WASHINGTON, D.C. 20549

                                    FORM 8-K

                 CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                         Date of Report: April 14, 2003
                        (Date of earliest event reported)

             (Exact name of registrant as specified in its charter)

          New York                 1-2360                        13-0871985
(State of Incorporation)    (Commission File Number)           (IRS employer
                                                             Identification No.)

                 ARMONK, NEW YORK                                   10504
     (Address of principal executive offices)                     (Zip Code)

                         (Registrant's telephone number)

Item 5.  Other Events

         The registrant's press release dated April 14, 2003, regarding its
financial results for the periods ended March 31, 2003, including unaudited
consolidated financial statements for the period ended March 31, 2003, is
Attachment I of this Form 8-K.

         Attachment II of this Form 8-K is IBM's Chief Financial Officer John R.
Joyce's first quarter earnings presentation to securities analysts on Monday,
April 14, 2003.

         Attachment III of this Form 8-K are additional materials relating to
the first quarter earnings presentation to securities analysts on Monday, April
14, 2003.

         All of the information in Attachment I, Attachment II and Attachment
III of this Form 8-K is hereby filed under this Item 5 except for the following
statements and information in Attachment II that are furnished pursuant to Item

        o  [The following statement on Page [6] of the Earnings Presentation
           Transcript: "With this view, Net Cash Provided from Operations
           excluding Global Financing Receivables was a negative $300 million,
           versus a positive $400 million in last year's 1st quarter."]

        o  [The following statement on Page [6] of the Earnings Presentation
           Transcript: "Last year, we generated $10.5 billion of cash from
           operations excluding Financing Receivables."]

        o  [Page [9] (IBM Cash Flow Analysis) of the Earnings Presentation

Item 9.  Regulation FD Disclosure

         All the statements and information in Attachment II of this Form
8-K that are not filed pursuant to Item 5 are hereby furnished under Item 12
(Results and Operations and Financial Condition).

         IBM's web site (www.ibm.com) contains a significant amount of
information about IBM, including financial and other information for investors
(www.ibm.com/investor/). IBM encourages investors to visit its various web sites
from time to time, as information is updated and new information is posted.


         Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.

Date:  April 14, 2003

                                    By: /s/ Robert F. Woods
                                             (Robert F. Woods)
                                        Vice President and Controller

                                                                ATTACHMENT I

                     IBM REPORTS 2003 FIRST-QUARTER RESULTS

                                 REVENUES UP 11%

     ARMONK, N.Y., April 14, 2003 . . . IBM today announced first-
quarter 2003 diluted earnings per common share of $.79 from continuing
operations, an increase of 8 percent, compared with diluted earnings per common
share of $.73 in the first quarter of 2002.  First-quarter income from
continuing operations was $1.4 billion, also increased 8 percent, compared with
$1.3 billion in the first-quarter 2002.  Revenues from continuing operations
for the first quarter were $20.1 billion, up 11 percent (4 percent at constant
currency) compared with the first quarter of 2002 revenues of $18.0 billion.

     Samuel J. Palmisano, IBM chairman and chief executive officer,
said:  "In the face of an ongoing difficult environment, we delivered
another strong quarter and continued to gain share across our strategic

     "Our results demonstrate that our e-business on demand strategy,
which draws on IBM's strengths in business transformation services and
open IT infrastructure, is responsive to the needs of our customers.
It is exactly this ability to help customers transform their business
operations with leadership technology that is at the heart of our on
demand strategy, and what sets us apart from our competition.

     "IBM Global Services delivered another good quarter with more than
$12 billion in signings, our second best performance in a first
quarter.  Our software business continued to gain share in database and
Web application servers.  IBM eServer xSeries delivered another strong
revenue performance, while our pSeries and iSeries servers also grew
revenues in the quarter.  All three geographic units grew, and our
focus on small and medium business is paying off, as we continue to see
growing acceptance for our offerings in this important segment.

     "Going forward, we are well positioned to set the agenda and help
customers transform their enterprises to realize the benefits,
efficiencies and productivity gains of e-business on demand."

     From continuing operations in the first quarter, the Americas
revenues were $8.6 billion, an increase of 5 percent (7 percent at
constant currency)from the 2002 period.  Revenues from Europe/Middle
East/Africa were $6.3 billion, up 23 percent (3 percent at constant
currency).  Asia-Pacific revenues grew 14 percent (5 percent at
constant currency) to $4.5 billion.  OEM revenues decreased 15 percent
(16 percent at constant currency) to $690 million compared with the
first quarter of 2002.

     Revenues from Global Services, including maintenance, grew 24
percent (15 percent at constant currency) in the first quarter to $10.2
billion aided by the addition of the former PwC Consulting.  Global
Services revenues, excluding maintenance, increased 27 percent (17
percent at constant currency).  Gross profit margin was 24.9 percent
compared with 26.0 percent in the prior-year period.  IBM signed
services contracts totaling more than $12 billion and ended the quarter
with an estimated backlog of $113 billion.

     Total hardware revenues from continuing operations were $5.8
billion, a decline of 1 percent (6 percent at constant currency),
compared with the first quarter of 2002.  Revenues from IBM's eServer
xSeries Intel-based products increased.  Both IBM pSeries UNIX-based
servers and iSeries midrange servers grew revenue.  The recently
announced p630, with Power4-plus technology, and iSeries servers with
e-business on demand capability contributed to the overall growth in
revenue.  Revenues from zSeries mainframes were lower in the first
quarter due to a combination of customer deferrals of IT decisions and
the anticipated introduction of a new zSeries mainframe.  However,
total deliveries of zSeries computing power as measured in MIPS
(millions of instructions per second) increased 3 percent compared with
the first quarter of 2002.  This reflects a positive trend in a

challenging operating environment.  Finally, revenues from disk storage
grew primarily as a result of increasing demand for high-end "Shark" products.

     Hardware revenues from microelectronics decreased in the quarter
largely related to non-strategic businesses exited last year.  Year
over year, revenues for the personal computer unit declined consistent
with industry trends.  However, total hardware gross profit margin
improved to 26.6 percent compared with 24.5 percent in the first-
quarter 2002.

     Software revenues increased 8 percent (2 percent at constant
currency) at $3.1 billion compared with the first quarter of 2002.
Middleware products, which include WebSphere and DB2 product families,
increased 9 percent (3 percent at constant currency) in the first
quarter of 2003.

     WebSphere, IBM's family of e-business on demand middleware
products, grew 14 percent (8 percent at constant currency) from a year
ago.  IBM's leading database management software, DB2, grew 22 percent
(14 percent at constant currency).  Revenues from Tivoli and Lotus
declined.  Operating systems revenues grew compared with the year-ago
period.  Overall software gross profit margin improved to 84.6 percent
compared with 81.1 percent in first-quarter 2002.

