3rd Quarter Results

IBM
                  

                IBM Reports 2005 Third-Quarter Results

    --  Total diluted earnings per common share of $.94, including $.32 per
        diluted share for a 'Homeland' repatriation tax charge; without the
        charge, IBM diluted earnings per share were $1.26, up 22 percent from
        third-quarter 2004, excluding non-recurring items.

    --  Total revenue of $21.5 billion, down 8 percent versus the third quarter
        of 2004, but up 4 percent without the impact of the divested PC
        business.

IBM today announced third- quarter 2005 diluted earnings per common share of
$.94 from continuing operations, including 32 cents per share for a one-time
charge of $525 million for taxes in connection with the planned repatriation of
foreign earnings. Diluted earnings per share for the third-quarter 2005 were
$1.26, excluding this one-time charge. Diluted earnings in the third quarter of
2004 were $.92 per share, including 11 cents per share for a one-time, pre-tax
charge of $320 million for a partial settlement of legal claims against IBM's
pension plan. Excluding these non-recurring items, diluted earnings per share of
$1.26 in the third-quarter 2005 increased 23 cents, or 22 percent over the
diluted earnings per share of $1.03 in the year-ago quarter.

Third-quarter income from continuing operations was $1.5 billion, including the
one-time charge for taxes associated with the planned repatriation of foreign
earnings under the provision of the American Jobs Creation Act of 2004
('Homeland'). This compares with $1.6 billion in the third quarter of 2004,
which includes the one-time, pre-tax charge for the legal settlement related to
the pension plan. Without the one-time charges, income from continuing
operations of $2.0 billion in the third quarter of 2005 increased $292 million,
or 17 percent versus the comparable period last year.

Total revenues for the third quarter of 2005 of $21.5 billion decreased 8
percent (8 percent, adjusting for currency) from the third quarter of 2004,
which includes revenue from the divested PC business. Excluding the PC revenue,
revenues increased 4 percent (4 percent, adjusting for currency) compared with
the third quarter of 2004.

Samuel J. Palmisano, IBM chairman and chief executive officer, said: 'IBM had a
good quarter. It showed the strength of our business model across hardware,
software and services, and we continued to see the benefit of the strategic
transitions that we've implemented in past quarters. Our restructuring actions
and our streamlined management in Europe are starting to yield results. We saw
excellent earnings-per- share improvement this quarter, and many of the
businesses that are central to our strategy -- including middleware, midrange
servers, and Business Performance Transformation Services, especially in our
Engineering and Technology Services -- performed well, especially in emerging
markets around the world. We are encouraged by the client reaction to the new
zSeries mainframe, and IBM is well positioned in our microelectronics business
as the game console industry moves to its next generation of products. Our
clients are leveraging IBM's unique ability to apply innovative, high-value
skills and solutions to transform their businesses and industries.'

Third-quarter revenue growth was 4 percent (4 percent, adjusting for currency)
excluding the divested PC business. In the Americas, third-quarter revenues were
$9.6 billion, down 5 percent as reported (up 5 percent, adjusting for currency
and PCs) from the 2004 period. Revenues from Europe/Middle East/Africa were $6.9
billion, down 6 percent (up 5 percent, adjusting for currency and PCs).
Asia-Pacific revenues decreased 17 percent (2 percent, adjusting for currency
and PCs) to $4.3 billion. OEM revenues were $814 million, up 12 percent compared
with the 2004 third quarter.

Without the PC business, revenues increased in three of IBM's five key industry
sales units in the third-quarter 2005 led by good growth in the Public and
Distribution sectors, as well as in sales to Small and Medium Businesses. IBM's
revenues for Business Performance Transformation Services grew over 35 percent
in the quarter (and are up over 30 percent year to date).

Revenues from Global Services, including maintenance, increased 3 percent (3
percent, adjusting for currency) to $11.7 billion in the third quarter. IBM
signed services contracts totaling $11.0 billion and ended the quarter with an
estimated services backlog, including Strategic Outsourcing, Business Consulting
Services, Integrated Technology Services and Maintenance, of $113 billion, an
increase of $3 billion from a year ago.

