Interim Results

IBM
                  

                IBM Reports 2004 Second-Quarter Results

IBM today announced second-quarter 2004 diluted earnings per common share of
$1.16 from continuing operations compared with diluted earnings of $.98 per
share in the same period of 2003, an increase of 18 percent. Second-quarter
income from continuing operations was $2.0 billion compared with $1.7 billion a
year ago, an increase of 15 percent. Revenues from continuing operations for the
second quarter were $23.2 billion, up 7 percent compared with the second quarter
of 2003 revenues of $21.6 billion.

Samuel J. Palmisano, IBM chairman and chief executive officer, said: 'The IBM
team delivered another fine quarter, which demonstrated the power of our
business model and the advantages of our continued focus on serving enterprises
and institutions around the world.

'We're seeing more and more clients move toward becoming on demand businesses.
This is increasing demand for our portfolio of services and computing
infrastructure products. It was another strong quarter for large-scale systems,
led by zSeries enterprise servers. IBM Global Services signed more than $10
billion in new business, and we are off to a strong start in the emerging
Business Process Transformation Services opportunity. We saw first-half growth
of roughly 40 percent over last year, and we continue to invest heavily in this
growth segment. IBM also grew significantly in emerging geographic markets in
the first half, with 35 percent combined growth in China, Russia, India and
Brazil. Our balance sheet is strong, with $8.2 billion of cash available, and we
continue to post an excellent return on invested capital.

'At a time of great change and opportunity in the IT industry, we remain focused
on strengthening and broadening our client relationships through innovation and
by delivering business solutions only IBM can provide. We continue to improve
the operational effectiveness of the company. We are confident about our
prospects going forward.'

Second-quarter revenue growth of 7 percent (4 percent, adjusting for currency)
was driven by growth across all geographies. In the Americas, second-quarter
revenues from continuing operations were $9.7 billion, up 2 percent (2 percent,
adjusting for currency) from the 2003 period. Revenues from Europe/Middle
East/Africa were $7.5 billion, an increase of 9 percent (2 percent, adjusting
for currency). Asia-Pacific revenues grew 13 percent (6 percent, adjusting for
currency) to $5.2 billion. OEM revenues increased 19 percent to $701 million
compared with the second quarter of 2003.

Revenues grew at a solid pace in four of IBM's five industry sectors in the
second quarter with particularly strong growth from the Financial Services
sector and Industrial sector, as well as sales to Small and Medium Businesses.

Revenues from Global Services, including maintenance, increased 7 percent (2
percent, adjusting for currency) to $11.3 billion in the second quarter. Global
Services revenues, excluding maintenance, increased 7 percent as well (3
percent, adjusting for currency). IBM signed services contracts totaling more
than $10 billion and ended the quarter with an estimated services backlog,
including Strategic Outsourcing, Business Consulting Services, Integrated
Technology Services and Maintenance, of $118 billion.

Hardware revenues from continuing operations increased 12 percent (10 percent,
adjusting for currency) to $7.4 billion in the second quarter versus the
second-quarter 2003. In the current quarter, revenues from the Systems and
Technology Group totaled $4.2 billion, up 10 percent due to eServer revenue
increases for zSeries servers, which had particularly strong results, and
xSeries Intel-based servers. The total delivery of zSeries computing power as
measured in MIPS (millions of instructions per second) increased 75 percent in
the quarter compared with the second quarter of 2003. Revenues for the eServer
iSeries midrange servers slowed significantly, as did pSeries UNIX servers to a
lesser degree, with both results reflecting lower demand partly due to the
product transition to 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 16
percent to $3.2 billion, led by strong growth in mobile personal computers.

Revenues from Software were $3.5 billion, essentially flat compared with the
second quarter of 2003 (down 4 percent, adjusting for currency). Revenues from
IBM's middleware brands, which include WebSphere, DB2, Rational, Tivoli and
Lotus products, were $2.7 billion, the same as the second quarter of 2003.
Operating systems revenues decreased 2 percent to $577 million compared with the
second quarter of 2003.