     On February 21, IBM purchased Rational Software for approximately
$2.1 billion.  The post-acquisition results of operations of Rational
are included in the software segment results.  Rational develops tools
to build, test and manage software projects and further complements the
company's middleware family of products.

     Global Financing revenues decreased 10 percent (15 percent at
constant currency) in the first quarter of 2003 to $705 million.
Revenues from the Enterprise Investments/Other area, which includes
industry-specific IT solutions, were $254 million, an increase of 7
percent (down 2 percent at constant currency) compared to the first
quarter of 2002.

     The company's overall gross profit margin from continuing
operations was 36.0 percent in the first quarter, compared to 36.1
percent in the year-ago quarter.

     In the first quarter, total expense and other income from
continuing operations of $5.3 billion increased 12 percent over the
year-earlier period, primarily related to the recent acquisitions of
the former PwC Consulting and Rational, partly offset by the benefits
of the 2002 productivity and skills rebalancing actions.  Selling,
general and administrative expense increased 5 percent in the quarter.
Research, development and engineering expense also increased 5 percent.
Lower intellectual property and custom development income had a
negative impact on results compared with the year-earlier period.
Other (income) and expense was negatively affected by foreign exchange
losses as well as the prior-year sale of the PC desktop manufacturing
operations to Sanmina-SCI.

     IBM's effective tax rate from continuing operations in the first
quarter was 30.0 percent compared with 29.2 percent in the first
quarter of 2002.

     For total operations, net income for the first-quarter 2003,
including discontinued operations, was $1.4 billion, or $.79 per
diluted common share, compared with $1.2 billion in net income, or $.68
per diluted share, in the first quarter of 2002.

     In the first quarter, IBM spent approximately $65 million on share
repurchases.  There were 1.73 billion basic common shares outstanding
at March 31, 2003.  The average number of diluted common shares
outstanding in the quarter was 1.76 billion compared with 1.75 billion
shares in the same period of 2002.

     Debt, including Global Financing, totaled $25.8 billion, a
decrease of approximately $200 million from year-end 2002.  Under a

management segment view, the non-global financing debt-to-
capitalization ratio was 7.3 percent at March 31, 2003, and Global
Financing debt increased approximately $300 million from year-end 2002
to a total of $24.1 billion, resulting in a debt-to-equity ratio of 6.8
to 1.

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.

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 also discloses the following
non-GAAP information which management believes provides useful
information to investors:

 O Management refers to growth rates at constant currency so that the
   business results of a segment can be viewed without the impact of
   changing foreign currency exchange rates, thereby facilitating
   period-to-period comparisons of the company's businesses.  Generally,
   when the dollar either strengthens or weakens against other
   currencies, the growth at constant currency rates will be higher or
   lower, respectively, than growth reported at actual exchange rates.

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 /1q03.

Financial Results Attached

   (Unaudited; Dollars in millions except per share amounts)

                              Three Months Ended March 31,
                                 2003      2002    Change
                              -------   -------   -------


 Global Services              $10,169    $8,229     23.6%
  Gross profit margin            24.9%     26.0%

 Hardware                       5,808     5,884     -1.3%
  Gross profit margin            26.6%     24.5%

 Software                       3,129     2,897      8.0%
  Gross profit margin            84.6%     81.1%

 Global Financing                 705       783    -10.0%
  Gross profit margin            58.9%     56.6%
 Enterprise Investments/
 Other                            254       237      7.4%
  Gross profit margin            36.7%     56.2%

TOTAL REVENUE                  20,065    18,030     11.3%

GROSS PROFIT                    7,233     6,500     11.3%
  Gross profit margin            36.0%     36.1%


 S,G&A                          4,215     4,023      4.8%
  Expense to revenue             21.0%     22.3%

 R,D&E                          1,195     1,135      5.3%
  Expense to revenue              6.0%      6.3%

 Intellectual property
  and custom development
  income                         (282)     (296)    -4.8%
 Other (income) and expense        84      (205)      NM
 Interest expense                  40        30     32.4%

OTHER INCOME                    5,252     4,687     12.1%
  Expense to revenue             26.2%     26.0%

INCOME TAXES                    1,981     1,813      9.3%
  Pre-tax margin                  9.9%     10.1%

Provision for
income taxes                      594       529     12.3%
  Effective tax rate             30.0%     29.2%

OPERATIONS                     $1,387    $1,284      8.0%
  Net margin                      6.9%      7.1%

Loss from discontinued
operations                         (3)      (92)

NET INCOME                     $1,384    $1,192     16.1%
                               ======    ======


   OPERATIONS                   $0.79     $0.73      8.2%
   OPERATIONS                   (0.00)    (0.05)
                               ======    ======
  TOTAL                         $0.79     $0.68     16.2%
                               ======    ======

   OPERATIONS                   $0.80     $0.75      6.7%
   OPERATIONS                   (0.00)    (0.05)
                               ======    ======
  TOTAL                         $0.80     $0.69*    15.9%
                               ======    ======

  ASSUMING DILUTION           1,758.5   1,753.0
  BASIC                       1,725.3   1,718.4

NM -- Not meaningful.
* Does not total due to rounding.


                                         At           At
(Dollars in millions)              March 31, December 31,  Percent
                                       2003         2002    Change
                                   --------  -----------   -------

 Cash, cash equivalents,
 and marketable securities           $5,577       $5,975     -6.7%

 Receivables - net, inventories,
 prepaid expenses                    34,160       35,677     -4.3%

 Plant, rental machines,
 and other property - net            14,363       14,440     -0.5%

 Investments and other assets        41,620       40,392      3.0%
                                   --------     --------

TOTAL ASSETS                        $95,720      $96,484     -0.8%
                                   ========     ========


 Short-term debt                     $5,767       $6,031     -4.4%
 Long-term debt                      20,036       19,986      0.3%
                                   --------     --------

 Total debt                          25,803       26,017     -0.8%

 Accounts payable, taxes,
 and accruals                        26,019       28,519     -8.8%

 Other liabilities                   19,325       19,166      0.8%
                                   --------     --------
TOTAL LIABILITIES                    71,147       73,702     -3.5%

STOCKHOLDERS' EQUITY                 24,573       22,782      7.9%
                                   --------     --------
STOCKHOLDERS' EQUITY                $95,720      $96,484     -0.8%
                                   ========     ========

                                  SEGMENT DATA

                                          FIRST-QUARTER 2003
(Dollars in millions)    -------- Revenue --------- Continuing  Pre-tax
                         External Internal    Total Operations   Margin
                         -------- --------  ------- ----------  -------