Hardware revenues decreased 32 percent (33 percent, adjusting for currency) to
$5.1 billion in the third-quarter 2005 compared to $7.5 billion in the year-ago
period, which includes revenue from the divested PC business. Hardware revenues
without the PC business increased 7 percent (6 percent, adjusting for currency).

Hardware revenues for the Systems and Technology Group totaled $5.0 billion for
the quarter, up 7 percent. Revenue growth from S&TG eServer products was driven
by iSeries midrange servers, which increased 25 percent; pSeries UNIX servers,
an increase of 15 percent; and xSeries servers, which increased 11 percent.
Revenues from the zSeries mainframe product decreased 4 percent compared with
the year-ago period. Total delivery of zSeries computing power, which is
measured in MIPS (millions of instructions per second), increased 18 percent. In
addition to eServers, revenues from Storage Systems and Microelectronics
increased 11 percent and 14 percent, respectively.

Revenues from Software were $3.8 billion, an increase of 5 percent (5 percent,
adjusting for currency) compared with the third quarter of 2004. Revenues from
IBM's middleware brands, which include WebSphere, DB2, Tivoli, Lotus and
Rational products, were $3.0 billion, up 6 percent versus the third quarter of
2004. Operating systems revenues decreased 2 percent to $588 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 14
percent. Revenues for Information Management software increased 10 percent with
revenue growth of 4 percent in the DB2 database family of software offerings,
which enables clients to leverage information on demand. Revenues from Tivoli
software, infrastructure software that enables customers to centrally manage
networks and storage, increased 8 percent, and revenues for Lotus software,
which allows collaborating and messaging by customers in real- time
communication and knowledge management, increased 12 percent. Revenues from
Rational software, integrated tools to improve the processes of software
development, increased 12 percent compared with the year-ago quarter.

As a result, IBM expects to gain market share for the third quarter in the
collaborative software, systems management and security software, Web services
and data management categories.

Global Financing revenues declined 6 percent (7 percent, adjusting for currency)
in the third quarter to $600 million. Revenues from the Enterprise
Investments/Other area, which includes industry-specific IT solutions such as
product life-cycle management software, increased 9 percent (9 percent,
adjusting for currency) to $302 million versus the prior-year third quarter.

The company's total gross profit margin was 40.6 percent in the 2005 third
quarter compared with 36.5 percent in the 2004 period, which includes the
divested PC business. Excluding the PC business, the third- quarter 2004 gross
profit margin was 40.0 percent versus the 40.6 percent in the current-year
quarter.

Total expense and other income decreased 8 percent to $5.8 billion, or 3 percent
without the prior-year charge of $320 million for the legal settlement. SG&A
expense of $4.6 billion decreased 10 percent year over year. Excluding the
prior-year legal settlement charge, SG&A expense decreased 4 percent principally
as a result of the sale of the PC business. RD&E expense was $1.45 billion
compared with $1.47 billion in the year-ago period. Intellectual property and
custom development income decreased to $213 million compared with $259 million a
year ago. Other (income) and expense was $99 million of income in the third
quarter of 2005, versus $55 million of income in the same period last year.

IBM's effective tax rate in the third-quarter 2005 was 48.0 percent, compared
with 28.8 percent in the third quarter of 2004. Substantially all of the tax
rate increase is due to the incremental tax charge of $525 million in connection
with the planned repatriation of foreign earnings in the current-year quarter
and the tax impact associated with the legal settlement in the prior-year
quarter. Excluding these one-time items, the third-quarter 2005 tax rate was
30.0 percent compared with 30.1 percent in the year-ago quarter.

Share repurchases totaled approximately $1.7 billion in the third quarter. The
weighted-average number of diluted common shares outstanding in the
third-quarter 2005 was 1.62 billion compared with 1.70 billion shares in the
same period of 2004. As of September 30, 2005, there were 1.58 billion basic
common shares outstanding.

