3rd Quarter Results

IBM
                  

                IBM Reports 2004 Third-Quarter Results

    --  Company Posts Diluted EPS As Reported of $1.06

    --  EPS of $1.17 Before One-Time $320 Million Charge to Settle Pension
        Claims

IBM today announced third-quarter 2004 diluted earnings per common share of
$1.06 from continuing operations as reported, compared with diluted earnings of
$1.02 per share in the same period of 2003, an increase of 4 percent. In
September, the company agreed to a one-time, pre-tax charge of $320 million (or
11 cents per diluted share) for the partial settlement of legal claims against
IBM's pension plan. Without the one-time charge, IBM's earnings per diluted
common share would have been $1.17, an increase of 15 percent.

Third-quarter income from continuing operations was $1.80 billion, an increase
of 1 percent compared with $1.79 billion a year ago. Without the one-time
charge, IBM's third-quarter income from continuing operations would have been
$2.00 billion, an increase of 12 percent. Revenues from continuing operations
for the third quarter were $23.4 billion, up 9 percent compared with the third
quarter of 2003 revenues of $21.5 billion (and up 1 percent sequentially from
$23.2 billion in the second quarter of this year).

Samuel J. Palmisano, IBM chairman and chief executive officer, said: 'In what is
normally a challenging quarter for the technology industry, IBM delivered one of
our strongest third quarters in revenue and earnings growth in recent years. IBM
has been gaining momentum throughout the year, and the strength of our
integrated business model gives us confidence as we look toward 2005.

'We continue to see robust growth in key initiatives. Business Performance
Transformation Services revenue grew more than 45 percent year-to-date. We saw
more than 30 percent combined growth in the emerging markets of Brazil, China,
India and Russia. And we're seeing more and more clients move toward becoming on
demand businesses, which is driving demand across our portfolio.'

Third-quarter revenue growth of 9 percent (5 percent, adjusting for currency)
was driven by growth across all geographies, as reported. In the Americas,
third-quarter revenues from continuing operations were $10.1 billion, up 8
percent (7 percent, adjusting for currency) from the 2003 period. Revenues from
Europe/Middle East/Africa were $7.3 billion, an increase of 8 percent
(essentially flat, adjusting for currency). Asia-Pacific revenues grew 11
percent (6 percent, adjusting for currency) to $5.3 billion. OEM revenues
increased 13 percent to $726 million compared with the third quarter of 2003.

Revenues grew at a solid pace in all of IBM's five industry sectors in the third
quarter with particularly strong growth from the Communications sector and
Public sector, as well as good growth in sales to Small and Medium Businesses.

Revenues from Global Services, including maintenance, increased 10 percent (5
percent, adjusting for currency) to $11.4 billion in the third quarter. Global
Services revenues, excluding maintenance, increased 11 percent (6 percent,
adjusting for currency). IBM signed services contracts totaling nearly $10
billion and ended the quarter with an estimated services backlog, including
Strategic Outsourcing, Business Consulting Services, Integrated Technology
Services and Maintenance, of $110 billion.

Hardware revenues from continuing operations increased 12 percent (9 percent,
adjusting for currency) to $7.5 billion in the third quarter versus the
third-quarter 2003. In the current quarter, revenues from the Systems and
Technology Group totaled $4.1 billion, up 9 percent due to eServer revenue
increases for xSeries Intel-based servers, which had particularly strong
results, and zSeries servers. The total delivery of zSeries computing power as
measured in MIPS (millions of instructions per second) increased 17 percent in
the quarter compared with the third quarter of 2003. Revenues for the eServer
pSeries UNIX servers increased as well, while revenues for the iSeries midrange
servers decreased significantly, in part, due to transition to new POWER5
architecture. Storage Systems revenues increased due to good demand for external
midrange disk and tape products, and revenues from OEM Technology increased.
Personal Systems Group revenues increased 17 percent to $3.3 billion, led by
strong growth in mobile personal computers.