Global Services          $10,169     $699   $10,868      $983      9.0%
     % change               23.6%     9.2%     22.5%     -8.4%
Systems Group              2,646      180     2,826       195      6.9%
     % change                6.5%     8.4%      6.6%     10.2%
Personal Systems Group     2,390       36     2,426       (69)    -2.8%
     % change               -4.8%   176.9      -3.9%        NM
Technology Group             742      174       916       (11)    -1.2%
     % change              -20.2%   -26.3%    -21.4%     92.1%
Software                   3,129      387     3,516       639     18.2%
     % change                8.0%    70.5%     12.5%     14.1%
Global Financing             701      295       996       273     27.4%
     % change               -8.7%    58.6%      4.4%     23.0%
Enterprise Investments       241        1       242       (67)   -27.7%
     % change                4.3%     0.0%      4.3%    -26.4%

TOTAL SEGMENTS            20,018    1,772    21,790     1,943      8.9%
     % change               10.9%    20.6%     11.6%      2.0%

Eliminations / Other          47   (1,772)   (1,725)       38

TOTAL IBM                $20,065       $0   $20,065    $1,981      9.9%
     % change               11.3%              11.3%      9.3%

NM-Not Meaningful

                                     FIRST-QUARTER 2002
(Dollars in millions)    -------- Revenue --------- Continuing  Pre-tax
                         External Internal    Total Operations   Margin
                         -------- --------  ------- ----------  -------
Global Services           $8,229     $640    $8,869    $1,073     12.1%
Systems Group              2,484      166     2,650       177      6.7%
Personal Systems Group     2,511       13     2,524        65      2.6%
Technology Group             930      236     1,166      (139)   -11.9%
Software                   2,897      227     3,124       560     17.9%
Global Financing             768      186       954       222     23.3%
Enterprise Investments       231        1       232       (53)   -22.8%

TOTAL SEGMENTS            18,050    1,469    19,519     1,905      9.8%

Eliminations / Other         (20)  (1,469)   (1,489)      (92)

TOTAL IBM                $18,030       $0   $18,030    $1,813     10.1%

                                                                   ATTACHMENT II

Thanks and good afternoon. This is Hervey Parke, Vice President of Investor
Relations for IBM, thank you all for joining us.

At this time, the opening page of the presentation should have automatically
loaded and you should be on Chart 1, the title page. After the last chart in the
presentation, we will provide you an index to go back to specific slides during
the Q&A. Or, you can jump to any chart in the presentation at any time by
clicking on the chart name on the scrolling list found on the left navigation

For printing slides, there are two alternatives. There is a link on the index
page so you can download the entire set of charts for printing. Or, there is a
link to printer-friendly charts along the bottom of the presentation window so
you can download them at any time.

In roughly an hour, you will also be able to link to the prepared remarks using
a link also found at the bottom of the presentation window. And finally, a
replay of this webcast will be available on this website by this time tomorrow.

Now, please click on the NEXT button and move to Chart 2.

Certain comments made by John Joyce or myself during this call may be
characterized as forward looking under the Private Securities Litigation Reform
Act of 1995. Those statements involve a number of factors that could cause
actual results to differ materially. Additional information concerning these
factors is contained in the company's filing with the SEC. Copies are available
from the SEC, from the IBM web site, or from us in Investor Relations.

Now, please click again on the NEXT button for Chart 3.

Before we get started, let me make a point of clarification. All financial
information will be presented on a Continuing Operations basis. Discontinued
Operations associated with the Hard Disk Drive divestiture had virtually no
impact on the net income from Total Operations in this year's 1st quarter.

Now, let me turn the call over to John Joyce, IBM's Senior Vice President and
Chief Financial Officer.

Thank you Hervey.


In another challenging quarter, IBM again delivered strong results, building on
the 7% revenue growth in our 4th quarter. We had 20.1 billion dollars of
revenue, up 11.3% as reported, or 4.4% at constant currency, reflecting our
recent strategic shift to invest more of our strong cash flow in strategic
acquisitions versus stock buyback.

We delivered $2 billion of profit and 79 cents in earnings per share, up 9% and
8% year-to-year despite the transition costs of these acquisitions, and, even
with a higher tax rate and lower stock buyback. Based on these strong results in
a tough environment, we are on track for 2003, and on track to meet the
analyst's full-year average revenue and profit.

There was a lot of discussion late in the quarter about the effect of currency
on our results.

Let me state right here that, because of our currency hedging strategy, the
dollar movement since I spoke to you in January had no incremental impact on our
earnings per share. I will cover this in more detail later.

So what happened during the quarter? Given the economic environment and the
heightened geopolitical pressures, we saw some customer deferrals of IT
decisions. From a customer perspective, investments continued to be principally
focused on activities that provide a short-term payback.

Our business model and our execution overcame these issues. We gained more share
than we expected in key business areas and yet, we continued to improve gross
profit margins in those same business areas.

Our expense-to-revenue for SG&A and R&D improved even as we continued to invest
in our e-Business on Demand strategy, and at the same time, we absorbed the
market's year-to-year effect on net pension income.

The strength of our results reflects the fact that we can help customers address
their current business issues. Customers know that their own revenue growth will
be a struggle in this economic environment. So their priorities remain on
improving productivity and efficiency to address their profitability, with the
emphasis on short-term payback.

But they also have an eye on the long run. Our initiative for eBusiness on
Demand addresses the questions customers have about how to gain real competitive
value and efficiency from combining business process transformation and IT


As you know, this is where we have been focusing billions of dollars, in
Research and Development, in capital, and acquisitions, because we want to be
out in front of a very important shift that is taking place.

Last year, with a clear view of our strategy, and with valuations far more
realistic, we made a strategic shift in the use of our cash, from stock buyback
to acquisitions in Services and Software.

And by the way, we also exited some businesses that were no longer critical to
IBM's strategy. These have hurt our revenue growth, but not our profit growth.

So, this year we get the revenue benefit of the acquisitions. And importantly,
in 2004, we will get the profit benefit of those acquisitions.

As Sam Palmisano has said, this use of our strong cash flow for acquisitions
will continue. And therefore, the cycle of revenue growth followed by profit
growth will also continue.

So our strategy is right, and the strong 1st-quarter results show that we are
executing well against that strategy. We are on track for 2003.

Now let's get into the details of the 1st quarter. Please turn to Chart 4, and
we'll discuss revenue.


Total Revenue was up 11.3% as reported, and up 4.4% at constant currency.

As I said in my opening, this growth reflects two fundamentals; a strategic
shift in the use of our cash for acquisitions, and continued share gains.

Bear in mind that our revenue growth was also impacted by our exiting some
non-strategic businesses last year, and by PC's being down 5% at actual rates
and 10% at constant currency because of falling prices. Each of these hurt our
growth rate by about a point, but our profit improved.

Revenue for Global Services, half of the 1st quarter's total revenue, was up 24%
year-to-year as reported, and 15% at constant currency.

The acquisition of what was formerly PwC Consulting was key to this growth. The
new Business Consulting Services is now operating on a single set of systems


and processes, but more importantly, the teams are integrated. This is hard
work that is showing very good progress.