IBM ended the third quarter of 2005 with $8.3 billion of cash on hand. The
balance sheet remains strong, and the company is well positioned to take
advantage of opportunities.

Debt, including Global Financing, totaled $21.4 billion, compared with $22.9
billion at year-end 2004. From a management segment view, the non-global
financing debt-to-capitalization ratio was 3.1 percent at the end of September
30, 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 6.8 to 1.

Year-To-Date 2005 Results

Income from continuing operations for the nine months ended September 30, 2005
was $4.8 billion compared with $4.7 billion for the same period of 2004,
including the following non-recurring items in the respective periods:


   --  Year-to-date 2005:
       -  charge of $525 million for taxes in connection with the
          planned repatriation of foreign earnings,
       -  incremental pre-tax 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.

   --  Year-to-date 2004:
       -  pre-tax charge of $320 million for the partial settlement of
          legal claims against IBM's pension plan.


Diluted earnings per share from continuing operations for nine months of 2005
were $2.92 compared with $2.72 per diluted share for the 2004 period. Excluding
these non-recurring items from both periods, diluted earnings per share were
$3.22 compared with diluted earnings per share of $2.83 for the 2004 period, an
increase of 14 percent. Revenues from continuing operations for the nine-month
period, which includes PC revenues of $2.9 billion for the first four months of
2005 only, totaled $66.7 billion, down 3 percent (5 percent, adjusting for
currency) compared with $68.6 billion for the nine months of 2004. Without the
revenues from the divested PC business, revenues totaled $63.8 billion, up 5
percent (3 percent, adjusting for currency) compared with the nine- month period
of 2004.

For total operations, net income for the first nine months of 2005, including a
loss from discontinued operations of $27 million, was $4.75 billion, or $2.90
per diluted share, compared with the nine months of 2004 net income of $4.65
billion, or $2.72 per diluted share, which included a loss from discontinued
operations of $3 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:

   --  IBM results:
       -  without non-recurring 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 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 Form 8-K.

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/3q05. Presentation charts will be available on the Web site
prior to the Webcast.

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

 Global Services   $11,687  $11,312     3.3% $35,368  $33,608     5.2%
  Gross margin        26.0%    24.3%            25.5%    24.1%

 Hardware            5,121    7,501   -31.7%  17,426   21,659   -19.5%
  Gross margin        37.1%    28.3%            32.4%    28.0%

 Software            3,819    3,621     5.5%  11,191   10,545     6.1%
  Gross margin        87.4%    87.2%            86.8%    86.5%

 Global Financing      600      638    -5.8%   1,802    1,951    -7.6%
  Gross margin        54.5%    60.1%            53.7%    60.0%

 Enterprise Investments/
 Other                 302      277     9.2%     920      859     7.2%
  Gross margin        42.8%    44.2%            46.6%    43.4%


TOTAL REVENUE       21,529   23,349    -7.8%  66,707   68,622    -2.8%


GROSS PROFIT         8,738    8,533     2.4%  25,767   24,831     3.8%
  Gross margin        40.6%    36.5%            38.6%    36.2%


EXPENSE AND OTHER INCOME

 S,G&A               4,632    5,162   -10.3%  16,062   14,640     9.7%
  % of revenue        21.5%    22.1%            24.1%    21.3%

 R,D&E               1,447    1,468    -1.4%   4,383    4,360     0.5%
  % of revenue         6.7%     6.3%             6.6%     6.4%

 Intellectual
  property
  and custom
  development
  income              (213)    (259)  -17.5%    (720)    (871)  -17.3%
 Other (income)
   and expense         (99)     (55)   80.7%  (1,788)     (19)     nm
 Interest expense       56       32    75.7%     172      100    72.7%

