Interim Results

IBM
                  

IBM Reports 2006 Second-Quarter Results

    --  Diluted earnings per share of $1.30 from continuing operations, up 14
        percent as reported, or 16 percent excluding non-recurring items from
        the second-quarter 2005;

    --  Income from continuing operations of $2.0 billion, up 9 percent, or 11
        percent excluding the non-recurring items;

    --  Total revenues of $21.9 billion, down 2 percent as reported, up 1
        percent when adjusted for the impact of the divested PC business.

IBM today announced second-quarter 2006 diluted earnings per common share of
$1.30 from continuing operations, compared with diluted earnings of $1.14 per
share in the second quarter of 2005, a year-over-year increase of 14 percent.
Second-quarter income from continuing operations was $2.0 billion compared with
$1.9 billion in the second quarter of 2005, an increase of 9 percent.

The company posted a 16 percent increase in diluted earnings per share year over
year without the second-quarter 2005 non-recurring pretax items of a year ago,
which included incremental restructuring charges of $1.7 billion ($.72 per
share), offset by a $1.1 billion ($.45 per share) gain on the sale of the PC
business, and a $775 million ($.29 per share) legal settlement received from
Microsoft. Income from continuing operations increased 11 percent over the
second quarter of 2005 without the non- recurring items of a year ago.

Total revenues for the second quarter of 2006 of $21.9 billion decreased 2
percent as reported and adjusting for currency from the second quarter of 2005,
which includes revenue from the divested PC business. Excluding the PC revenue,
revenues increased 1 percent compared with the second quarter of 2005.

Samuel J. Palmisano, IBM chairman and chief executive officer, said: 'IBM had
another solid quarter with good earnings-per-share results. Our performance was
led by our software business, which generated $4.2 billion of revenue this
quarter with strong margins, and is a significant part of our integrated
portfolio. Our System z mainframe business returned to form this quarter, and we
continued to manage important transitions in parts of our services business,
which again improved margins. We continued to grow revenues in many key emerging
markets. Cash flow, a key strength of our business model, drove high returns to
shareholders through our stock buyback program.

'IBM has taken many strategic actions in recent years to reposition the company.
Our focus on higher-value segments of the marketplace continues to deliver good
results to shareholders, our cash position improved significantly year over
year, and we remain committed to investing in our business and driving business
performance to generate strong returns for investors. IBM has returned more than
$5.8 billion to shareholders in the first half of the year.'

From a geographic perspective, the Americas second-quarter revenues were $9.5
billion, an increase of 1 percent as reported (2 percent, adjusting for currency
and PCs) from the 2005 period. Revenues from Europe/Middle East/Africa were $7.2
billion, down 4 percent (1 percent, adjusting for currency and PCs).
Asia-Pacific revenues decreased 9 percent (3 percent, adjusting for currency and
PCs) to $4.2 billion. OEM revenues were $939 million, up 34 percent compared
with the 2005 second quarter.

Revenues from Global Services, including maintenance, decreased 1 percent as
reported and adjusting for currency to $11.9 billion in the second quarter of
2006. IBM signed services contracts totaling $9.6 billion and ended the quarter
with an estimated services backlog, including Strategic Outsourcing, Business
Transformation Outsourcing, Global Business Services, Integrated Technology
Services and Maintenance, of $109 billion.

Hardware revenues decreased 7 percent (8 percent, adjusting for currency) to
$5.1 billion in the second-quarter 2006 compared to $5.6 billion in the year-ago
period, which includes revenue from the divested PC business. Hardware revenues
without the PC business increased 3 percent (2 percent, adjusting for currency).

Hardware revenues for the Systems and Technology Group totaled $5.0 billion for
the quarter, up 3 percent. Revenues from the System z server products increased
7 percent compared with the year-ago period. Total delivery of System z
computing power, which is measured in MIPS (millions of instructions per
second), increased 7 percent. Revenues from the System x server products were
flat compared with the year-ago period. Revenues from the System p UNIX servers
decreased 10 percent and revenues from the System i servers decreased 7 percent.
Revenues from Microelectronics increased 45 percent and revenues from System
Storage decreased 2 percent.

Revenues from Software were $4.2 billion, an increase of 5 percent as reported
and adjusting for currency compared with the second quarter of 2005. Revenues
from IBM's middleware brands, which include WebSphere, Information Management,
Tivoli, Lotus and Rational products, were $3.2 billion, up 4 percent versus the
second quarter of 2005. Operating systems revenues decreased 6 percent to $558
million compared with the prior-year quarter. Revenues from other software and
services increased, led by solid growth in the Product Lifecycle Management
portfolio of products.

