IBM Reports 2008 Third-Quarter Results

--  Diluted earnings of $2.05 per share, up 22 percent;

    --  Net income of $2.8 billion, up 20 percent;

    --  Total revenues of $25.3 billion, up 5 percent;

    --  Global Technology Services revenues up 8 percent; pre-tax income up 16
        percent;

    --  Global Business Services revenues up 7 percent; pre-tax income up 39
        percent;

    --  Total services pre-tax margin at six-year high;

    --  Services signings of $12.7 billion, down 4 percent; short-term services
        signings up 13 percent;

    --  Software revenues up 12 percent; pre-tax income up 19 percent;

    --  System z mainframe revenues up 25 percent;

    --  E/ME/A revenues up 10 percent; Asia Pacific up 6 percent; Americas up 3
        percent;

    --  Revenues from growth markets up 13 percent.
                  IBM
                  

IBM (NYSE: IBM) today announced third-quarter 2008 diluted earnings of $2.05 per
share from continuing operations compared with diluted earnings of $1.68 per
share in the third quarter of 2007, an increase of 22 percent. Third-quarter
income from continuing operations was $2.8 billion compared with $2.4 billion in
the third quarter of 2007, an increase of 20 percent. Total revenues for the
third quarter of 2008 of $25.3 billion increased 5 percent (2 percent, adjusting
for currency) from the third quarter of 2007.

'Our results demonstrate that the combination of a steady base of recurring
revenue and profits, a range of products and services that deliver value to
clients worldwide, and a strong and flexible financial foundation give IBM a
competitive edge in good times and tough times,' said Samuel J. Palmisano, IBM
chairman, president and chief executive officer.

'These strengths along with our strategy to manage for productivity in major
markets and to invest for growth in emerging countries have enabled IBM to
thrive despite an economic environment that no one could have predicted. We
remain confident in our full-year 2008 outlook.'

From a geographic perspective, the Americas' third-quarter revenues were $10.5
billion, an increase of 3 percent as reported (2 percent, adjusting for
currency) from the 2007 period. Revenues from Europe/Middle East/Africa were
$8.9 billion, up 10 percent (4 percent, adjusting for currency). Asia-Pacific
revenues increased 6 percent (1 percent, adjusting for currency) to $5.2
billion. OEM revenues were $673 million, down 24 percent compared with the 2007
third quarter. Revenues from the company's growth markets organization increased
13 percent (10 percent, adjusting for currency) and represented 19 percent of
geographic revenues.

Total Global Services revenues grew 8 percent (4 percent, adjusting for
currency). Global Technology Services segment revenues increased 8 percent (5
percent, adjusting for currency) to $9.9 billion, with strong growth in
Integrated Technology Services. Global Business Services segment revenues
increased 7 percent (3 percent, adjusting for currency) to $4.9 billion. IBM
signed services contracts totaling $12.7 billion, at actual rates, a decrease of
4 percent ($11.1 billion, adjusting for currency, down 5 percent). Short-term
signings increased 13 percent, at actual rates, to $6.1 billion (up 8 percent to
$5.2 billion, adjusting for currency). The company ended the third quarter with
an estimated services backlog, including Strategic Outsourcing, Business
Transformation Outsourcing, Integrated Technology Services, Global Business
Services and Maintenance, of $114 billion, adjusting for currency.

Revenues from the Systems and Technology segment totaled $4.4 billion for the
quarter, down 10 percent (11 percent, adjusting for currency). Systems revenues
decreased 7 percent (8 percent, adjusting for currency). Revenues from System z
mainframe server products increased 25 percent compared with the year-ago
period, with double-digit growth in all geographies. Total delivery of System z
computing power, which is measured in MIPS (millions of instructions per
second), increased 49 percent. Revenues from the converged System p server
products increased 7 percent compared with the 2007 period. Revenues from the
System x servers decreased 18 percent, and revenues from the System i servers
decreased 82 percent. Revenues from System Storage decreased 3 percent, and
revenues from Retail Store Solutions decreased 24 percent. Revenues from
Microelectronics OEM decreased 27 percent.

