2004. Without the revenues from the divested PC
business, revenues totaled $88.3 billion, up 3 percent (3 percent, adjusting for
currency) compared with the 2004 period.

Full-year revenue was a decrease of 5 percent (up 3 percent, adjusting for
currency and the divested PC business). From a geographic perspective, the
Americas full-year revenues were $38.8 billion, down 3 percent as reported (up 4
percent, adjusting for currency and PCs) from the 2004 period. Revenues from
Europe/Middle East/Africa were $30.4 billion, a decrease of 5 percent (up 4
percent, adjusting for currency and PCs). Asia-Pacific revenues were down 12
percent (1 percent, adjusting for currency and PCs) to $18.6 billion. OEM
revenues increased 13 percent to $3.3 billion.

Without the PC business, revenues in four of IBM's five industry sectors grew
for the full year, as did sales to Small and Medium Businesses.

Revenues from Global Services in 2005 totaled $47.4 billion, an increase of 2
percent (2 percent, adjusting for currency) compared with 2004. Hardware
revenues were $24.3 billion, a decrease of 22 percent (up 5 percent, adjusting
for currency and PCs). Software revenues totaled $15.8 billion, an increase of 4
percent (4 percent, adjusting for currency). Global Financing revenues totaled
$2.4 billion, a decrease of 8 percent (8 percent, adjusting for currency).
Revenues from the Enterprise Investments/Other area increased 7 percent (7
percent, adjusting for currency) to $1.3 billion.

IBM's revenues for Business Performance Transformation Services grew 28 percent
for the full year.

For total operations, net income for 2005, including a loss from discontinued
operations of $24 million and the charge for the cumulative effect of the FIN 47
accounting change of $36 million, was $7.9 billion, or $4.87 per diluted share,
compared with 2004 net income of $7.5 billion, or $4.38 per diluted share, which
included a loss from discontinued operations of $18 million.

IBM ended 2005 with $13.7 billion of cash on hand. The balance sheet remains
strong, and the company is well positioned to take advantage of opportunities.

Share repurchases totaled approximately $7.7 billion in 2005. The
weighted-average number of diluted common shares outstanding in 2005 was 1.63
billion compared with 1.71 billion shares in 2004. As of December 31, 2005,
there were 1.57 billion basic common shares outstanding.

Debt, including Global Financing, totaled $22.6 billion, compared with $22.9
billion at year-end 2004. From a management segment view, the non-global
financing debt-to-capitalization ratio was 6.7 percent at the end of 2005, and
Global Financing debt declined $1.8 billion from year-end 2004 to a total of
$20.5 billion, resulting in a debt-to- equity ratio of 6.7 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 U.S. Securities and Exchange Commission (SEC).

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:
      - without nonrecurring items,
      - without PC business,
      - adjusting for currency.

The rationale for management's use of non-GAAP measures is included as part of
the supplementary materials presented within the fourth- quarter earnings
materials. These materials are available on the IBM investor relations Web site
at www.ibm.com/investor and will be included in a subsequent Form 8-K.

Conference Call and Webcast

IBM's regular quarterly earnings conference call is scheduled to begin at 4:30
p.m. EST, today. Investors may participate by viewing the Webcast at
www.ibm.com/investor/4q05. Presentation charts will be available on the Web site
prior to the Webcast.

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
                       2005    2004*  Change     2005    2004*  Change
                    -------  ------- -------  -------  ------- -------
REVENUE

 Global Services   $11,989  $12,605    -4.9% $47,357  $46,213     2.5%
  Gross margin        27.4%    24.3%            25.9%    24.2%

 Hardware            6,888    9,495   -27.4%  24,314   31,154   -22.0%
  Gross margin        42.1%    32.9%            35.1%    29.5%

 Software            4,562    4,549     0.3%  15,753   15,094     4.4%
  Gross margin        89.0%    88.9%            87.5%    87.2%

 Global Financing      605      657    -8.0%   2,407    2,608    -7.7%
  Gross margin        57.4%    59.7%            54.7%    59.9%

 Enterprise Investments/
 Other                 383      365     4.9%   1,303    1,224     6.5%
  Gross margin        46.2%    32.8%            46.5%    40.2%