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 17
percent. Revenues for Information Management software, which enables clients to
leverage information on demand, increased 6 percent. Revenues from Tivoli
software, infrastructure software that enables customers to centrally manage
networks including security and storage capability, increased 12 percent, and
revenues for Lotus software, which allows collaborating and messaging by
customers in real-time communication and knowledge management, increased 6
percent year over year. Revenues from Rational software, integrated tools to
improve the processes of software development, increased 8 percent compared with
the year-ago quarter.

Global Financing revenues decreased 7 percent as reported and adjusting for
currency in the second quarter to $580 million.

The company's total gross profit margin was 41.2 percent in the 2006 second
quarter compared with 39.4 percent in the 2005 period, which includes the
divested PC business. Excluding the PC business, the second- quarter 2005 gross
profit margin was 40.6 percent.

Total expense and other income increased 1 percent to $6.1 billion compared with
the prior-year period, which includes the non-recurring items. SG&A expense
decreased 24 percent primarily due to the prior-year incremental restructuring
charges of $1.5 billion. RD&E expense increased 3 percent compared with the
year-ago period. Intellectual property and custom development income decreased
to $188 million compared with $288 million a year ago. Other (income) and
expense was $196 million of income in the second quarter of 2006, versus $1.7
billion of income in the same period last year, reflecting the $775 million
benefit for the Microsoft legal settlement and the $1.1 billion gain from the
sale of the PC business partially offset by incremental charges of $236 million
relating to restructuring.

IBM's effective tax rate in the second-quarter 2006 was 30.0 percent, compared
with 32.3 percent in the second quarter of 2005. The company's tax rate in the
second-quarter 2005 increased 2.3 points due to the effect of the second-quarter
non-recurring actions.

Share repurchases totaled approximately $2.5 billion in the second quarter. The
weighted-average number of diluted common shares outstanding in the
second-quarter 2006 was 1.56 billion compared with 1.63 billion shares in the
same period of 2005. As of June 30, 2006, there were 1.52 billion basic common
shares outstanding.

IBM ended the second quarter of 2006 with $10.0 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 $21.8 billion, compared with $22.6
billion at year-end 2005. From a management segment view, the non- global
financing debt-to-capitalization ratio was 1.5 percent at the end of June 30,
2006, and Global Financing debt increased $813 million from year- end 2005 to a
total of $21.3 billion, resulting in a debt-to-equity ratio of 6.9 to 1.

Year-To-Date 2006 Results

Income from continuing operations for the six months ended June 30, 2006 was
$3.7 billion, compared with $3.3 billion in the year-ago period, which includes
non-recurring pretax items for incremental restructuring charges of $1.7
billion, offset by the $1.1 billion gain on the sale of the PC business, and the
$775 million legal settlement received from Microsoft. Diluted earnings per
share from continuing operations were $2.37 compared with $1.98 per diluted
share for the 2005 period. Revenues from continuing operations for the six-month
period totaled $42.5 billion, a decrease of 6 percent (4 percent, adjusting for
currency) compared with $45.2 billion for the six months of 2005, which includes
PC revenues of $2.9 billion for the first four months of 2005 only. Excluding
the divested PC business, revenues increased 1 percent (2 percent, adjusting for
currency) compared with the six-month period of 2005.

For total operations, net income for the first six months of 2006 was $3.7
billion, or $2.37 per diluted share, compared with the six months of 2005 net
income of $3.2 billion, or $1.96 per diluted share, which included a loss from
discontinued operations of $27 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 divested PC business,

    --  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 second-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 8K 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/2q06. Presentation charts will be available on the Web site
prior to the Webcast.

Financial Results Attached (amounts may not total due to rounding)


             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
                      2006     2005* Change     2006     2005* Change
                   -------  ------- -------  -------  ------- -------
REVENUE

 Global Services   $11,894  $12,001    -0.9% $23,461  $23,710    -1.0%
  Gross margin        27.7%    26.1%            27.2%    25.2%

 Hardware            5,148    5,562    -7.4%   9,722   12,315   -21.1%
  Gross margin        35.9%    33.9%            33.7%    30.4%

 Software            4,241    4,056     4.5%   8,147    7,871     3.5%
  Gross margin        84.2%    84.4%            84.2%    84.1%

 Global Financing      580      622    -6.8%   1,164    1,202    -3.2%
  Gross margin        51.1%    52.6%            52.0%    53.4%

 Other                  26       29   -11.0%      54       80   -31.8%
  Gross margin        19.8%    25.4%           -15.4%    63.8%


TOTAL REVENUE       21,890   22,270    -1.7%  42,549   45,178    -5.8%


GROSS PROFIT         9,014    8,775     2.7%  17,102   17,029     0.4%
  Gross margin        41.2%    39.4%            40.2%    37.7%