Hardware revenue in the 1st quarter declined 1% as reported and 6% at constant

These results are the average of two very different dynamics. Revenue decline
occurred in three areas, Technology Group, down 14% at actual and 15% at
constant currency due to exiting businesses; PC's down, as I just mentioned; and
mainframes, down 16% as reported and 21% at constant currency, in advance of a
new product announcement in the second quarter.

On the other hand, we had good revenue growth in the rest of our eServer family.

Software revenue grew 8% as reported and 2% at constant currency. In a segment
particularly visible with earnings warnings this quarter, we benefited from
competitive wins, our annuity-like revenue stream, and one month of Rational's
high-end tools in our family of middleware products.

Global Financing revenue declined 10% as reported, and 15% at constant currency,
reflecting the declining asset base and interest rates.

Income-generating assets were down 4% as reported from last year, and financing
originations were $8 billion in the quarter.

Finally, we've included our geographic breakout in our supplemental charts at
the end. Focusing on growth rates in constant currency, there were two
overriding points. Americas continued to be the strongest region and Europe the

And you can see the OEM revenue decline driven by our exiting two low-margin
businesses, our Displays and Electronic Card Manufacturing and Test.

Our OEM logic revenue grew 18% year-to-year, as reported.

Now let me give you an additional view of our revenue, by Industry Sector,
Chart 5.


This chart shows our five worldwide industry sectors, as well as our important
Small and Medium Business customers.


It's important to note that, while we report our results by brand and by
geography, our go-to-market strategy is based on customer requirements.

We are #1 in all five industry sectors, with deep customer relationships, and we
are gaining share in the Small and Medium-sized Business sector.

Let me give you some geographic texture. In Europe, there was weakness in the
Communication and Industrial sectors, but strength in Distribution. In Americas,
as well as in Europe, there was strength in the Public Sector where we are
gaining share, but weakness in Financial Services.

Asia was strong in the Industrial sector, particularly automotive, but weak in

We also continue to focus on Small and Medium-sized accounts which, at about 22%
of our customer revenue, represents a significant opportunity for growth.

Now let's turn to Gross Profit -- Chart 6.


Total gross profit margin in the 1st quarter was 36%, essentially unchanged from
last year. Global Services was down 1.1 points, primarily due to our changing
mix with the addition of the former PwC Consulting. On the other hand, gross
profit margins in Software, Hardware, and Global Financing all improved. I'll
have some more on this when I get into a discussion of the units.

Now let's turn to Expense -- Chart 7.


Total Expense and Other Income grew 12% in the 1st quarter. Underneath this, we
significantly improved our expense-to-revenue in SG&A by 1.3 points, down to
21%, and in R&D by 0.3 points, down to 6.0%.

The key to the growth in Total Expense was the Other Income and Expense line
which flipped from being income a year ago to expense this quarter.


The principal driver was currency hedging, part of which is reflected in this
line. I will come back to this in a moment.

As we have pointed out for the past year, there are some specific ongoing
expense items that can help or hurt earnings in different ways quarter to
quarter. Let me again go through this "road map" of expense.

Year-to-year this quarter, most factors hurt our profit. Income resulting from
retirement-related plans was the biggest factor, down $155 million, reflecting
the market's impact on our pension fund. Real estate and equity transactions
were both small this quarter, which hurt us for $41 million year-to-year, and,
IP Income of $282 million was down $14 million from a year ago. We realized $90
million from one long-term research and development agreement. And our
outsourcing arrangement with Sanmina-SCI produced $34 million.

We did have some year-to-year helps from this group of expense. Continued
workforce rebalancing expense was $79 million, $59 million less than last year.
And we added Accounts Receivable provisions of $80 million. While that was $75
million less than last year, our Accounts Receivable provision on the balance
sheet is up $250 million year-to-year, and our Reserve Coverage is also up
significantly year-to-year. Over the past two years, you will recall we had made
sizable provisions each quarter.

We have increased our Reserve Coverage to reflect the general economic
environment as well as specific customer issues, such as in the Telecomm sector.
And the credit rating of our largest customers has remained steady. Let me add
that coverage for inventory write-offs is also up year-to-year.

The net of these plusses and minuses was about a 3-cent hurt to earnings per
share in the quarter.

Finally, let me say a word about currency in light of the dollar's new weakness.
Our ongoing hedging programs are intended to mitigate the volatility of
currency, offsetting losses created by a strong dollar, and benefits created by
a weak dollar.

We accomplish this by applying forward contracts to lock in exchange rates as
much as a year in advance relative to the inter-country flow of certain products
and services, as well as dividends and royalties.

A weaker dollar, as we had this quarter, will translate into higher revenue and


But this is offset by the hedging losses added to cost of goods sold, SG&A, and
Other Income and Expense.

The forward contracts move right along with the currency. The fact that the
dollar weakened during the quarter did not change our earnings per share.

Now let's turn to Cash Flow -- Chart 8.


We want to enhance our cash flow discussion this quarter.

We'll start with this standard chart based on FAS 95, and then we'll give you a
different view of the same data so that you can clearly see how we invest the
cash from operations.

Net Cash Provided by Operating activities was $2.2 billion, down $500 million

Compared to a strong cash flow performance in last year's 1st quarter, Working
Capital and Other required an incremental $800 million.

There were two key factors in Working Capital. Accounts Receivable was up
year-to-year due to better revenue performance during the quarter than during
last year's 1st quarter. In addition, IBM's total Days Sales Outstanding grew as
a result of the addition of the former PwC Consulting which had longer trade
terms than the rest of IBM. Inventory during the quarter was up slightly from
year end. But year-to-year, Inventory was down $1.1 billion, and inventory turns
improved by one full turn.

We made increased payments of about $400 million for restructuring and to non-US
pension plans, but we realized $383 million from the monetization of interest
rate swaps.

Now let's look at Cash Flow in terms of Sources and Uses. Turn to Chart 9 -- IBM
Cash Flow Analysis.


Most businesses try to minimize receivables. For a financing business,
increasing receivables is the basis for growth. Receivables are an investment
and an


income-producing asset. Therefore, we exclude the effect of Global Financing
Receivables from Net Cash from Operations. With this view, Net Cash Provided
from Operations excluding Global Financing Receivables was a negative $300
million, versus a positive $400 million in last year's 1st quarter. As noted
earlier, the principal reason was the use of cash in working capital.

We invest Cash from Operations in three broad categories. Two which are for
organic growth, capital expenditures, and Global Financing Receivables, which
drive Global Financing debt. And acquisitions, sometimes offset by divestitures.

Then, we return cash to shareholders, in the form of stock buybacks and

First, the investments. Capital Expenditures were $800 million, down $400
million from a year ago, driven primarily by slowing investment in our
Microelectronics business as we complete our 300 millimeter facility. Our
investments in Global Financing Receivables declined $2.5 billion, driven by our
typical seasonality in addition to the economy's impact on hardware demand.
Acquisitions used an additional $1 billion of cash flow versus the 1st quarter
of last year, driven by the acquisition of Rational Software.