Revenues from the Software segment were $5.2 billion, an increase of 12 percent
(8 percent, adjusting for currency) compared with the third quarter of 2007.
Revenues from IBM's total middleware products, which primarily include
WebSphere, Information Management, Tivoli, Lotus and Rational products, were
$4.1 billion, up 12 percent versus the third quarter of 2007. Operating systems
revenues of $594 million increased 5 percent 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 26 percent. Revenues from Tivoli
software, infrastructure software that enables clients to centrally manage
networks including security and storage capability, increased 2 percent, and
revenues for Lotus software, which allows collaborating and messaging by clients
in real-time communication and knowledge management, increased 10 percent year
over year. Revenues from Rational software, integrated tools to improve the
processes of software development, increased 23 percent compared with the
year-ago quarter.

Global Financing segment revenues increased 2 percent (down 1 percent, adjusting
for currency) in the third quarter to $633 million. Financing revenues increased
6 percent.

The company's total gross profit margin was 43.3 percent in the 2008 third
quarter compared with 41.3 percent in the 2007 period, led by strong performance
in both services segments and software.

Total expense and other income increased 6 percent to $7.1 billion compared with
the prior-year period. Adjusting for currency and estimated acquisitions
performance, total expense and other income decreased 4 percent year over year.
SG&A expense increased 6 percent to $5.6 billion. RD&E expense increased 4
percent compared with the year-ago period. Intellectual property and custom
development income decreased to $267 million compared with $270 million a year
ago. Other (income) and expense was income of $51 million, down from $95
million. Interest expense decreased to $159 million compared with $193 million.

IBM's effective tax rate in the third-quarter 2008 was 27.5 percent compared
with 28.0 percent in the third quarter of 2007.

Shares repurchased in the third quarter were approximately $2.7 billion on a
cash-paid basis. The weighted-average number of diluted common shares
outstanding in the third-quarter 2008 was 1.38 billion compared with 1.41
billion shares in the same period of 2007. As of September 30, 2008, there were
1.34 billion basic common shares outstanding.

Debt, including Global Financing, totaled $34.4 billion, compared with $35.3
billion at year-end 2007. From a management segment view, Global Financing debt
totaled $24.5 billion at September 30, 2008 and at year-end 2007, resulting in a
debt-to-equity ratio of 7.1 to 1. Non-global financing debt totaled $9.9
billion, a decrease of $0.8 billion since year-end 2007, resulting in a
debt-to-capitalization ratio of 29.1 percent from 30.0 percent at year-end 2007.
The cash balance was $9.8 billion at the end of the third quarter.

Year-To-Date 2008 Results

Income from continuing operations for the nine months ended September 30, 2008
was $7.9 billion compared with $6.5 billion in the year-ago period, an increase
of 22 percent. Diluted earnings per share from continuing operations were $5.68
compared with $4.42 per diluted share for the 2007 period, an increase of 29
percent. Revenues from continuing operations for the nine-month period totaled
$76.6 billion, an increase of 10 percent (4 percent, adjusting for currency)
compared with $69.9 billion for the nine months of 2007.

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, including the company's failure
to continue to develop and market new and innovative products and services and
to keep pace with technological change; competitive pressures; failure to obtain
or protect intellectual property rights; breaches of the company's data security
measures; changes in the economic environment and corporate IT spending budgets;
fluctuations in revenues and purchases, and volatility of stock prices; the
company's ability to attract and retain key personnel and its reliance on
critical skills; adverse affects from tax matters; environmental matters;
currency fluctuations and customer financing risks; customer credit risk on
receivables; risks from investing in growth opportunities; the company's failure
to maintain the adequacy of its internal controls; the company's use of certain
estimates and assumptions; dependence on certain suppliers; changes in the
financial or business condition of the company's distributors or resellers; the
company's ability to successfully manage acquisitions and alliances; failure to
have sufficient insurance; legal, political, health and economic conditions;
risk factors related to IBM securities; and other risks, uncertainties and
factors discussed in the company's Form 10-Q, Form 10-K and in the company's
other filings with the U.S. Securities and Exchange Commission (SEC) or in
materials incorporated therein by reference. The company assumes no obligation
to update or revise any forward-looking statements.