TOTAL EXPENSE AND
OTHER INCOME         5,823    6,348    -8.3%  18,109   18,210    -0.6%
  % of revenue        27.0%    27.2%            27.1%    26.5%

INCOME FROM CONTINUING
OPERATIONS BEFORE
INCOME TAXES         2,915    2,185    33.4%   7,658    6,621    15.7%
  Pre-tax margin      13.5%     9.4%            11.5%     9.6%

Provision for
income taxes         1,399      631   121.7%   2,884    1,966    46.7%
  Effective tax
  rate                48.0%    28.8%            37.7%    29.7%

INCOME FROM CONTINUING
OPERATIONS          $1,516   $1,554    -2.5%  $4,774   $4,655     2.6%
  Net margin           7.0%     6.7%             7.2%     6.8%

DISCONTINUED OPERATIONS
Loss from discontinued
operations               0        0               27        3

NET INCOME          $1,516   $1,554    -2.5%  $4,747   $4,652     2.0%
                    ======   ======           ======   ======


EARNINGS/(LOSS)PER SHARE
OF COMMON STOCK:

 ASSUMING DILUTION
  CONTINUING
   OPERATIONS        $0.94    $0.92     2.2%   $2.92    $2.72     7.4%
  DISCONTINUED
   OPERATIONS        (0.00)   (0.00)           (0.02)   (0.00)
                    ------   ------           ------   ------
  TOTAL              $0.94    $0.92     2.2%   $2.90    $2.72     6.6%
                    ======   ======           ======   ======
 BASIC
  CONTINUING
   OPERATIONS        $0.95    $0.93     2.2%   $2.97    $2.77     7.2%
  DISCONTINUED
   OPERATIONS        (0.00)   (0.00)           (0.02)   (0.00)
                    ------   ------           ------   ------
  TOTAL              $0.95    $0.93     2.2%   $2.95    $2.77     6.5%
                    ======   ======           ======   ======

WEIGHTED-AVERAGE NUMBER
OF COMMON SHARES
OUTSTANDING (M's)
  ASSUMING
   DILUTION        1,617.2  1,698.1          1,635.2  1,712.3
  BASIC            1,591.3  1,669.6          1,607.9  1,680.3

nm - not meaningful

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


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

                                         At           At
(Dollars in millions)          September 30, December 31,  Percent
                                       2005         2004*   Change
                               ------------  -----------   -------
ASSETS

 Cash, cash equivalents,
 and marketable securities           $8,254      $10,570    -21.9%

 Receivables - net, inventories,
 prepaid expenses                    30,889       36,573    -15.5%

 Plant, rental machines,
 and other property - net            14,042       15,175     -7.5%

 Investments and other assets        47,824       48,685     -1.8%
                                   --------     --------

TOTAL ASSETS                       $101,009     $111,003     -9.0%
                                   ========     ========


LIABILITIES AND STOCKHOLDERS' EQUITY

 Short-term debt                     $4,050       $8,099    -50.0%
 Long-term debt                      17,372       14,828     17.2%
                                   --------     --------
 Total debt                          21,422       22,927     -6.6%

 Accounts payable, taxes,
 and accruals                        25,914       31,687    -18.2%

 Other liabilities                   23,438       24,701     -5.1%
                                   --------     --------
TOTAL LIABILITIES                    70,774       79,315    -10.8%

STOCKHOLDERS' EQUITY                 30,235       31,688     -4.6%
                                   --------     --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY               $101,009     $111,003     -9.0%
                                   ========     ========

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



                 INTERNATIONAL BUSINESS MACHINES CORPORATION
                               SEGMENT DATA
                               (Unaudited)

                                     THIRD QUARTER 2005
                        ----------------------------------------------
                                                      Pre-tax
                                                       Income
                                                       (Loss)
                                                         From
(Dollars in millions)   --------- Revenue -------- Continuing  Pre-tax
                        External Internal    Total Operations   Margin
                        -------- --------  ------- ----------  -------
SEGMENTS