Next, the return to shareholders. Share repurchase remains an important part of
our financial model. But given the acquisition of Rational Software, our share
repurchase was reduced in the 1st quarter. We spent $65 million to buy back
approximately 800,000 shares, with $3.8 billion remaining from our last Board

Although we are buying back stock at low levels, as I've stated before, we will
pick up the pace in the second half of this year. Average diluted shares for the
quarter were 1.758 billion, up slightly from a year ago. Finally, we paid out
$259 million in dividends in the quarter.

Last year, we generated $10.5 billion of cash from operations excluding
Financing Receivables. We expect to generate a considerable sum again this year,
and we will continue to invest this money wisely, generating annual Return on
Invested Capital that exceeds the S&P 500 average.

Now, please turn to Chart 10, and we'll discuss the Balance Sheet.



This is the same Balance Sheet format we've used in the past.

Our cash level at the end of the 1st quarter remained high at $5.6 billion, up
$1.6 billion from a year ago, and down only slightly from year-end 2002, despite
payment for Rational and for employee variable compensation.
93% of our total debt of $25.8 billion is driven by our Global Financing
business, and Global Financing was leveraged at an appropriate 6.8 to 1.

The remaining non-financing debt level of $1.7 billion was up from a year ago,
but down sequentially. So debt-to-capital was well within acceptable levels at

Let me emphasize that, with all that we've done in the past several quarters --
a couple of major acquisitions, significant restructuring of our business,
multi-billion-dollar funding of the U.S. pension plan, and, continued
multi-billion-dollar investments in our organic growth, the Balance Sheet
remains very strong, despite the sustained weakness of the economy.

Now let me turn to a discussion of some of our individual businesses, starting
with Global Services, Chart 11


Global Services had another good quarter, particularly in light of the economic
environment. Revenue, at $10.2 billion, was up $1.9 billion or 24% as reported,
15% at constant currency while gross profit dollars increased $396 million. Each
of our services segments picked up, beating average Street revenue-growth
expectations by about 5 points of growth. Services was up 27%, or 17% at
constant currency, while maintenance was up 7% or flat at constant currency.

Total signings for Services were $12.1 billion. This quarter we signed 15 deals
greater than $100 million, of which one deal was greater than $2 billion. Our
BCS signings increased year-to-year by more than a billion dollars, aided by the
addition of the former PwC Consulting business.


          As you can see from the bar chart for signings, there is no real
     quarterly. It depends on when the customers are ready to proceed on
     these important relationships.

          The backlog for Global Services at the end of the 1st quarter,
     including Strategic Outsourcing, BCS, IT Services and Maintenance, was
     estimated at $113 billion.

          Note that, this quarter, changes in scope to existing contracts
     continued to decline from the previous quarter. And our pipeline of
     potential new contracts in 2003 is strong, particularly in the Financial
     Services industry.

Now, let's review the three major segments of Global Services. Strategic
Outsourcing, which was nearly 40% of Global Services, was up 13% year-to-year or
6% at constant currency. Our On-Demand value proposition continued to address
our customers' requirements. In the 1st quarter we secured a $2 billion
on-Demand outsourcing contract with Visteon. We also expanded a signing from
last quarter for on-Demand outsourcing with AXA Group, a worldwide leader in
financial protection and wealth management. It's now a cumulative total of about
$1 billion. With these two significant deals, approximately 60% of our
1st-quarter signings were long-term in nature.

E-Business hosting, which provides web hosting infrastructure and application
management as an Internet service, continued its strong pattern of growth, up

The second segment, Integrated Technology Services, grew 10%, or 2% at constant
currency. ITS was almost 30% of Global Services, and nearly half of this is
Maintenance revenue which grew 7% as reported, but was flat at constant

And finally, the third segment of IGS -- Business Consulting Services.

With the acquisition of the former PwC Consulting, BCS now represents more than
30% of Global Services revenue. This unit grew 63% for the quarter or 50% at
constant currency. BCS Americas continued to perform well with our on-Demand
value proposition. Year-to-year growth improved over the 4th quarter. BCS Europe
continued to lag the Americas, but we expect results to improve during the 2nd


Now, let me update you on the progress of the PwC Consulting integration. We
have successfully retained about 98% of the partners. And so far, we've regained
110 of the 149 accounts that dropped PwC prior to the acquisition due to auditor

So, overall, a good quarter for Global Services, strong signings, given the
environment improved revenue performance in each of our services segments, and
continued successful integration of PwC Consulting into the new Business
Consulting Services.

Now, click on the NEXT button for Chart 12, and I'll discuss eServers and


IBM's servers and storage had another strong quarter with both share gains and
profit growth.

zSeries mainframe revenue was down 16% year-to-year at actual, and 21% at
constant currency, on MIPS growth of 3%.

Many of our customers, particularly in the high end, were anticipating a
significant pending announcement. Later this quarter, we will be introducing our
new eServer zSeries system, some of you know this by its code name, T-Rex. This
is the most sophisticated server ever created in terms of secure transaction
capacity, virtualization and automation. This addition to the zSeries family
will offer new levels of capacity allowing customers to significantly reduce
infrastructure costs. They will be able to consolidate UNIX, Linux, Windows and
traditional workloads in an environment that is completely responsive and
variable for the on-demand environment.

As with previous new mainframe offerings, customers will continue to buy entry
and mid-sized models and then upgrade to this new high-end model when it begins
shipping late in the 2nd quarter.

Our pSeries UNIX server revenue grew 15% year-to-year at actual, 8% at constant
currency, and continued to gain share across the product line.


In the 1st quarter we introduced the Power4+ processor, further extending our
product leadership. When this processor was announced for the p630 earlier this
year, it delivered 65% more performance than Sun's V480, and it will be extended
to the rest of the high-end pSeries including the p690 later this quarter. In
addition, our pSeries line will be extending its on-demand offerings to include
the capability for temporary usage-based capacity. This will complete the
transition to Power4+, the fastest technology transition in the history of our
UNIX business.

iSeries revenue was up 22% year-to-year at actual, 14% at constant currency,
driven by strong demand for our e-Business on Demand offerings. The ability to
turn on additional capacity remotely for short periods of time offers the
increased flexibility customers have been asking for. The integration of key IBM
middleware products into the iSeries is a logical extension of the iSeries'
solution packaging. These new on-Demand and integration capabilities led to
solid growth in the first quarter for the iSeries, and we expect growth to

xSeries server revenue grew 20% at actual rates and 13% constant currency. The
server growth was also driven by our technology leadership, particularly in the
rack-optimized servers where we were first to market in the transition to Intel
Xeon processors. xSeries growth was also helped by the fast adoption of our new
BladeCenter offering, which brings the integration of servers, storage, and
networking into a highly dense enterprise solution. Our customers are combining
the BladeCenter offering with our IBM Director system management software, often
on Linux, to reduce the cost and complexity in their infrastructure.