TOTAL REVENUE       24,427   27,671   -11.7%  91,134   96,293    -5.4%


GROSS PROFIT        10,765   10,738     0.3%  36,532   35,569     2.7%
  Gross margin        44.1%    38.8%            40.1%    36.9%


EXPENSE AND OTHER INCOME

 S,G&A               5,252    5,439    -3.4%  21,314   20,079     6.1%
  % of revenue        21.5%    19.7%            23.4%    20.9%

 R,D&E               1,459    1,514    -3.6%   5,842    5,874    -0.6%
  % of revenue         6.0%     5.5%             6.4%     6.1%

 Intellectual property
  and custom development
  income              (228)    (298)  -23.7%    (948)  (1,169)  -19.0%
 Other (income)
   and expense        (334)      (4)     nm   (2,122)     (23)     nm
 Interest expense       48       39    22.5%     220      139    58.6%

TOTAL EXPENSE AND
OTHER INCOME         6,197    6,690    -7.4%  24,306   24,900    -2.4%
  % of revenue        25.4%    24.2%            26.7%    25.9%

INCOME FROM CONTINUING
OPERATIONS BEFORE
INCOME TAXES         4,568    4,048    12.8%  12,226   10,669    14.6%
  Pretax margin       18.7%    14.6%            13.4%    11.1%

Provision for
income taxes         1,348    1,206    11.6%   4,232    3,172    33.4%
  Effective tax
  rate                29.5%    29.8%            34.6%    29.7%


INCOME FROM CONTINUING
OPERATIONS           3,220    2,842    13.3%   7,994    7,497     6.6%
  Net margin          13.2%    10.3%             8.8%     7.8%


DISCONTINUED OPERATIONS
Income/(loss) from
discontinued opera-
tions                    3      (15)             (24)     (18)

CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING
PRINCIPLE**            (36)       0              (36)       0

NET INCOME          $3,187   $2,827    12.7%  $7,934   $7,479     6.1%
                    ======   ======           ======   ======

EARNINGS/(LOSS)PER SHARE
OF COMMON STOCK:

 ASSUMING DILUTION
  CONTINUING
   OPERATIONS        $2.01    $1.68    19.6%   $4.91    $4.39    11.8%
  DISCONTINUED
   OPERATIONS         0.00    (0.01)           (0.01)   (0.01)
  CUMULATIVE EFFECT OF
   CHANGE IN ACCOUNTING
   PRINCIPLE         (0.02)    0.00            (0.02)    0.00

                    ------   ------           ------   ------
  TOTAL              $1.99    $1.67    19.2%    4.87#   $4.38    11.2%
                    ======   ======           ======   ======
 BASIC
  CONTINUING
   OPERATIONS        $2.04    $1.71    19.3%   $4.99    $4.48    11.4%
  DISCONTINUED
   OPERATIONS         0.00    (0.01)           (0.02)   (0.01)
  CUMULATIVE EFFECT OF
   CHANGE IN ACCOUNTING
   PRINCIPLE         (0.02)    0.00            (0.02)    0.00
                    ------   ------           ------   ------
  TOTAL              $2.02    $1.70    18.8%    4.96#   $4.47    11.0%
                    ======   ======           ======   ======
WEIGHTED-AVERAGE NUMBER OF
COMMON SHARES OUT-
STANDING (M's)
  ASSUMING DILUTION 1,604.8  1,692.1          1,627.6  1,707.2
  BASIC             1,578.5  1,659.0          1,600.6  1,675.0

* Restated 2004 financial results to include the impact of share-based
compensation expense.
** Change in accounting principle related to the adoption of FASB
Interpretation No. 47,'Accounting for Conditional Asset Retirement
Obligations - an interpretation of FASB Statement No. 143.'
# Does not total due to rounding.

nm - not meaningful


               INTERNATIONAL BUSINESS MACHINES CORPORATION
              CONSOLIDATED STATEMENT OF FINANCIAL POSITION


                                         At           At
(Dollars in millions)           December 31, December 31,  Percent
                                       2005         2004*   Change
                                -----------  -----------   -------
ASSETS