Revenues from Software were $3.6 billion, an increase of 5 percent (1 percent,
adjusting for currency) compared with the third quarter of 2003. Revenues from
IBM's middleware brands, which include WebSphere, DB2, Rational, Tivoli and
Lotus products, were $2.9 billion, up 6 percent versus the third quarter of
2003. Operating systems revenues decreased 2 percent to $600 million compared
with the third quarter of 2003.

Revenues for WebSphere software, which facilitates customers' ability to manage
a wide variety of business processes using open standards to interconnect
applications, data and operating systems, increased 14 percent. Revenues for
Data Management increased 11 percent including revenues for DB2 database
software, which increased 15 percent. Revenues from Tivoli software
(infrastructure software that enables customers to centrally manage networks and
storage) increased 19 percent, and revenues for Lotus software, which enables
customers to communicate, collaborate and learn effectively, decreased 6
percent. Revenues from Rational (comprehensive software development tools)
increased 6 percent compared with the third quarter of 2003.

Global Financing revenues declined 11 percent (14 percent, adjusting for
currency) in the third quarter to $638 million. Revenues from the Enterprise
Investments/Other area, which includes industry-specific IT solutions such as
product life-cycle management software, increased 4 percent (2 percent,
adjusting for currency) to $277 million compared with the third quarter of 2003.

The company's total gross profit margin from continuing operations was 36.9
percent in the 2004 third quarter, compared with 36.3 percent in the third
quarter of 2003.

In the third quarter of 2004, total expense and other income from continuing
operations of $6.1 billion, including the one-time $320 million charge to settle
certain pension claims, increased 16 percent over the year-earlier period, of
which 6 points is associated with the charge. The company's selling, general and
administrative expense including the charge increased 16 percent to $5.0
billion. Research, development and engineering expense increased 9 percent to
$1.4 billion. Intellectual property and custom development income declined to
$259 million compared with $406 million a year ago. Other (income) and expense
was $55 million of net income in the third quarter of 2004 versus $26 million of
net expense in the same period last year.

IBM's effective tax rate from continuing operations in the third- quarter 2004,
including the effect of the one-time charge relating to pension claims, was 28.9
percent. Before the charge, the rate would have been 30.0 percent, the same as
the third quarter of 2003.

IBM ended the quarter with $9.7 billion of cash on hand and low debt levels for
the non-financing business. The balance sheet remains strong, and the company is
well positioned to take advantage of opportunities.

Share repurchases totaled approximately $1.3 billion in the third quarter. The
weighted-average number of diluted common shares outstanding in the quarter was
1.70 billion compared with 1.76 billion shares in the same period of 2003. As of
September 30, 2004, there were 1.66 billion basic shares outstanding.

Debt, including Global Financing, totaled $22.0 billion, compared with $23.6
billion at year-end 2003. From a management segment view, the non-global
financing debt-to-capitalization ratio was 1.0 percent as of September 30, 2004,
and Global Financing debt declined $1.6 billion from year-end 2003 to a total of
$21.7 billion, resulting in a debt-to- equity ratio of 6.8 to 1.

Year-To-Date 2004 Results

Income from continuing operations for the nine months ended September 30, 2004,
including the one-time $320 million pre-tax charge to settle certain pension
claims, was $5.4 billion compared with $4.9 billion for the same period of 2003,
an increase of 10 percent. Diluted earnings per common share from continuing
operations was $3.14 compared with $2.78 per diluted share for the 2003 period,
an increase of 13 percent. Revenues from continuing operations for the nine
months ended September 30, 2004, totaled $68.8 billion, up 9 percent (4 percent,
adjusting for currency) compared with $63.2 billion for the nine months of 2003.

For total operations, net income for the nine months of 2004, including a loss
from discontinued operations of $3 million, was $5.4 billion, or $3.14 per
diluted common share, compared with the nine months of 2003 net income of $4.9
billion, or $2.77 per diluted share, which included a loss from discontinued
operations of $23 million.

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:

    --  effect of one-time charge to settle certain pension claims on certain
        financial results

    --  adjusting for currency

The rationale for management's use of non-GAAP measures is included as part of
the supplementary materials presented within the third-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 filing of a Form
8-K with the SEC.