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 -

    --  adjusting for currency (i.e., at constant 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 are being included in Attachment II ('Non-GAAP
Supplementary Materials') to the Form 8-K that includes this press release and
is being submitted today to 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/3q08. Presentation charts will be available on the Web site
prior to the Webcast.

Financial Results Attached (certain amounts may not add due to use of rounded
numbers; percentages presented are calculated from the underlying whole-dollar
amounts).

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             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
                 2008      2007    Change    2008      2007    Change
               --------- --------- ------- --------- --------- -------
REVENUE

 Global
  Technology
  Services     $  9,864  $  9,093     8.5% $ 29,640  $ 26,106    13.5%
  Gross margin     32.7%     30.6%             31.9%     29.9%

 Global
  Business
  Services        4,900     4,586     6.8%   14,918    13,108    13.8%
  Gross margin     27.4%     22.9%             26.1%     23.7%

 Systems and
  Technology      4,431     4,898    -9.5%   13,862    14,520    -4.5%
  Gross margin     36.2%     38.5%             37.3%     36.9%

 Software         5,249     4,694    11.8%   15,670    13,723    14.2%
  Gross margin     84.7%     84.2%             84.4%     84.3%

 Global
  Financing         633       623     1.7%    1,900     1,834     3.6%
  Gross margin     49.1%     44.6%             51.8%     47.2%

 Other              224       225    -0.4%      633       630     0.6%
  Gross margin     15.7%      2.7%              0.6%     11.2%

TOTAL REVENUE    25,302    24,119     4.9%   76,623    69,920     9.6%


GROSS PROFIT     10,959     9,956    10.1%   32,725    28,760    13.8%
  Gross margin     43.3%     41.3%             42.7%     41.1%


EXPENSE AND
 OTHER INCOME

 S,G&A            5,644     5,324     6.0%   17,553    16,044     9.4%
  % of revenue     22.3%     22.1%             22.9%     22.9%

 R,D&E            1,579     1,524     3.6%    4,809     4,568     5.3%
  % of revenue      6.2%      6.3%              6.3%      6.5%

 Intellectual
  property and
  custom
  development
  income           (267)     (270)   -1.3%     (825)     (721)   14.4%
 Other
  (income) and
  expense           (51)      (95)  -46.0%     (201)     (528)  -61.9%
 Interest
  expense           159       193   -17.7%      482       396    21.6%

TOTAL EXPENSE
 AND OTHER
 INCOME           7,064     6,676     5.8%   21,818    19,759    10.4%
  % of revenue     27.9%     27.7%             28.5%     28.3%

 INCOME FROM
  CONTINUING
  OPERATIONS
  BEFORE
  INCOME TAXES    3,895     3,280    18.7%   10,907     9,001    21.2%
  Pre-tax
   margin          15.4%     13.6%             14.2%     12.9%

Provision for
 income taxes     1,071       918    16.6%    2,999     2,534    18.4%
  Effective
   tax rate        27.5%     28.0%             27.5%     28.2%

 INCOME FROM
  CONTINUING
  OPERATIONS   $  2,824  $  2,362    19.6% $  7,907  $  6,467    22.3%
  Net margin       11.2%      9.8%             10.3%      9.2%

 DISCONTINUED
  OPERATIONS
 Loss from
  discontinued
  operations        ---        (1)              ---        (1)

NET INCOME     $  2,824  $  2,361    19.6% $  7,907  $  6,466    22.3%
               ========= ========= ======= ========= ========= =======