 Cash, cash equivalents,
 and marketable securities          $13,686      $10,570     29.5%

 Receivables - net, inventories,
 prepaid expenses                    31,975       36,573    -12.6%

 Plant, rental machines,
 and other property - net            13,756       15,175     -9.4%

 Investments and other assets        46,331       48,685     -4.8%
                                   --------     --------

TOTAL ASSETS                       $105,748     $111,003     -4.7%
                                   ========     ========


LIABILITIES AND STOCKHOLDERS' EQUITY

 Short-term debt                     $7,216       $8,099    -10.9%
 Long-term debt                      15,425       14,828      4.0%
                                   --------     --------
 Total debt                          22,641       22,927     -1.2%

 Accounts payable, taxes,
 and accruals                        27,936       31,687    -11.8%

 Other liabilities                   22,073       24,701    -10.6%
                                   --------     --------
TOTAL LIABILITIES                    72,650       79,315     -8.4%

STOCKHOLDERS' EQUITY                 33,098       31,688      4.4%
                                   --------     --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY               $105,748     $111,003     -4.7%
                                   ========     ========

* Restated 2004 financial position to include the impact of
share-based compensation expense.

                 INTERNATIONAL BUSINESS MACHINES CORPORATION
                               SEGMENT DATA

                                        FOURTH QUARTER 2005
                        ----------------------------------------------
                                                       Pretax
                                                       Income
                                                       (Loss)
                                                         From
(Dollars in millions)   --------- Revenue -------- Continuing   Pretax
                        External Internal    Total Operations   Margin
                        -------- --------  ------- ----------  -------
SEGMENTS

Global Services         $11,989     $647   $12,636    $1,506     11.9%
  % change                 -4.9%   -21.0%     -5.9%     18.5%

Systems and Technology
Group                     6,849      355     7,204     1,229     17.1%
  % change                  6.3%    20.7%      6.9%     16.1%

Software                  4,562      554     5,116     1,934     37.8%
  % change                  0.3%     7.8%      1.0%     18.9%

Global Financing            603      493     1,096       491     44.8%
  % change                 -8.1%    19.7%      2.6%     18.9%

Enterprise Investments      366        1       367       (14)    -3.8%
  % change                 -3.4%   -50.0%     -3.7%     61.1%

Personal Computing
Division                      0        0         0         0      0.0%

TOTAL REPORTABLE
SEGMENTS                 24,369    2,050    26,419     5,146     19.5%
  % change                -11.7%    -1.4%    -11.0%     17.8%

Eliminations / Other         58   (2,050)   (1,992)     (578)

TOTAL IBM CONSOLIDATED  $24,427       $0   $24,427    $4,568     18.7%
  % change                -11.7%             -11.7%     12.8%

nm - not meaningful

                                       FOURTH QUARTER 2004**
                        ----------------------------------------------
                                                       Pretax
                                                       Income
                                                       (Loss)
                                                         From
(Dollars in millions)   --------- Revenue -------- Continuing   Pretax
                        External Internal    Total Operations   Margin
                        -------- --------   ------ ----------  -------
SEGMENTS

Global Services         $12,605     $819   $13,424    $1,271      9.5%

Systems and Technology
Group*                    6,443      294     6,737     1,059     15.7%

Software                  4,549      514     5,063     1,626     32.1%

Global Financing            656      412     1,068       413     38.7%

Enterprise Investments      379        2       381       (36)    -9.4%

Personal Computing
Division                  2,968       38     3,006        36      1.2%

TOTAL REPORTABLE
SEGMENTS                 27,600    2,079    29,679     4,369     14.7%

Eliminations / Other         71   (2,079)   (2,008)     (321)

TOTAL IBM CONSOLIDATED  $27,671       $0   $27,671    $4,048     14.6%

* Systems and Technology Group segment results have been reclassified
to conform with current reporting structure.
** Restated 2004 financial results to include the impact of
share-based compensation expense.


