3rd Quarter Results

3rd Quarter Results 

    ARMONK, N.Y.--(BUSINESS WIRE)--October 16, 2002--

                IBM Reports 2002 Third-Quarter Results

IBM today announced third- quarter 2002 results from continuing
operations of $.99 diluted earnings per common share compared with
$.97 in the third quarter of 2001. Third-quarter income from
continuing operations was $1.7 billion compared with $1.7 billion in
the 2001 third quarter. Revenues were $19.8 billion, flat (down 2
percent at constant currency) compared with the third quarter of 2001.

Samuel J. Palmisano, IBM president and chief executive officer, said:
'We are encouraged by the solid results the IBM team produced this
quarter. In this difficult economic environment, we delivered a good
revenue performance and grew EPS. In addition, we gained share and
momentum in key businesses.

'Global Services, Storage and IBM eServers, particularly our pSeries
UNIX server and Intel-based xSeries line, performed well, despite the
economy. We believe both WebSphere and DB2 gained share in a difficult
software market. Microelectronics increased revenue for the first time
in many quarters and cut its losses substantially.

'Our performance was the result of disciplined execution, backed with
IBM's strong strategic position in areas becoming increasingly
important in the information technology industry. Customers continue
to value and invest in integrated solutions, deep industry expertise,
comprehensive services capability, and open enterprise hardware and
middleware.

'We recognized early the fundamental changes now taking place in
computing and did the hard work to prepare ourselves, including the
acquisitions of PricewaterhouseCoopers Consulting and several software
companies. As a result, we are well positioned for the future and
believe we will continue to distance ourselves from the competition.'

From continuing operations in the third quarter, the Americas revenues
were $9.0 billion, a decrease of 2 percent (flat at constant currency)
from the 2001 period. Revenues from Europe/Middle East/Africa were
$5.7 billion, up 1 percent (down 8 percent at constant currency).
Asia-Pacific revenues grew 3 percent (2 percent at constant currency)
to $4.3 billion. OEM revenues increased 1 percent (1 percent at
constant currency) to $867 million compared with the third quarter of
2001.

Revenues from Global Services, including maintenance, grew 2 percent
(flat at constant currency) in the third quarter to $8.9 billion.
Global Services revenues, excluding maintenance, increased 2 percent
(flat at constant currency). IBM signed $9 billion in services
contracts in the quarter. On October 1, IBM completed the acquisition
of PwC Consulting and announced the new global business unit, Business
Consulting Services.

Hardware revenues from continuing operations decreased 1 percent (2
percent at constant currency) to $6.8 billion from the 2001 third
quarter. Overall, sequential year-to-year revenue performance for IBM
eServers and storage improved significantly in the quarter. Revenues
from pSeries UNIX servers and xSeries Intel-based servers grew in the
quarter, with xSeries having strong back-to-back quarterly results.
Meanwhile, the iSeries had a difficult quarter. With a single-digit
percentage decline in the quarter, revenues from IBM eServer zSeries
mainframe were much improved year to year compared with the first-half
2002. Total deliveries of zSeries computing power as measured in MIPS
(millions of instructions per second) increased 7 percent.

Also in the third quarter, personal computer revenues declined year
over year but at a slower pace. Revenues from Microelectronics
increased from a year ago after a period of weakness in demand for
semiconductor products.

Software revenues decreased 3 percent (5 percent in constant currency)
to $3.1 billion compared to the 2001 third quarter. Middleware
products, which include WebSphere and DB2, declined 5 percent at
constant currency in the third quarter. WebSphere, IBM's family of
e-business middleware products, grew 27 percent from a year ago. IBM's
leading database management software, DB2, grew 2 percent. Revenues
from Lotus and Tivoli declined year over year, as did operating
systems revenues. In the third quarter, the company made several
acquisitions to complement the company's software infrastructure
portfolio, improve time to market and gain market share.

Global Financing revenues decreased 3 percent (4 percent at constant
currency) in the third quarter to $795 million. Revenues from the
Enterprise Investments/Other area, which includes industry-specific IT
solutions, increased 5 percent (1 percent at constant currency)
compared to the third quarter of 2001 to $257 million.

The company's overall gross profit margin from continuing operations
was 36.9 percent in the third quarter, compared to 37.6 percent in the
year-ago quarter.

Third-quarter expense and other income from continuing operations was
$4.9 billion, 2 percent lower than the year-earlier period. Selling,
general and administrative and research and development expenses
improved 2 percent and 3 percent, respectively. Lower intellectual
property and custom development income was offset partially by a
benefit from other income and expense, and lower interest expense.
IBM's improved expense performance benefited additionally from the
company's continuing e-business transformation, productivity
enhancements and focus on discretionary spending.

IBM's effective tax rate from continuing operations in the third
quarter was 29.5 percent compared with 28.9 percent in the third
quarter of 2001.