WebSphere software, which facilitates customers' ability to manage a wide
variety of business processes using open standards to interconnect applications,
data and operating systems, extended its lead in market share by 5 points for
full-year 2003, according to an industry report. Revenues for Data Management
decreased 3 percent including revenues for DB2 database software, which
increased 5 percent. Revenues from Tivoli software (infrastructure software that
enables customers to centrally manage networks and storage) decreased 5 percent,
and revenues for Lotus software, which enables customers to communicate,
collaborate and learn effectively, decreased 2 percent. Revenues from Rational
(comprehensive software development tools) decreased 5 percent compared with the
second quarter of 2003.

Global Financing revenues declined 3 percent (6 percent, adjusting for currency)
in the second quarter to $651 million. Revenues from the Enterprise
Investments/Other area, which includes industry-specific IT solutions such as
product life-cycle management software, increased 23 percent (19 percent,
adjusting for currency) to $294 million compared with the second quarter of
2003.

The company's total gross profit margin from continuing operations was 36.8
percent in the 2004 second quarter, compared with 37.0 percent in the second
quarter of 2003.

In the second quarter of 2004, total expense and other income from continuing
operations of $5.7 billion increased 3 percent over the year-earlier period. The
company's selling, general and administrative expense-to-revenue ratio improved
to 20.0 percent in the quarter compared with 20.6 percent in the second-quarter
2003, while SG&A expense increased 4 percent to $4.6 billion. Research,
development and engineering expense increased 16 percent to $1.4 billion.
Intellectual property and custom development income increased significantly in
the quarter reflecting an IP transaction with AMCC for $208 million. Other
(income) and expense was $23 million of net expense in the second quarter of
2004 versus $4 million of net expense in the same period last year.

IBM's effective tax rate from continuing operations in the second-quarter 2004
was 30.0 percent, the same as the second quarter of 2003.

For total operations, net income for the second quarter of 2004, including a
loss from discontinued operations of $2 million, was $2.0 billion, or $1.16 per
diluted common share. Net income for the second quarter of 2003, including a
loss from discontinued operations of $20 million, was $1.7 billion, or $.97 per
diluted share.

Share repurchases totaled approximately $1.3 billion in the second quarter. The
weighted-average number of diluted common shares outstanding in the quarter was
1.71 billion compared with 1.76 billion shares in the same period of 2003. As of
June 30, 2004, there were 1.68 billion basic shares outstanding.

Debt, including Global Financing, totaled $21.9 billion, compared with $23.6
billion at year-end 2003. From a management segment view, the non-global
financing debt-to-capitalization ratio was 2.4 percent as of June 30, 2004, and
Global Financing debt declined $2.0 billion from year-end 2003 to a total of
$21.3 billion, resulting in a debt-to-equity ratio of 6.9 to 1.

Year-To-Date 2004 Results

Income from continuing operations for the six months ended June 30, 2004 was
$3.6 billion compared with $3.1 billion for the same period of 2003, an increase
of 15 percent. Diluted earnings per common share from continuing operations was
$2.09 compared with $1.77 per diluted share for the 2003 period, an increase of
18 percent. Revenues from continuing operations for the six months ended June
30, 2004 totaled $45.4 billion, up 9 percent (3 percent, adjusting for currency)
compared with $41.7 billion for the six months of 2003.

For total operations, net income for the six months of 2004, including a loss
from discontinued operations of $3 million, was $3.6 billion, or $2.08 per
diluted common share, compared with the six months of 2003 net income of $3.1
billion, or $1.75 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 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:

    --  return on invested capital

    --  adjusting for currency

The rationale for management's use of non-GAAP measures is included as part of
the supplementary materials presented within the second-quarter earnings
materials. These materials are available on the IBM investor relations Web site
at www.ibm.com/investor.

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/2q04.

Financial Results Attached

             INTERNATIONAL BUSINESS MACHINES CORPORATION
                    COMPARATIVE FINANCIAL RESULTS
      (Unaudited; Dollars in millions except per share amounts)

                           Three Months               Six Months
                          Ended June 30,           Ended June 30,

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

 Global Services  $11,327  $10,635     6.5% $22,426  $20,804     7.8%
  Gross margin       25.2%    25.9%            24.8%    25.4%

 Hardware           7,423    6,613    12.3%  14,158   12,421    14.0%
  Gross margin       29.2%    26.9%            28.0%    26.8%

 Software           3,458    3,471    -0.4%   6,924    6,600     4.9%
  Gross margin       86.3%    86.2%            86.2%    85.4%