EXPENSE AND OTHER INCOME

 S,G&A               4,916    6,497   -24.3%   9,518   11,430   -16.7%
  % of revenue        22.5%    29.2%            22.4%    25.3%

 R,D&E               1,522    1,477     3.1%   2,977    2,936     1.4%
  % of revenue         7.0%     6.6%             7.0%     6.5%

 Intellectual property
  and custom development
  income              (188)    (288)  -34.5%    (418)    (507)  -17.6%
 Other (income)
   and expense        (196)  (1,711)  -88.6%    (442)  (1,689)  -73.8%
 Interest expense       72       67     6.4%     138      116    19.0%

TOTAL EXPENSE AND
OTHER INCOME         6,125    6,042     1.4%  11,774   12,286    -4.2%
  % of revenue        28.0%    27.1%            27.7%    27.2%

INCOME FROM CONTINUING
OPERATIONS BEFORE
INCOME TAXES         2,889    2,733     5.7%   5,328    4,743    12.3%
  Pre-tax margin      13.2%    12.3%            12.5%    10.5%

Provision for
income taxes           867      882    -1.7%   1,598    1,485     7.7%
  Effective tax
  rate                30.0%    32.3%            30.0%    31.3%

INCOME FROM CONTINUING
OPERATIONS          $2,022   $1,851     9.2%  $3,730   $3,258    14.5%
  Net margin           9.2%     8.3%             8.8%     7.2%

DISCONTINUED OPERATIONS
Loss from discontinued
operations               0       22                0       27

NET INCOME          $2,022   $1,829    10.5%  $3,730   $3,231    15.4%
                    ======   ======           ======   ======
EARNINGS/(LOSS)PER SHARE
OF COMMON STOCK:

 ASSUMING DILUTION
  CONTINUING
   OPERATIONS        $1.30    $1.14    14.0%   $2.37    $1.98    19.7%
  DISCONTINUED
   OPERATIONS        (0.00)   (0.01)           (0.00)   (0.02)
                    ------   ------           ------   ------
  TOTAL              $1.30    $1.12    16.1%   $2.37    $1.96    20.9%
                    ======   ======           ======   ======
 BASIC
  CONTINUING
   OPERATIONS        $1.31    $1.15    13.9%   $2.40    $2.02    18.8%
  DISCONTINUED
   OPERATIONS        (0.00)   (0.01)           (0.00)   (0.02)
                    ------   ------           ------   ------
  TOTAL              $1.31    $1.14    14.9%   $2.40    $2.00    20.0%
                    ======   ======           ======   ======

WEIGHTED-AVERAGE NUMBER
OF COMMON SHARES
OUTSTANDING (M's)
  ASSUMING DILUTION 1,560.1  1,627.9          1,573.6  1,644.2
  BASIC             1,538.1  1,603.9          1,551.3  1,616.3


* Reclassified to conform with 2006 presentation; prior year
Enterprise Investments reclassified to various segments.



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

                                         At           At
(Dollars in millions)               June 30, December 31,  Percent
                                       2006         2005    Change
                                   --------  -----------   -------
ASSETS

 Cash, cash equivalents,
 and marketable securities           $9,990      $13,686    -27.0%

 Receivables - net, inventories,
 prepaid expenses                    29,601       31,975     -7.4%

 Plant, rental machines,
 and other property - net            13,963       13,756      1.5%

 Investments and other assets        49,823       46,331      7.5%
                                   --------     --------

TOTAL ASSETS                       $103,377     $105,748     -2.2%
                                   ========     ========


LIABILITIES AND STOCKHOLDERS' EQUITY

 Short-term debt                     $7,907       $7,216      9.6%
 Long-term debt                      13,872       15,425    -10.1%
                                   --------     --------
 Total debt                          21,779       22,641     -3.8%

 Accounts payable, taxes,
 and accruals                        26,210       27,936     -6.2%

 Other liabilities                   21,838       22,073     -1.1%
                                   --------     --------
TOTAL LIABILITIES                    69,828       72,650     -3.9%

STOCKHOLDERS' EQUITY                 33,549       33,098      1.4%
                                   --------     --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY               $103,377     $105,748     -2.2%
                                   ========     ========


                 INTERNATIONAL BUSINESS MACHINES CORPORATION
                               SEGMENT DATA
                                (Unaudited)

                                  SECOND QUARTER 2006
                         ---------------------------------------------
                                                     Pre-tax
                                                      Income
                                                      (Loss)
                                                       From
(Dollars in millions)   -------- Revenue --------- Continuing  Pre-tax
                        External Internal    Total Operations   Margin
                        -------- --------  ------- ----------  -------
SEGMENTS