Turning to storage, Shark continued to gain share, growing 22% year-to-year as
reported, or 14% year-to-year at constant currency, and we continue to see the
average footprint size increase for our Shark installations.

The integration of storage into the systems group will enable us to deliver new
technologies into storage with the same speed we just demonstrated with Power4+
in the pSeries. And later this quarter we will be announcing enhancements to
Shark including, improved eBusiness on demand functionality, point-in-time copy
and disaster recovery advanced function capabilities. These enhancements offer
customers significant improvements in efficiency, data accessibility, and
disaster recovery.


We will be announcing the IBM Total Storage Virtualization Family, a key
component for customers evolving to an on-demand operating environment that
reduces customers' total cost of computing.

Tape was flat as reported, but down 6% at constant currency. This was driven by
some weakness in high-end models, offset by double-digit growth in our mid-range
LTO offering.

Now click on the NEXT button for Personal and Printing Systems -- Chart 13.


Revenue in the quarter from our Personal Systems Group was down 5% year-to-year,
10% at constant currency. This segment lost $69 million, which is a $134-million
decline from last year.

As you may recall, last year we received a benefit from initiating our
outsourcing strategy with Sanmina-SCI. Now we are getting the ongoing benefits
in terms of operational efficiency.

Reflecting our supply chain initiatives, our inventories were down over $100
million year-to-year, and our inventory turns were up. With dropping commodity
prices, we were able to take reduced costs directly to gross margin, which was
up 1 point.

Days Sales Outstanding also improved by nearly one day.

Last quarter, I mentioned our ThinkVantage capabilities for PCs that guarantee
customers savings from day one. Since then, we have introduced these tools to
every PC product, often saving customers more than the initial cost of the PC

So by continuing to build on these operational and product improvements, we
expect to be profitable for the year.

Now if you'll move to Chart 14, we'll cover Technology.



While revenue for the total Technology Segment declined 21% year-to-year as
reported, profit improved by $128 million. This is a direct result of the
restructuring actions we took in 2002 and our leadership status in those
businesses we are now focused on.

In logic, for example, we were again named the market leader in ASICs by
Dataquest, for the fourth year.

And this quarter, we also announced a win with Nvidia and a joint development
agreement with AMD, with both companies needing IBM's leading-edge technologies
to move ahead of their own competitors.

The introduction of 130-nanometer and 90-nanometer circuit size heralded a new
phase of semiconductor manufacturing. At these sizes, the relationship between
chip design, manufacturing processes, and system performance becomes critical.

IBM's experience in designing and manufacturing high-end chips for our own
systems and the new 300-millimeter facility provide competitive advantage.

The Nvidia contract, as well as other contracts we have announced, will help
load our Fishkill 300-millimeter fab in the second half of this year. This
state-of-the-art facility continued to ramp up, and should be completed as we
enter 2004.

The second quarter, a transition quarter as customer demand shifts more to
products from our new 300-millimeter line, should be our toughest quarter of the

We also continued to see strong demand for our Engineering & Technology
Services, and earlier this quarter, we expanded this offering to include Europe.

Now click on the NEXT button for Software - - Chart 15.


Our software business, at $3.1 billion, grew 8% at actual rates, 2% at constant
currency. Operating Systems, which represents 18% of total software, was up 8%,
or 2% at constant currency. Middleware was up 9%, or 3% at constant currency.


In an environment recently described by one software financial analyst as
"arguably the toughest quarter ever for the software industry" our results
were generally strong, with WebSphere and Data Management gaining share
against their primary competitors.

The WebSphere family of software is the industry's most complete portfolio of
infrastructure software for integrating and managing high-volume transactions.
It grew 14%, or 8% at constant currency, while our largest competitor had
declining license revenues.

Within the family, WebSphere Business Integration, which helps software work
together throughout the enterprise, grew 18% , or 12% at constant currency.
Portals, which provides Web-based application user interfaces, more than
doubled. The market continues to move to these higher-function products as the
core application server continues to commoditize.

Our Data Management software grew 9% or 3% at constant currency. DB2 software
grew 22% or 14% at constant currency. Content Management software supports our
customers' needs to manage many different kinds of unstructured data, like audio
and video files, grew 64% , or 54% at constant currency. Informix products
declined as more customers adopted DB2, while IMS continued to provide a
consistent annuity stream.

Lotus messaging software, which includes Notes and Domino, declined 1% as
reported, or 8% at constant currency. Growth in new license sales in this mature
market will not occur until our customers' businesses begin growing again.
However, we continue to win against competition in those accounts most sensitive
to Total Cost of Ownership and security related concerns.

Tivoli software declined 5%, or 12% at constant currency, consistent with the
direction of the industry. Tivoli was hardest hit by customers delaying purchase
decisions. A significant number of deals in the pipeline were delayed into the
2nd quarter.

Other middleware products in the software segment outside these brands, such as
our traditional host software products like CICS, Storage, and Printer Software,
grew 7%, or 2% at constant currency.


Helping to drive incremental software revenue, we continued to have success on
two fronts. We saw continued success with leading independent software vendors.
For example, we signed three new strategic alliances and 30 joint agreements in
the quarter. We also signed up new partners, like Intuit, focused on the Small
and Medium-sized Business opportunity. They are porting to our middleware and
partnering with us on products like WebSphere Express and IBM eServers.

For software overall, gross profit margin improved 3.5 points to 85%. We
continued to make productivity improvements in customer support and development
through actions like the utilization of shared software components across IBM
software brands .

We accomplished a significant milestone during the quarter with the completion
of the acquisition of Rational software. The IBM Rational platform combines
software engineering best practices with industry-leading software development
tools. This enables software development teams to attain higher levels of
responsiveness and productivity, key performance metrics for an On-Demand
business. The software applications that these businesses demand, require an
ongoing need for innovation, to keep ahead of competition. Currently, Rational
tools are used by our customers to build software for a range of applications
including cell phones, medical devices as well as an increasingly broad array of
business application software.

Rational's product portfolio is leveraged through IBM's market access and will
continue to be enhanced through its integration with key IBM products.

In the five weeks since the close of the acquisition, our first phase of
integration is already ahead of schedule. We are already seeing the results of
the synergy from the transaction. This quarter, Rational achieved higher deal
revenue, exceeded our initial business case revenue expectations, and surpassed
the Street's revenue estimates for Rational as an independent company for the
latest quarter.

The breadth of our software family of products, now enhanced by the addition of
Rational, is an important competitive advantage in the emerging world of
e-Business On-Demand.