IBM spent approximately $600 million on share repurchases in the third
quarter. The average number of basic common shares outstanding in the
quarter was 1.69 billion compared with 1.73 billion shares in the same
period of 2001. There were 1.69 billion basic common shares
outstanding at September 30, 2002.

Cash on the balance sheet was $5.2 billion at September 30, 2002.

Debt, including global financing, totaled $25.7 billion, a decrease of
$1.4 billion from year-end 2001. The core debt-to-capitalization ratio
was 8 percent at the end of the third quarter, and global financing
debt declined $1.4 billion from year-end 2001 to a total of $24.1
billion, resulting in a debt-to-equity ratio of 6.8 to 1.

As previously announced in June, the company reached an agreement with
Hitachi, Ltd. to sell its hard disk drive business, and, therefore,
the results from continuing operations exclude the HDD business. The
HDD business is presented separately as discontinued operations.

For the third-quarter 2002, IBM reported a loss from discontinued
operations of $381 million, or $.22 per diluted common share,
including $.06 per diluted share, or $140 million pre-tax loss related
to the HDD sale, compared with a loss from discontinued operations of
$118 million, or $.07 per diluted share in the 2001 third quarter.

For total operations, net income for the third quarter was $1.3
billion, or $.76 per diluted common share, compared with $1.6 billion
in net income, or $.90 per diluted share in the third quarter of 2001.
Total revenues of $20.3 billion, which includes $498 million of
revenues from the HDD unit, declined 1 percent from the third quarter
of 2001.

Year-To-Date 2002 Results

For the nine months ended September 30, 2002, income from continuing
operations was $3.4 billion, or $1.97 per diluted common share,
including $.64 per diluted share, or $1.6 billion in incremental pre-
tax charges, associated with the realignment of the Microelectronics
Division and productivity actions. In the prior-year period, income
from continuing operations was $5.6 billion, or $3.14 per diluted
share. Revenues from continuing operations totaled $57.5 billion, a
decline of 6 percent (5 percent at constant currency) compared with
the first nine months of 2001.

For the first nine months of 2002, the loss from discontinued
operations was $862 million, or $.50 per diluted common share,
including $.23 per diluted share, or $573 million on a pre-tax basis
for asset write-offs and the loss related to the HDD sale, compared
with a loss from discontinued operations of $191 million, or $.11 per
diluted share in the prior-year period.

For total operations, net income for the first nine months of 2002 was
$2.6 billion, or $1.47 per diluted common share, including $.87 per
diluted share, or $2.2 billion in incremental pre-tax charges,
associated with the realignment of the Microelectronics Division, the
agreement to sell the HDD business, and productivity actions. In the
prior-year period, net income was $5.4 billion, or $3.03 per diluted
share. Total revenues of $58.9 billion, which includes $1.4 billion of
revenues from the HDD unit, declined 7 percent from a year ago.

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.

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/3q02.

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
                     2002     2001  Change     2002     2001  Change
                  -------  ------- -------  -------  ------- -------
REVENUE

 Global Services   $8,895   $8,682     2.4% $25,785  $25,895    -0.4%
  Gross margin       26.5%    28.4%            26.3%    27.2%

 Hardware           6,764    6,834    -1.0%  19,320   22,564   -14.4%
  Gross margin       26.7%    26.9%            25.4%    30.5%

 Software           3,110    3,201    -2.9%   9,273    9,155     1.3%
  Gross margin       83.9%    81.5%            83.3%    81.4%

 Global Financing     795      822    -3.2%   2,403    2,499    -3.8%
  Gross margin       56.2%    51.0%            56.5%    48.8%

 Enterprise Investments/
 Other                257      244     5.5%     721      813   -11.4%
  Gross margin       40.2%    40.8%            47.2%    44.6%


TOTAL REVENUE      19,821   19,783     0.2%  57,502   60,926    -5.6%


GROSS PROFIT        7,323    7,434    -1.4%  21,093   22,956    -8.1%
  Gross margin       36.9%    37.6%            36.7%    37.7%


EXPENSE AND OTHER INCOME

 S,G&A              3,987    4,085    -2.4%  13,298   12,350     7.7%
  % of revenue       20.1%    20.6%            23.1%    20.3%

 R,D&E              1,213    1,252    -3.1%   3,546    3,745    -5.3%
  % of revenue        6.1%     6.3%             6.2%     6.1%

 Intellectual property
  and custom development
  income             (232)    (393)  -41.1%    (771)  (1,012)  -23.8%
 Other (income)
   and expense        (83)      29     nm       111     (164)    nm
 Interest expense      34       53   -36.3%      97      181   -46.5%

TOTAL EXPENSE AND
OTHER INCOME        4,919    5,026    -2.1%  16,281   15,100     7.8%
  % of revenue       24.8%    25.4%            28.3%    24.8%