                 INTERNATIONAL BUSINESS MACHINES CORPORATION
                                SEGMENT DATA

                                       TWELVE MONTHS 2005
                        ----------------------------------------------
                                                       Pretax
                                                       Income
                                                       (Loss)
                                                         From
(Dollars in millions)   --------- Revenue -------- Continuing   Pretax
                        External Internal    Total Operations   Margin
                        -------- --------   ------ ----------  -------
SEGMENTS

Global Services         $47,357   $2,891   $50,248    $3,382      6.7%
  % change                  2.5%    -7.7%      1.8%    -15.8%

Systems and Technology
Group                    20,981    1,118    22,099     1,966      8.9%
  % change                  5.0%     2.1%      4.9%     -8.1%

Software                 15,753    1,970    17,723     4,882     27.5%
  % change                  4.4%     9.1%      4.9%     18.0%

Global Financing          2,401    1,506     3,907     1,583     40.5%
  % change                 -7.9%    17.0%      0.3%      8.6%

Enterprise Investments    1,203        8     1,211      (145)   -12.0%
  % change                  1.9%     0.0%      1.9%     27.1%

Personal Computing
Division                  2,876       33     2,909      (165)     nm
  % change                   nm       nm        nm        nm

TOTAL REPORTABLE
SEGMENTS                 90,571    7,526    98,097    11,503     11.7%
  % change                 -5.5%     1.0%     -5.0%     -0.4%

Eliminations / Other        563   (7,526)   (6,963)      723

TOTAL IBM CONSOLIDATED  $91,134       $0   $91,134   $12,226     13.4%
  % change                 -5.4%              -5.4%     14.6%

nm - not meaningful


                                       TWELVE MONTHS 2004**
                        ----------------------------------------------
                                                       Pretax
                                                       Income
                                                       (Loss)
                                                         From
(Dollars in millions)   --------- Revenue -------- Continuing   Pretax
                        External Internal    Total Operations   Margin
                        -------- --------  ------- ----------  -------
SEGMENTS

Global Services         $46,213   $3,131   $49,344    $4,018      8.1%

Systems and Technology
Group*                   19,973    1,095    21,068     2,140     10.2%

Software                 15,094    1,805    16,899     4,138     24.5%

Global Financing          2,607    1,287     3,894     1,458     37.4%

Enterprise Investments    1,180        8     1,188      (199)   -16.8%

Personal Computing
Division                 10,737      129    10,866       (10)    -0.1%

TOTAL REPORTABLE
SEGMENTS                 95,804    7,455   103,259    11,545     11.2%

Eliminations / Other        489   (7,455)   (6,966)     (876)

TOTAL IBM CONSOLIDATED  $96,293       $0   $96,293   $10,669     11.1%

* Systems and Technology Group segment results have been reclassified
to conform with current reporting structure.
** Restated 2004 financial results to include the impact of
share-based compensation expense.


                INTERNATIONAL BUSINESS MACHINES CORPORATION
                   FINANCIAL SUMMARY - SUPPLEMENTAL DATA
               (Dollars in millions except per share amounts)

                   Three Months Ended December 31, 2005

                         As Reported     Charge*      Excl.   Charge
                       4Q'05    Yr/Yr     4Q'05       4Q'05    Yr/Yr
                       -----    -----    ------       -----    -----
Continuing Operations

Revenue              $24,427   -11.7%               $24,427   -11.7%

Gross profit          10,765     0.3%                10,765     0.3%

 Gross profit margin   44.1%                          44.1%

Total expense and
other income           6,197    -7.4%      $267       5,930   -11.3%

 Expense to revenue    25.4%                          24.3%

Income from continuing
operations before
income taxes           4,568    12.8%      (267)      4,835    19.4%

 Pretax margin         18.7%                          19.8%

Provision for
income taxes           1,348               (104)      1,452

 Effective tax rate    29.5%                          30.0%

Income from continuing
operations            $3,220    13.3%     ($163)     $3,383    19.1%

 Net margin            13.2%                          13.9%

EARNINGS PER SHARE
OF COMMON STOCK:

 Assuming dilution     $2.01    19.6%    ($0.10)      $2.11    25.6%

* One-time, pretax curtailment charge of $267 million relating to
changes to the U.S. defined benefit pension plans, effective January
1, 2008.

    CONTACT: IBM
             Edward Barbini, 914-499-6565
             [e-mail]