EARNINGS /
 (LOSS) PER
 SHARE OF
 COMMON STOCK:

 ASSUMING
  DILUTION
  CONTINUING
   OPERATIONS  $   2.05  $   1.68    22.0% $   5.68  $   4.42    28.5%
  DISCONTINUED
   OPERATIONS       ---     (0.00)              ---     (0.00)
               --------- ---------         --------- ---------
  TOTAL        $   2.05  $   1.68    22.0% $   5.68  $   4.42    28.5%
               ========= =========         ========= =========
 BASIC
  CONTINUING
   OPERATIONS  $   2.09  $   1.72    21.5% $   5.79  $   4.50    28.7%
  DISCONTINUED
   OPERATIONS       ---     (0.00)              ---     (0.00)
               --------- ---------         --------- ---------
  TOTAL        $   2.09  $   1.72    21.5% $   5.79  $   4.50    28.7%
               ========= =========         ========= =========

WEIGHTED-
 AVERAGE
 NUMBER OF
 COMMON SHARES
 OUTSTANDING
 (M's)
  ASSUMING
   DILUTION     1,379.1   1,405.8           1,393.1   1,463.1
  BASIC         1,350.7   1,371.4           1,366.7   1,436.0
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             INTERNATIONAL BUSINESS MACHINES CORPORATION
             CONSOLIDATED STATEMENT OF FINANCIAL POSITION
                             (Unaudited)

                                               At           At
(Dollars in millions)               September 30, December 31, Percent
                                             2008         2007  Change
                                   -------------- ------------ -------
ASSETS

 Cash, cash equivalents,
 and marketable securities               $  9,755     $ 16,146  -39.6%

 Receivables - net, inventories,
 prepaid expenses                          34,432       37,031   -7.0%

 Plant, rental machines,
 and other property - net                  14,659       15,081   -2.8%

 Investments and other assets              57,064       52,172    9.4%
                                   -------------- ------------

TOTAL ASSETS                             $115,910     $120,431   -3.8%
                                   ============== ============


LIABILITIES AND STOCKHOLDERS'
EQUITY

 Short-term debt                         $ 16,181     $ 12,235   32.2%
 Long-term debt                            18,232       23,039  -20.9%
                                   -------------- ------------
 Total debt                                34,413       35,274   -2.4%

 Accounts payable, taxes,
 and accruals                              28,571       32,076  -10.9%

 Other liabilities                         25,407       24,612    3.2%
                                   -------------- ------------
TOTAL LIABILITIES                          88,391       91,962   -3.9%

STOCKHOLDERS' EQUITY                       27,519       28,470   -3.3%
                                   -------------- ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY                     $115,910     $120,431   -3.8%
                                   ============== ============
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             INTERNATIONAL BUSINESS MACHINES CORPORATION
                             SEGMENT DATA
                             (Unaudited)

                                      THIRD-QUARTER 2008
                         ---------------------------------------------

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

Global Technology
 Services                $ 9,864  $   384  $10,248  $   1,189    11.6%
  Y-T-Y Change               8.5%    -5.8%     7.9%      15.6%

Global Business Services   4,900      259    5,160        724    14.0%
  Y-T-Y Change               6.8%    -6.0%     6.1%      38.9%

Systems and Technology     4,431      223    4,654        283     6.1%
  Y-T-Y Change              -9.5%    -5.6%    -9.4%     -21.7%

Software                   5,249      655    5,904      1,527    25.9%
  Y-T-Y Change              11.8%    14.8%    12.1%      19.0%

Global Financing             633      456    1,090        349    32.0%
  Y-T-Y Change               1.7%    31.3%    12.3%       3.2%

TOTAL REPORTABLE
 SEGMENTS                 25,077    1,978   27,055      4,072    15.1%
  Y-T-Y Change               5.0%     7.6%     5.1%      15.3%

Eliminations / Other         224   (1,978)  (1,753)      (177)