INCOME FROM CONTINUING
OPERATIONS BEFORE
INCOME TAXES        2,404    2,408    -0.1%   4,812    7,856   -38.7%
  Pre-tax margin     12.1%    12.2%             8.4%    12.9%

Provision for
income taxes          710      695     2.1%   1,389    2,275   -38.9%
  Effective tax
  rate               29.5%    28.9%            28.9%    29.0%

INCOME FROM CONTINUING
OPERATIONS         $1,694   $1,713    -1.0%  $3,423   $5,581   -38.7%
  Net margin          8.5%     8.7%             6.0%     9.2%

DISCONTINUED OPERATIONS
Loss from discontinued
operations           (381)    (118)    nm      (862)    (191)    nm

NET INCOME         $1,313   $1,595   -17.7%  $2,561   $5,390   -52.5%

Preferred stock
dividends             --       --               --        10

NET INCOME
APPLICABLE TO COMMON
SHAREHOLDERS       $1,313   $1,595   -17.7%  $2,561   $5,380   -52.4%
                   ======   ======           ======   ======

EARNINGS/(LOSS)PER SHARE
OF COMMON STOCK

 ASSUMING DILUTION
  CONTINUING
   OPERATIONS       $0.99    $0.97     2.1%   $1.97    $3.14   -37.3%
  DISCONTINUED
   OPERATIONS       (0.22)   (0.07)    nm     (0.50)   (0.11)    nm
                    ------   ------           ------   ------
  TOTAL             $0.76*   $0.90   -15.6%   $1.47    $3.03   -51.5%

 BASIC
  CONTINUING
   OPERATIONS       $1.00    $0.99     1.0%   $2.01    $3.21   -37.4%
  DISCONTINUED
   OPERATIONS       (0.23)   (0.07)    nm     (0.51)   (0.11)    nm
                    ------   ------           ------   ------
  TOTAL             $0.78*   $0.92   -15.2%   $1.50    $3.10   -51.6%
                    ======   ======           ======   ======

AVERAGE NUMBER OF
COMMON SHARES OUT-
STANDING (M's)
  ASSUMING
   DILUTION       1,711.7  1,767.9          1,731.7  1,775.6
  BASIC           1,690.5  1,731.8          1,704.6  1,737.0

nm - not meaningful

* Does not total due to rounding.

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


                                         At           At
(Dollars in millions)          September 30, December 31,  Percent
                                       2002         2001    Change
                               ------------- -----------   -------
ASSETS

 Cash, cash equivalents,
 and marketable securities           $5,222       $6,393    -18.3%

 Receivables - net, inventories,
 prepaid expenses                    32,094       36,068    -11.0%

 Plant, rental machines,
 and other property - net            14,451       16,504    -12.4%

 Investments and other assets        30,218       29,348      3.0%

 Assets of discontinued operations    1,971         --

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

TOTAL ASSETS                        $83,956      $88,313     -4.9%
                                   ========     ========


LIABILITIES AND STOCKHOLDERS' EQUITY

 Short-term debt                     $7,971      $11,188    -28.8%
 Long-term debt                      17,773       15,963     11.3%
                                   --------     --------
 Total debt                          25,744       27,151     -5.2%

 Accounts payable, taxes,
 and accruals                        22,268       23,931     -6.9%

 Other liabilities                   13,667       13,617      0.4%

 Liabilities of discontinued
 Operations                             185         --
                                   --------     --------
TOTAL LIABILITIES                    61,864       64,699     -4.4%

STOCKHOLDERS' EQUITY                 22,092       23,614     -6.4%
                                   --------     --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY                $83,956      $88,313     -4.9%
                                   ========     ========


            INTERNATIONAL BUSINESS MACHINES CORPORATION
                          SEGMENT DATA
                           (Unaudited)


                                      THIRD QUARTER 2002
                     -------------------------------------------------
                                                     Pre-tax
                                                      Income
                                                      (Loss)
(Dollars in millions)                                   From
                     ---------- Revenue --------  Continuing   Pre-tax
                      External Internal    Total  Operations    Margin
                     --------- -------- --------  ----------   -------
SEGMENTS

Global Services        $8,895     $708   $9,603      $1,259      13.1%
          % change        2.4%     3.5%     2.5%       -8.3%

Enterprise Systems      3,028      200    3,228         381      11.8%
          % change       -0.9%    14.3%    -0.1%       96.4%

Personal and Printing
Systems                 2,736       33    2,769         (20)     -0.7%
          % change       -3.3%    83.3%    -2.7%       71.4%

Technology              1,039      214    1,253         (17)     -1.4%
          % change        3.3%   -48.6%   -11.9%       78.2%