 Global Financing     651      672    -3.2%   1,313    1,377    -4.6%
  Gross margin       59.4%    54.6%            60.0%    56.8%

 Enterprise Investments/
 Other                294      240    22.6%     582      494    17.7%
  Gross margin       46.4%    41.9%            43.0%    39.2%


TOTAL REVENUE      23,153   21,631     7.0%  45,403   41,696     8.9%


GROSS PROFIT        8,525    7,998     6.6%  16,534   15,231     8.6%
  Gross margin       36.8%    37.0%            36.4%    36.5%


EXPENSE AND OTHER INCOME

 S,G&A              4,632    4,460     3.9%   9,116    8,675     5.1%
  % of revenue       20.0%    20.6%            20.1%    20.8%

 R,D&E              1,426    1,226    16.3%   2,793    2,421    15.4%
  % of revenue        6.2%     5.7%             6.2%     5.8%

 Intellectual property
  and custom development
  income             (432)    (199)  117.3%    (612)    (481)   27.2%
 Other (income)
   and expense         23        4   451.2%      36       88   -58.5%
 Interest expense      33       41   -20.8%      68       81   -16.7%

TOTAL EXPENSE AND
OTHER INCOME        5,682    5,532     2.7%  11,401   10,784     5.7%
  % of revenue       24.5%    25.6%            25.1%    25.9%

INCOME FROM CONTINUING
OPERATIONS BEFORE
INCOME TAXES        2,843    2,466    15.3%   5,133    4,447    15.4%
  Pre-tax margin     12.3%    11.4%            11.3%    10.7%

Provision for
income taxes          853      741    15.3%   1,540    1,335    15.4%
  Effective tax
  rate               30.0%    30.0%            30.0%    30.0%

INCOME FROM CONTINUING
OPERATIONS         $1,990   $1,725    15.3%  $3,593   $3,112    15.4%
  Net margin          8.6%     8.0%             7.9%     7.5%

DISCONTINUED OPERATIONS
Loss from discontinued
operations              2       20                3       23

NET INCOME         $1,988   $1,705    16.6%  $3,590   $3,089    16.2%
                   ======   ======           ======   ======

EARNINGS/(LOSS)PER SHARE
OF COMMON STOCK:

 ASSUMING DILUTION
  CONTINUING
   OPERATIONS       $1.16    $0.98    18.4%   $2.09    $1.77    18.1%
  DISCONTINUED
   OPERATIONS       (0.00)   (0.01)           (0.00)   (0.01)
                   ------   ------           ------   ------
  TOTAL             $1.16    $0.97    19.6%   $2.08*   $1.75*   18.9%
                   ======   ======           ======   ======
 BASIC
  CONTINUING
   OPERATIONS       $1.18    $1.00    18.0%   $2.13    $1.80    18.3%
  DISCONTINUED
   OPERATIONS       (0.00)   (0.01)           (0.00)   (0.01)
                   ------   ------           ------   ------
  TOTAL             $1.18    $0.99    19.2%   $2.13    $1.79    19.0%
                   ======   ======           ======   ======

WEIGHTED-AVERAGE NUMBER
OF COMMON SHARES
OUTSTANDING (M's)
  ASSUMING
   DILUTION       1,713.4  1,763.7          1,721.7  1,761.1
  BASIC           1,679.6  1,729.8          1,685.6  1,727.6

* Does not total due to rounding.


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

                                         At           At
(Dollars in millions)               June 30, December 31,  Percent
                                       2004         2003    Change
                                   --------  -----------   -------
ASSETS

 Cash, cash equivalents,
 and marketable securities           $8,193       $7,647      7.1%

 Receivables - net, inventories,
 prepaid expenses                    33,216       37,351    -11.1%

 Plant, rental machines,
 and other property - net            14,569       14,689     -0.8%

 Investments and other assets        43,604       44,770     -2.6%
                                   --------     --------

TOTAL ASSETS                        $99,582     $104,457     -4.7%
                                   ========     ========


LIABILITIES AND STOCKHOLDERS' EQUITY

 Short-term debt                     $7,505       $6,646     12.9%
 Long-term debt                      14,421       16,986    -15.1%
                                   --------     --------
 Total debt                          21,926       23,632     -7.2%