Now if you'll click on the Next button for Chart 16, I'll wrap up.


The technology sector has always made a significant contribution to world
economic growth. But now it is entering a new, more critical phase, offering
customers a new ability to transform their strategy, processes, structures,
technologies and even their culture.

It is well beyond the traditional levels of accessing information for individual
productivity, even beyond integrating applications within an enterprise. It is
truly about organizational integration to drive productivity, and this is what
IBM's eBusiness on Demand is all about.

This new technology sector requires a combination of IT and Business insight and
IBM is leading. We are gaining share in key segments. We are improving our
profitability and generating strong cash flow. We are reinvesting to increase
our leadership position. At the same time, we continue to benefit from the
consistency of our annuity-like revenue and profit stream, while we deliver
sustained Return on Invested Capital that is well above the S&P 500 average.

I have said before that history will not repeat itself. That's because, to
survive, great companies must continually reinvent themselves. Consider this
within the context of historical valuations. We are not the same company we were
three, four or five years ago, evolutionary in our business model, but
completely different in our competitiveness. We used to be criticized for our
inability to turn our industry-leading base technology into competitive
products. Now we have world-class, industry-leading products and services
offerings. We have a new breadth of Services and Middleware that gives us an
unmatched ability to integrate and transform our customers' business models, not
just their IT environment, and to improve their overall competitiveness. And
this is precisely where customers are willing to spend money

Customer requirements have changed dramatically. They have become so
sophisticated, so focused on getting solutions, that many IT companies cannot
provide the required combination of business insight and IT expertise. This is
why history simply will not repeat itself.

We are off to a good start this year. We delivered another strong quarter in a
tough environment, and we are confident about our position for 2003.

Now Hervey and I will take your questions.


Thanks, John.

Now, if you'll all go to the next chart, you'll find an index of all our slides
that may be helpful during the Q&A. And as John mentioned, we also have a couple
of supplemental charts.

You are all on a tight schedule this afternoon, so before I turn the call over
to the operator to give you polling instructions, let me make my usual request
that you refrain from multi-part questions and clarifications, to give others
some time.

OK, let's get started.




IBM 1Q 2003
Earnings Presentation

April 2003



Certain comments made in this presentation may be characterized as forward
looking under the Private Securities Litigation Reform Act of 1995.

Those statements involve a number of factors
that could cause actual results to differ materially.

Additional information concerning these factors is contained in the Company's
filing with the SEC. Copies are available from the SEC, from the IBM web
site, or from IBM Investor Relations.


                    [IBM GRAPHIC]

                                      IBM REVENUE

                                               B/(W)    Yr/Yr
                                               --------------   % of
($B)                                   1Q03    Rptd     @CC   1Q Rev
                                       ----    ----     ---   ------

Global Services                        10.2     24%     15%      51%

Hardware                                5.8     (1%)    (6%)     29%

Software                                3.1      8%      2%      15%

Global Financing                        0.7    (10%)   (15%)      3%

Enterprise Inv./Other                   0.3      7%     (2%)      2%
                                       ----    ----    ----     ----

IBM                                    20.1     11%      4%     100%
                                       ----    ----    ----     ----



                                        1Q Revenue        @ Act.          @CC
                                        ----------        ------          ----

Financial Services                         $4.8B            11%            3%

Public                                      3.0             19%           11%

Industrial                                  2.6             13%            4%

Distribution                                1.9             12%            4%

Communications                              1.8              8%            2%

Small / Medium Business                     4.3              13%           6%


                             IBM GROSS PROFIT MARGIN

                                           1 Q03               Yr/Yr
                                           -----               -----

Global Services                             24.9%            (1.1 pts)

Hardware                                    26.6%             2.1 pts

Software                                    84.6%             3.5 pts

Global Financing                            58.9%             2.3 pts

Enterprise Inv./Other                       36.7%           (19.5 pts)
                                           ------           ----------

IBM                                         36.0%             (0.1 pts)
                                           ------           ----------


                            IBM EXPENSE SUMMARY

($B)                                                                    B/(W)
                                                               1Q03     Yr/Yr
                                                              ------   ---------
SG&A                                                           4.2       (5%)

RD&E                                                           1.2       (5%)

IP and Custom Dev. Income                                     (0.3)      (5%)

Other Income and Expense                                       0.1        nm

Interest Expense                                                --       (32%)

                                                              ------   --------

Total Expense and Other Income                                 5.3*      (12%)

        E/R%                                                  26.2%    (0.2 pts)
                                                              ------   --------

nm = not meaningful
* Rounding


                            IBM CASH FLOW

($B)                                               1Q02       FY02     1 Q03
                                                   ----       ----     -----

   Net Income from Continuing Ops.                 1.3        5.3       1.4

         Depreciation / Amortization               1.1        4.4       1.1

         Working Capital / Other                  (2.0)       0.8      (2.8)

         GF A/R                                    2.3        3.3       2.5
                                                 -----       ----      ----

   Net cash provided by operating activities       2.7       13.8       2.2

         Capital Expenditures, Net                (1.2)      (4.6)     (0.8)

         Divestitures                               --        1.2        --

         Acquisitions                             (0.1)      (3.2)     (1.1)

         Other Investing                          (0.1)      (0.3)     (0.8)
                                                 -----       ----      ----
   Net cash used in investing activities          (1.4)      (6.9)     (2.7)

         GF Debt                                  (0.9)      (3.1)       --

         Non-GF Debt                              (1.1)      (0.1)     (0.7)

         Dividends                                (0.2)      (1.0)     (0.3)

         Share Repurchase                         (1.8)      (4.2)     (0.1)

         Other                                     0.3        1.1       0.4
                                                 -----       ----      ----
   Net cash used in financing activities          (3.7)      (7.3)     (0.7)

   Effect of exchange rate changes on cash           --       0.1        --

   Discontinued Operations                        (0.1)      (0.7)     (0.1)
   Net change in cash & cash equivalents
    (Cont Ops)                                    (2.5)      (0.9)*    (1.2)*

* Rounding

                             IBM CASH FLOW ANALYSIS

($B)                                              1Q02        FY02        1Q03
                                                 ------     -------      ------
      Net cash from Operations (Cont. Ops.)       2.7        13.8          2.2

      Less: GF Accounts Receivable               (2.3)       (3.3)        (2.5)
                                                 ----        ----          ----
      Net cash from Operations (Cont Ops),
       excl GF rec.]                              0.4        10.5         (0.3)
      Investing Activities

            Capital Expenditures, Net            (1.2)       (4.6)        (0.8)

            GF A/R                                2.3         3.3          2.5

            GF Debt                              (0.9)       (3.1)          --
                                                 ----        ----          ----
                 Net GF Debt to AIR               1.4         0.2          2.5

            Acquisitions                         (0.1)       (3.2)        (1.1)