Global Services         $11,687     $724   $12,411    $1,153      9.3%
  % change                  3.3%    -8.5%      2.5%     15.9%

Systems and Technology
Group                     4,988      268     5,256       385      7.3%
  % change                  6.9%    -2.9%      6.4%     -2.3%

Software                  3,819      484     4,303     1,173     27.3%
  % change                  5.5%    11.8%      6.1%     29.3%

Global Financing            599      289       888       363     40.9%
  % change                 -5.5%    -6.5%     -5.8%      6.5%

Enterprise Investments      284        2       286       (39)   -13.6%
  % change                 10.5%     0.0%     10.4%     32.8%

Personal Computing
Division                      0        0         0         0      0.0%

TOTAL REPORTABLE
 SEGMENTS                21,377    1,767    23,144     3,035     13.1%
  % change                 -7.9%    -4.6%     -7.6%     17.6%

Eliminations / Other        152   (1,767)   (1,615)     (120)

TOTAL IBM CONSOLIDATED  $21,529       $0   $21,529    $2,915     13.5%
  % change                 -7.8%              -7.8%     33.4%


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

Global Services         $11,312     $791   $12,103      $995      8.2%

Systems and Technology
Group*                    4,665      276     4,941       394      8.0%

Software                  3,621      433     4,054       907     22.4%

Global Financing            634      309       943       341     36.2%

Enterprise Investments      257        2       259       (58)   -22.4%

Personal Computing
Division                  2,713       41     2,754         2      0.1%

TOTAL REPORTABLE
 SEGMENTS                23,202    1,852    25,054     2,581     10.3%

Eliminations / Other        147   (1,852)   (1,705)     (396)

TOTAL IBM CONSOLIDATED  $23,349       $0   $23,349    $2,185      9.4%

* 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
                               (Unaudited)

                                       NINE MONTHS 2005
                        ----------------------------------------------
                                                      Pre-tax
                                                       Income
                                                       (Loss)
                                                         From
(Dollars in millions)   --------- Revenue -------- Continuing  Pre-tax
                        External Internal    Total Operations   Margin
                        -------- --------  ------- ----------  -------
SEGMENTS

Global Services         $35,368   $2,244   $37,612    $1,876      5.0%
  % change                  5.2%    -2.9%      4.7%    -31.7%

Systems and Technology
Group                    14,132      763    14,895       737      4.9%
  % change                  4.4%    -4.7%      3.9%    -31.8%

Software                 11,191    1,416    12,607     2,948     23.4%
  % change                  6.1%     9.7%      6.5%     17.4%

Global Financing          1,798    1,013     2,811     1,092     38.8%
  % change                 -7.8%    15.8%     -0.5%      4.5%

Enterprise Investments      837        7       844      (131)   -15.5%
  % change                  4.5%    16.7%      4.6%     19.6%

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

TOTAL REPORTABLE
 SEGMENTS                66,202    5,476    71,678     6,357      8.9%
  % change                 -2.9%     1.9%     -2.6%    -11.4%

Eliminations / Other        505   (5,476)   (4,971)    1,301

TOTAL IBM CONSOLIDATED  $66,707       $0   $66,707    $7,658     11.5%
  % change                 -2.8%              -2.8%     15.7%

nm - not meaningful

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

Global Services         $33,608   $2,312   $35,920    $2,747      7.6%

Systems and Technology
Group*                   13,530      801    14,331     1,081      7.5%

Software                 10,545    1,291    11,836     2,512     21.2%

Global Financing          1,951      875     2,826     1,045     37.0%

Enterprise Investments      801        6       807      (163)   -20.2%

Personal Computing
Division                  7,769       91     7,860       (46)    -0.6%

TOTAL REPORTABLE
 SEGMENTS                68,204    5,376    73,580     7,176      9.8%

Eliminations / Other        418   (5,376)   (4,958)     (555)

TOTAL IBM CONSOLIDATED  $68,622       $0   $68,622    $6,621      9.6%

* 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.

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