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/3q04.

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
                     2004     2003  Change     2004     2003  Change
                  -------  ------- -------  -------  ------- -------
REVENUE

 Global Services  $11,392  $10,383     9.7% $33,818  $31,187     8.4%
  Gross margin      25.0%    25.1%            24.9%    25.3%

 Hardware           7,501    6,697    12.0%  21,659   19,118    13.3%
  Gross margin      28.4%    25.2%            28.1%    26.2%

 Software           3,621    3,461     4.6%  10,545   10,061     4.8%
  Gross margin      87.3%    85.8%            86.6%    85.6%

 Global Financing     638      715   -10.9%   1,951    2,092    -6.8%
  Gross margin      60.1%    57.7%            60.0%    57.1%

 Enterprise Investments/
 Other                277      266     4.3%     859      760    13.1%
  Gross margin      44.3%    53.4%            43.4%    44.1%


TOTAL REVENUE      23,429   21,522     8.9%  68,832   63,218     8.9%


GROSS PROFIT        8,646    7,812    10.7%  25,180   23,043     9.3%
  Gross margin      36.9%    36.3%            36.6%    36.4%


EXPENSE AND OTHER INCOME

 S,G&A              4,978    4,303    15.7%  14,094   12,978     8.6%
  % of revenue      21.2%    20.0%            20.5%    20.5%

 R,D&E              1,419    1,307     8.6%   4,212    3,728    13.0%
  % of revenue       6.1%     6.1%             6.1%     5.9%

 Intellectual property
  and custom development
  income             (259)    (406)  -36.1%    (871)    (887)   -1.7%
 Other (income)
   and expense        (55)      26      nm      (19)     114      nm
 Interest expense      32       33    -3.3%     100      114   -12.8%

TOTAL EXPENSE AND
OTHER INCOME        6,115    5,263    16.2%  17,516   16,047     9.2%
  % of revenue      26.1%    24.5%            25.4%    25.4%

INCOME FROM CONTINUING
OPERATIONS BEFORE
INCOME TAXES        2,531    2,549    -0.7%   7,664    6,996     9.5%
  Pre-tax margin    10.8%    11.8%            11.1%    11.1%

Provision for
income taxes          731      764    -4.4%   2,271    2,099     8.2%
  Effective tax
  rate              28.9%    30.0%            29.6%    30.0%

INCOME FROM CONTINUING
OPERATIONS         $1,800   $1,785     0.9%  $5,393   $4,897    10.1%
  Net margin         7.7%     8.3%             7.8%     7.7%

DISCONTINUED OPERATIONS
Loss from discontinued
operations              0        0                3       23

NET INCOME         $1,800   $1,785     0.9%  $5,390   $4,874    10.6%
                   ======   ======           ======   ======

EARNINGS/(LOSS)PER SHARE
OF COMMON STOCK:

 ASSUMING DILUTION
  CONTINUING
   OPERATIONS       $1.06    $1.02     3.9%   $3.14    $2.78    12.9%
  DISCONTINUED
   OPERATIONS       (0.00)   (0.00)           (0.00)   (0.01)
                   ------   ------           ------   ------
  TOTAL             $1.06    $1.02     3.9%   $3.14    $2.77    13.4%
                   ======   ======           ======   ======
 BASIC
  CONTINUING
   OPERATIONS       $1.08    $1.04     3.8%   $3.21    $2.84    13.0%
  DISCONTINUED
   OPERATIONS       (0.00)   (0.00)           (0.00)   (0.01)
                   ------   ------           ------   ------
  TOTAL             $1.08    $1.04     3.8%   $3.21    $2.82*   13.8%
                   ======   ======           ======   ======

WEIGHTED-AVERAGE NUMBER
OF COMMON SHARES
OUTSTANDING (M's)
  ASSUMING
   DILUTION       1,700.4  1,756.4          1,714.6  1,759.5
  BASIC           1,669.6  1,722.6          1,680.3  1,725.9