Software                3,110      302    3,412         799      23.4%
          % change       -2.9%    28.0%    -0.7%       13.5%

Global Financing          789      238    1,027         218      21.2%
          % change       -3.1%    16.7%     0.9%      -30.6%

Enterprise Investments    240        1      241         (70)    -29.0%
          % change       -0.8%     0.0%    -0.8%        7.9%

TOTAL SEGMENTS         19,837    1,696   21,533       2,550      11.8%
          % change        0.0%    -2.2%    -0.1%        8.0%

Eliminations / Other      (16)  (1,696)  (1,712)       (146)

TOTAL IBM             $19,821       $0  $19,821      $2,404      12.1%
          % change        0.2%              0.2%       -0.1%


                                      THIRD QUARTER 2001
                     -------------------------------------------------
                                                     Pre-tax
                                                      Income
                                                      (Loss)
(Dollars in millions)                                   From
                     ---------- Revenue --------  Continuing   Pre-tax
                      External Internal    Total  Operations    Margin
                     --------- -------- --------  ----------   -------
SEGMENTS

Global Services        $8,682     $684   $9,366      $1,373      14.7%

Enterprise Systems      3,056      175    3,231         194       6.0%

Personal and Printing
Systems                 2,829       18    2,847         (70)     -2.5%

Technology *            1,006      416    1,422         (78)     -5.5%

Software                3,201      236    3,437         704      20.5%

Global Financing          814      204    1,018         314      30.8%

Enterprise Investments    242        1      243         (76)    -31.3%

TOTAL SEGMENTS         19,830    1,734   21,564       2,361      10.9%

Eliminations / Other *    (47)  (1,734)  (1,781)         47

TOTAL IBM             $19,783       $0  $19,783      $2,408      12.2%

* Reclassified to conform with 2002 presentation.



            INTERNATIONAL BUSINESS MACHINES CORPORATION
                          SEGMENT DATA
                           (Unaudited)

                                      NINE MONTHS 2002
                     -------------------------------------------------
                                                     Pre-tax
                                                      Income
                                                      (Loss)
(Dollars in millions)                                   From
                     ---------- Revenue --------  Continuing   Pre-tax
                      External Internal    Total  Operations    Margin
                     --------- -------- --------  ----------   -------
SEGMENTS

Global Services       $25,785   $2,089  $27,874      $3,038      10.9%
          % change       -0.4%     8.6%     0.2%      -18.9%

Enterprise Systems      8,446      526    8,972         740       8.2%
          % change      -12.6%    -3.8%   -12.2%      -33.4%

Personal and Printing
Systems                 8,047       79    8,126          10       0.1%
          % change      -11.3%    58.0%   -10.9%      107.4%

Technology              2,972      649    3,621      (1,099)    -30.4%
          % change      -24.9%   -43.2%   -29.0%        nm

Software                9,273      844   10,117       2,272      22.5%
          % change        1.3%    23.0%     2.8%       13.5%

Global Financing        2,375      617    2,992         677      22.6%
          % change       -4.5%    -4.6%    -4.5%      -22.9%

Enterprise Investments    694        3      697        (204)    -29.3%
          % change      -11.3%    50.0%   -11.1%       16.0%

TOTAL SEGMENTS         57,592    4,807   62,399       5,434       8.7%
          % change       -5.6%    -3.8%    -5.5%      -27.7%

Eliminations / Other      (90)  (4,807)  (4,897)       (622)

TOTAL IBM             $57,502       $0  $57,502      $4,812       8.4%
          % change       -5.6%             -5.6%      -38.7%

nm - not meaningful

                                      NINE MONTHS 2001
                     -------------------------------------------------
                                                     Pre-tax
                                                      Income
                                                      (Loss)
(Dollars in millions)                                   From
                     ---------- Revenue --------  Continuing   Pre-tax
                      External Internal    Total  Operations    Margin
                     --------- -------- --------  ----------   -------
SEGMENTS

Global Services       $25,895   $1,923  $27,818      $3,748      13.5%

Enterprise Systems      9,669      547   10,216       1,111      10.9%

Personal and Printing
Systems                 9,072       50    9,122        (136)     -1.5%

Technology *            3,960    1,143    5,103         161       3.2%

Software                9,155      686    9,841       2,001      20.3%

Global Financing        2,486      647    3,133         878      28.0%

Enterprise Investments    782        2      784        (243)    -31.0%

TOTAL SEGMENTS         61,019    4,998   66,017       7,520      11.4%

Eliminations / Other *    (93)  (4,998)  (5,091)        336

TOTAL IBM             $60,926       $0  $60,926      $7,856      12.9%

* Reclassified to conform with 2002 presentation.

*T

   Short Name: Intnl Bus. Mach
   Category Code: QRT
   Sequence Number: 00000965
   Time of Receipt (offset from UTC): 20021016T210712+0100