TOTAL IBM CONSOLIDATED   $25,302  $     0  $25,302  $   3,895    15.4%
  Y-T-Y Change               4.9%              4.9%      18.7%


                                      THIRD-QUARTER 2007
                         ---------------------------------------------
                                                     Pre-tax
                                                      Income
                                                      (Loss)
                                                       From
(Dollars in millions)    -------- Revenue  -------- Continuing Pre-tax
                         External Internal  Total   Operations Margin
                         -------- -------- -------- ---------- -------
SEGMENTS

Global Technology
 Services                $ 9,093  $   408  $ 9,501  $   1,028    10.8%

Global Business Services   4,586      276    4,862        521    10.7%

Systems and Technology     4,898      236    5,134        361     7.0%

Software                   4,694      571    5,265      1,283    24.4%

Global Financing             623      348      970        339    34.9%

TOTAL REPORTABLE
 SEGMENTS                 23,894    1,838   25,732      3,532    13.7%

Eliminations / Other         225   (1,838)  (1,613)      (252)

TOTAL IBM CONSOLIDATED   $24,119  $     0  $24,119  $   3,280    13.6%
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             INTERNATIONAL BUSINESS MACHINES CORPORATION
                             SEGMENT DATA
                             (Unaudited)

                                       NINE-MONTHS 2008
                         ---------------------------------------------
                                                     Pre-tax
                                                      Income
                                                      (Loss)
                                                       From
(Dollars in millions)    -------- Revenue  -------- Continuing Pre-tax
                         External Internal  Total   Operations Margin
                         -------- -------- -------- ---------- -------
SEGMENTS

Global Technology
 Services                $29,640  $ 1,162  $30,803    $ 3,171    10.3%
  Y-T-Y Change              13.5%    -6.4%    12.6%      27.0%

Global Business Services  14,918      776   15,694      1,940    12.4%
  Y-T-Y Change              13.8%   -14.3%    12.0%      31.4%

Systems and Technology    13,862      633   14,495        829     5.7%
  Y-T-Y Change              -4.5%   -16.6%    -5.1%       5.0%

Software                  15,670    2,041   17,711      4,286    24.2%
  Y-T-Y Change              14.2%    19.8%    14.8%      20.1%

Global Financing           1,900    1,367    3,267      1,165    35.7%
  Y-T-Y Change               3.6%    31.8%    13.8%      11.6%

TOTAL REPORTABLE
 SEGMENTS                 75,990    5,980   81,970     11,391    13.9%
  Y-T-Y Change               9.7%     5.9%     9.4%      21.5%

Eliminations / Other         633   (5,980)  (5,347)      (484)

TOTAL IBM CONSOLIDATED   $76,623  $     0  $76,623    $10,907    14.2%
  Y-T-Y Change               9.6%              9.6%      21.2%


                                       NINE-MONTHS 2007
                         ---------------------------------------------
                                                     Pre-tax
                                                      Income
                                                      (Loss)
                                                       From
(Dollars in millions)    -------- Revenue  -------- Continuing Pre-tax
                         External Internal  Total   Operations Margin
                         -------- -------- -------- ---------- -------
SEGMENTS

Global Technology
 Services                $26,106  $ 1,243  $27,348    $ 2,497     9.1%

Global Business Services  13,108      906   14,014      1,477    10.5%

Systems and Technology    14,520      758   15,279        789     5.2%

Software                  13,723    1,704   15,427      3,569    23.1%

Global Financing           1,834    1,037    2,871      1,045    36.4%

TOTAL REPORTABLE
 SEGMENTS                 69,291    5,648   74,939      9,376    12.5%

Eliminations / Other         630   (5,648)  (5,018)      (375)

TOTAL IBM CONSOLIDATED   $69,920  $     0  $69,920    $ 9,001    12.9%
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IBM
John Bukovinsky, 732/618-3531
[e-mail]
or
Michael Fay, 914/499-6435
[e-mail]
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