 Accounts payable, taxes,
 and accruals                        26,852       31,254    -14.1%

 Other liabilities                   21,974       21,707      1.2%
                                   --------     --------
TOTAL LIABILITIES                    70,752       76,593     -7.6%

STOCKHOLDERS' EQUITY                 28,830       27,864      3.5%
                                   --------     --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY                $99,582     $104,457     -4.7%
                                   ========     ========


                 INTERNATIONAL BUSINESS MACHINES CORPORATION
                               SEGMENT DATA
                                (Unaudited)

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

Global Services         $11,327     $759   $12,086    $1,089      9.0%
  % change                  6.5%     9.2%      6.7%     -6.8%

Systems and Technology
Group                     4,154      276     4,430       603     13.6%
  % change                  9.7%    43.8%     11.4%    151.3%

Personal Systems Group    3,165       40     3,205        27      0.8%
  % change                 16.2%    -9.1%     15.8%    437.5%

Software                  3,458      457     3,915       958     24.5%
  % change                 -0.4%    17.2%      1.4%     12.7%

Global Financing            652      286       938       348     37.1%
  % change                 -4.3%    -6.8%     -5.1%     17.6%

Enterprise Investments      269        2       271       (46)   -17.0%
  % change                 18.5%   100.0%     18.9%     47.1%

TOTAL SEGMENTS           23,025    1,820    24,845     2,979     12.0%
  % change                  7.0%    11.7%      7.3%     21.1%

Eliminations / Other        128   (1,820)   (1,692)     (136)

TOTAL IBM               $23,153       $0   $23,153    $2,843     12.3%
  % change                  7.0%               7.0%     15.3%


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

Global Services         $10,635     $695   $11,330    $1,168     10.3%

Systems and Technology
Group *                   3,786      192     3,978       240      6.0%

Personal Systems Group    2,723       44     2,767        (8)    -0.3%

Software                  3,471      390     3,861       850     22.0%

Global Financing            681      307       988       296     30.0%

Enterprise Investments      227        1       228       (87)   -38.2%

TOTAL SEGMENTS           21,523    1,629    23,152     2,459     10.6%

Eliminations / Other        108   (1,629)   (1,521)        7

TOTAL IBM               $21,631       $0   $21,631    $2,466     11.4%

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



                 INTERNATIONAL BUSINESS MACHINES CORPORATION
                                SEGMENT DATA
                                 (Unaudited)

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

Global Services         $22,426   $1,521   $23,947    $2,080      8.7%
  % change                  7.8%     9.1%      7.9%     -3.3%

Systems and Technology
Group                     7,930      512     8,442       773      9.2%
  % change                 11.8%    35.8%     13.0%     84.5%

Personal Systems Group    5,991       63     6,054        16      0.3%
  % change                 17.2%   -21.3%     16.6%    120.8%

Software                  6,924      858     7,782     1,812     23.3%
  % change                  4.9%    10.4%      5.5%     21.7%

Global Financing          1,317      566     1,883       722     38.3%
  % change                 -4.7%    -6.0%     -5.1%     26.9%

Enterprise Investments      544        4       548       (98)   -17.9%
  % change                 16.2%   100.0%     16.6%     36.4%

TOTAL SEGMENTS           45,132    3,524    48,656     5,305     10.9%
  % change                  8.9%     9.0%      8.9%     20.7%

Eliminations / Other        271   (3,524)   (3,253)     (172)

TOTAL IBM               $45,403       $0   $45,403    $5,133     11.3%
  % change                  8.9%               8.9%     15.4%


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

Global Services         $20,804   $1,394   $22,198    $2,151      9.7%

Systems and Technology
Group *                   7,094      377     7,471       419      5.6%

Personal Systems Group    5,113       80     5,193       (77)    -1.5%

Software                  6,600      777     7,377     1,489     20.2%

Global Financing          1,382      602     1,984       569     28.7%

Enterprise Investments      468        2       470      (154)   -32.8%

TOTAL SEGMENTS           41,461    3,232    44,693     4,397      9.8%

Eliminations / Other        235   (3,232)   (2,997)       50

TOTAL IBM               $41,696       $0   $41,696    $4,447     10.7%

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

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