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
                                       2004         2003    Change
                                   --------  -----------   -------
ASSETS

 Cash, cash equivalents,
 and marketable securities           $9,671       $7,647     26.5%

 Receivables - net, inventories,
 prepaid expenses                    32,759       37,351    -12.3%

 Plant, rental machines,
 and other property - net            14,608       14,689     -0.6%

 Investments and other assets        43,638       44,770     -2.5%
                                   --------     --------

TOTAL ASSETS                       $100,676     $104,457     -3.6%
                                   ========     ========


LIABILITIES AND STOCKHOLDERS' EQUITY

 Short-term debt                     $8,427       $6,646     26.8%
 Long-term debt                      13,524       16,986    -20.4%
                                   --------     --------
 Total debt                          21,951       23,632     -7.1%

 Accounts payable, taxes,
 and accruals                        26,740       31,254    -14.4%

 Other liabilities                   22,283       21,707      2.7%
                                   --------     --------
TOTAL LIABILITIES                    70,974       76,593     -7.3%

STOCKHOLDERS' EQUITY                 29,702       27,864      6.6%
                                   --------     --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY               $100,676     $104,457     -3.6%
                                   ========     ========



                 INTERNATIONAL BUSINESS MACHINES CORPORATION
                               SEGMENT DATA
                               (Unaudited)

                                     THIRD QUARTER 2004
                         ---------------------------------------------
                                                       Pre-tax
                                                        Income
                                                        (Loss)
                                                          From
(Dollars in millions)    --------- Revenue -------- Continuing Pre-tax
                         External Internal    Total Operations  Margin
                         -------- --------  ------- ---------- -------
SEGMENTS

Global Services          $11,392     $791   $12,183    $1,157     9.5%
  % change                  9.7%    14.5%     10.0%     -4.4%

Systems and Technology
Group                      4,117      265     4,382       417     9.5%
  % change                  8.9%    24.4%      9.7%     32.4%

Personal Systems Group     3,261       52     3,313        54     1.6%
  % change                 16.6%    20.9%     16.7%       nm

Software                   3,621      433     4,054     1,011    24.9%
  % change                  4.6%    17.0%      5.8%     17.8%

Global Financing             634      309       943       351    37.2%
  % change                -11.1%    16.2%     -3.7%     20.2%

Enterprise Investments       257        2       259       (55)  -21.2%
  % change                  0.0%     0.0%      0.0%     -1.9%

TOTAL REPORTABLE SEGMENTS 23,282    1,852    25,134     2,935    11.7%
  % change                  8.8%    16.8%      9.4%     14.2%

Eliminations / Other         147   (1,852)   (1,705)     (404)

TOTAL IBM CONSOLIDATED   $23,429       $0   $23,429    $2,531    10.8%
  % change                  8.9%               8.9%     -0.7%

nm - not meaningful

                                     THIRD QUARTER 2003
                         ---------------------------------------------
                                                       Pre-tax
                                                        Income
                                                        (Loss)
                                                          From
(Dollars in millions)    --------- Revenue -------- Continuing Pre-tax
                         External Internal    Total Operations  Margin
                         -------- --------  ------- ---------- -------
SEGMENTS

Global Services          $10,383     $691   $11,074    $1,210    10.9%

Systems and Technology
Group *                    3,781      213     3,994       315     7.9%

Personal Systems Group     2,796       43     2,839       (50)   -1.8%

Software                   3,461      370     3,831       858    22.4%

Global Financing             713      266       979       292    29.8%

Enterprise Investments       257        2       259       (54)  -20.8%

TOTAL REPORTABLE SEGMENTS 21,391    1,585    22,976     2,571    11.2%

Eliminations / Other         131   (1,585)   (1,454)      (22)

TOTAL IBM CONSOLIDATED   $21,522       $0   $21,522    $2,549    11.8%

* 2003 Technology Group and Systems Group segment results have been
  reclassified to conform with current reporting structure.