Global Technology
 Services                $7,955     $449    $8,404      $787      9.4%
  % change                  1.1%   -16.0%      0.0%       nm

Global Business Services  3,939      351     4,290       407      9.5%
  % change                 -4.6%    -6.3%     -4.7%       nm

Systems and Technology
Group                     5,014      271     5,286       187      3.5%
  % change                  3.3%     6.9%      3.5%    -30.4%

Software                  4,241      543     4,784     1,156     24.2%
  % change                 4.5%    14.8%      5.6%     27.1%

Global Financing            576      338       914       319     34.9%
  % change                 -7.0%    22.8%      2.1%     -5.7%

Personal Computing
Division                      0        0         0         0      0.0%

TOTAL REPORTABLE
 SEGMENTS                21,725    1,952    23,677     2,856     12.1%
  % change                 -1.6%     1.7%     -1.4%    122.5%

Eliminations / Other        165   (1,952)   (1,787)       32

TOTAL IBM CONSOLIDATED  $21,890       $0   $21,890    $2,889     13.2%
  % change                 -1.7%              -1.7%      5.7%


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

Global Technology
 Services                $7,872     $535    $8,407      ($16)    -0.2%

Global Business
 Services                 4,129      374     4,503       (68)    -1.5%

Systems and Technology
Group                     4,855      254     5,109       269      5.3%

Software                  4,056      474     4,530       909     20.1%

Global Financing            620      275       895       338     37.8%

Personal Computing
Division                    557        7       564      (149)   -26.4%

TOTAL REPORTABLE
 SEGMENTS                22,089    1,919    24,008     1,283      5.3%

Eliminations / Other        182   (1,919)   (1,737)    1,449

TOTAL IBM CONSOLIDATED  $22,270       $0   $22,270    $2,733     12.3%

nm - not meaningful

* The company made changes to its management system effective as of
the first quarter of 2006, including the separation of the Global
Services segment into two new reportable segments: Global Technology
Services and Global Business Services, as well as the reclassification
of Enterprise Investments to other reportable segments.


                 INTERNATIONAL BUSINESS MACHINES CORPORATION
                                SEGMENT DATA
                                 (Unaudited)

                                      SIX MONTHS 2006
                        ----------------------------------------------
                                                      Pre-tax
                                                       Income
                                                       (Loss)
                                                         From
(Dollars in millions)   -------- Revenue --------- Continuing  Pre-tax
                        External Internal    Total Operations   Margin
                        -------- --------  ------- ----------  -------
SEGMENTS

Global Technology
 Services               $15,674     $900   $16,575    $1,631      9.8%
  % change                 -0.1%   -18.8%     -1.4%    153.2%

Global Business
 Services                 7,787      687     8,474       763      9.0%
  % change                 -2.8%    -1.5%     -2.7%       nm

Systems and Technology
Group                     9,433      552     9,985       169      1.7%
  % change                  3.2%    11.4%      3.6%    -45.3%

Software                  8,147    1,057     9,205     2,177     23.6%
  % change                  3.5%    12.9%      4.5%     27.0%

Global Financing          1,158      702     1,860       733     39.4%
  % change                 -3.4%    -3.0%     -3.3%      0.5%

Personal Computing
Division                      0        0         0         0      0.0%

TOTAL REPORTABLE
 SEGMENTS                42,200    3,898    46,098     5,473     11.9%
  % change                 -5.8%    -2.4%     -5.5%     64.7%

Eliminations / Other        349   (3,898)   (3,549)     (145)

TOTAL IBM CONSOLIDATED  $42,549       $0   $42,549    $5,328     12.5%
  % change                 -5.8%              -5.8%     12.3%


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

Global Technology
 Services               $15,694   $1,109   $16,803      $644      3.8%

Global Business
 Services                 8,016      697     8,713        92      1.1%

Systems and Technology
Group                     9,144      495     9,639       309      3.2%

Software                  7,871      937     8,807     1,714     19.5%

Global Financing          1,199      724     1,923       729     37.9%

Personal Computing
Division                  2,876       33     2,909      (165)    -5.7%

TOTAL REPORTABLE
 SEGMENTS                44,799    3,995    48,794     3,323      6.8%

Eliminations / Other        379   (3,995)   (3,616)    1,419

TOTAL IBM CONSOLIDATED  $45,178       $0   $45,178    $4,743     10.5%

nm - not meaningful

* The company made changes to its management system effective as of
the first quarter of 2006, including the separation of the Global
Services segment into two new reportable segments: Global Technology
Services and Global Business Services, as well as the reclassification
of Enterprise Investments to other reportable segments.

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

*T