                 INTERNATIONAL BUSINESS MACHINES CORPORATION
                               SEGMENT DATA
                               (Unaudited)

                                       NINE MONTHS 2004
                         ---------------------------------------------
                                                       Pre-tax
                                                        Income
                                                        (Loss)
                                                          From
(Dollars in millions)    --------- Revenue -------- Continuing Pre-tax
                         External Internal    Total Operations  Margin
                         -------- --------  ------- ---------- -------
SEGMENTS

Global Services          $33,818   $2,312   $36,130    $3,237     9.0%
  % change                  8.4%    10.9%      8.6%     -3.7%

Systems and Technology
Group                     12,047      777    12,824     1,190     9.3%
  % change                 10.8%    31.7%     11.9%     62.1%

Personal Systems Group     9,252      115     9,367        70     0.7%
  % change                 17.0%    -6.5%     16.6%       nm

Software                  10,545    1,291    11,836     2,823    23.9%
  % change                  4.8%    12.6%      5.6%     20.3%

Global Financing           1,951      875     2,826     1,073    38.0%
  % change                 -6.9%     0.8%     -4.6%     24.6%

Enterprise Investments       801        6       807      (153)  -19.0%
  % change                 10.5%    50.0%     10.7%     26.4%

TOTAL REPORTABLE SEGMENTS 68,414    5,376    73,790     8,240    11.2%
  % change                  8.8%    11.6%      9.0%     18.3%

Eliminations / Other         418   (5,376)   (4,958)     (576)

TOTAL IBM CONSOLIDATED   $68,832       $0   $68,832    $7,664    11.1%
  % change                  8.9%               8.9%      9.5%

nm - not meaningful

                                       NINE MONTHS 2003
                         ---------------------------------------------
                                                       Pre-tax
                                                        Income
                                                        (Loss)
                                                          From
(Dollars in millions)    --------- Revenue -------- Continuing Pre-tax
                         External Internal    Total Operations  Margin
                         -------- --------  ------- ---------- -------
SEGMENTS

Global Services          $31,187   $2,085   $33,272    $3,361    10.1%

Systems and Technology
Group *                   10,875      590    11,465       734     6.4%

Personal Systems Group     7,909      123     8,032      (127)   -1.6%

Software                  10,061    1,147    11,208     2,347    20.9%

Global Financing           2,095      868     2,963       861    29.1%

Enterprise Investments       725        4       729      (208)  -28.5%

TOTAL REPORTABLE SEGMENTS 62,852    4,817    67,669     6,968    10.3%

Eliminations / Other         366   (4,817)   (4,451)       28

TOTAL IBM CONSOLIDATED   $63,218       $0   $63,218    $6,996    11.1%

* 2003 Technology Group and Systems Group segment results have been
  reclassified to conform with current reporting structure.



                 INTERNATIONAL BUSINESS MACHINES CORPORATION
                   FINANCIAL SUMMARY - SUPPLEMENTAL DATA

                   Three Months Ended September 30, 2004

          (Unaudited; Dollars in millions except per share amounts)



                        As Reported     Charge*        Excl. Charge
                       3Q'04    Yr/Yr     3Q'04       3Q'04    Yr/Yr
                       -----    -----    ------       -----    -----
Continuing Operations

Revenue              $23,429     8.9%               $23,429     8.9%

Gross profit           8,646    10.7%                 8,646    10.7%

 Gross profit margin   36.9%                          36.9%

Total expense and
other income           6,115    16.2%      $320       5,795    10.1%

 Expense to revenue    26.1%                          24.7%

Income from continuing
operations before
income taxes           2,531   (0.7)%      (320)      2,851    11.8%

 Pre-tax margin        10.8%                          12.2%

Provision for
income taxes             731               (125)        856

 Effective tax rate    28.9%                          30.0%

Income from continuing
Operations            $1,800     0.9%     ($195)     $1,995    11.8%

 Net margin             7.7%                           8.5%

EARNINGS PER SHARE
OF COMMON STOCK:

 Assuming dilution     $1.06     3.9%    ($0.11)      $1.17    14.7%


* One-time, pre-tax charge of $320 million for the partial settlement
of legal claims against IBM's pension plan.


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