            Divestitures                           --         1.2           --
      Return to shareholders
            Share Repurchase                     (1.8)       (4.2)        (0.1)

            Dividends                            (0.2)       (1.0)        (0.3)

      Change in Non-GF Debt                      (1.1)       (0.1)        (0.7)

      Other                                       0.3         1.5          0.5

      Discontinued Operations                    (0.1)       (0.7)        (0.1)
                                                -----       -----        -----

     Change in cash & marketable securities      (2.4)       (0.4)        (0.4)


                                     IBM BALANCE SHEET

                                                  Mar          Dec         Mar
                                                 2002*        2002         2003
 ($B)                                         --------      -------     ------
      Cash & Marketable Securities               4.0           6.0         5.6

      Non-GF Assets**                           48.2          56.4        58.1

      Global Fin. Assets**                      33.0          34.1        32.0
                                                ----          ----        ----
      Total Assets                              85.2          96.5        95.7

      Other Liabilities                         37.4          47.7        45.3
      Non-GF Debt                                0.5           2.2         1.7
      Global Fin. Debt                          24.4          23.8        24.1
                                                ----          ----        ----
      Total Debt                                24.9          26.0        25.8
                                                ----          ----        ----
      Total Liabilities                         62.3          73.7        71.1

      Equity                                    22.9          22.8        24.6
      Non-GF Debt/Cap                            3%           10%          7%

      Global Fin. Leverage                      6.6           6.9         6.8
    *   Reclassified to conform with 2003 presentation
    **  Excluding Cash & Marketable Securities


                                  GLOBAL SERVICES

                           Revenue $10.2B, +24%; +15% @CC

                                                       Yr/Yr Delta
($B)                                    1Q03       Yr/Yr     @Act.       @CC
                                        ----       -----     -----       ----
Revenue                                $10.2        1.9        24%        15%
Gross Profit                           $ 2.5        0.4        19%
Margin                                   25%      (1.1 pts)

  Strategic Outsourcing                                        13%         6%
  Business Consulting Services                                 63%        50%
  Integrated Tech Services                                     10%         2%
    Maintenance                                                 7%         0%

                     IGS WW Contract Signings

"Omitted graphis is available on IBM's website (www.ibm.com)."

                                             1Q03 Signings        $ 12B
                                             Estimated Backlog    $113B

                                             Business Consulting Services
                                                > Continued PwCC win-backs

                                             On Demand
                                                > Strong BTO pipeline
                                                > Visteon


                        SYSTEMS GROUP - eSERVERS & STORAGE

                       Revenue $2.6B, 6% yr/yr; flat @CC

                           Actual       @CC       Share    GP%
                           ------      ----       -----    ---
zSeries                     -16%       -21%         =       =     MIPS up 3% - New mainframe
                                                                  in 2Q

pSeries                     +15%         +8%        +       +     Mid-range & Low-end strength

iSeries                     +22%       +14%         +       =     Growth from on-demand

xSeries Servers             +20%       +13%         +       +     Strength in both high-end &
                                                                  high volume

Shark                       +22%       +14%         +       +     New function in 2Q

Tape Storage                Flat        -6%         -       +     Mid-range LTO growth
                                                                  High-end declines


                         PERSONAL SYSTEMS GROUP
                  Revenue $2.4B, - 5% yr/yr; -10% @CC

 / /  Average unit revenue down offset by lower
      commodity costs

 / /  Segment loss of $69M, down $134M yr/yr
      -'02 benefit - initiation of outsourcing strategy
      -Ongoing benefit - improved operational efficiency
       -Inventory down
       -PC gross margins up one point
       -DSO improved

 / /  ThinkVantage / Beyond the Box savings


                          TECHNOLOGY GROUP

External Revenue ($M)                1Q02       1Q03       @Act.         @CC
                                    -----       -----      -------      ------
 OEM Logic                          $430        $509         18%          17%
   Semis for HDDs Internal in '02                 67
 E&T Services                          6          34        433%         402%
 Displays                             56          29        (49%)        (52%)
 Card Assembly                       241          23        (90%)        (91%)
 Other                                33           1          -            -
                                    -----       -----      -------      ------
   Total                            $766        $663        (14%)        (15%)

  / /  Break-even levels improved
       -Segment loss of $11M, improved $128M yr/yr on
        21% less revenue
  / /  300mm plant ramping volume as planned
       -Capital released for 2H tooling
  / /  Continued progress for our new Engineering and
       Technology Services
       -European launch


                     Revenue $3.1B, +8%, +2% @CC

                    Act.    @CC                    Act.     @CC       Brand                 Act.         ACC
                    ----    ----                  -----    ----      ------               -----        -----
        OS           8%     2%                                        WebSphere Family      14%           8%
                                  Distributed     12%      5%         Data Management        9%           3%
                                                                      Lotus                 (3%)        (10%)
Middleware           9%     3%           Host      8%      2%         Tivoli                (5%)        (12%)
                                                                      Other Middleware       7%           2%
                                                                      Rational               na           na

                      WebSphere and Data Management gained share
                         against their primary competitors


        > Closed acquisition on February 21
        > Integration effort ahead of expectations
        > Record high average deal size
        > Exceeding initial business case revenue expectations
        > Full-quarter revenue exceeded the Street's expectations
          for RATL corporation


           [IBM GRAPHIC]


                         IBM GEOGRAPHIC REVENUE
                                                                          % of
                                            B/(W)          Yr/Yr           Rev
($B)                            1 Q03,      Rptd            @CC           1 Q03
                                -----       -----          -----          -----
Americas                        $8.6         5%             7%             43%

Europe/ME/A                      6.3        23%             3%             31%

Asia Pacific                     4.5        14%             5%             22%

OEM                              0.7       (15%)          (16%)             4%
                               -----       ---            ----            ---
IBM                            $20.1        11%             4%            100%
                               -----       ---            ----            ---


                           CURRENCY: YEAR-TO-YEAR COMPARISON

                                 QUARTERLY AVERAGES PER US$

                                                              @ 4/11 SPOT
                                            4/11     -------------------------
                               1Q03         SPOT      2Q03     3Q03       4Q03
                            -----------    ------    ------  -------   -------

         Euro               0.93            0.93

            Yr/Yr                  18%                 15%      8%         7%

         Pound              0.62            0.64

            Yr/Yr                  11%                  7%      1%        -0%

         Yen                 119             120

            Yr/Yr                  10%                  5%     -1%         2%
                            -----------    ------    ------  -------   -------
IBM Revenue Impact                  7                 4-5      2-3        2-3
                                   pts                pts      pts        pts

Negative Yr/Yr growth signifies a translation hurt

                                                                  ATTACHMENT III


BALANCE SHEETS                                MARCH         DECEMBER     MARCH
(dollars in millions)                        31, 2003       31, 2002    31, 2002
                                             --------       --------    --------

Cash                                         $ 1,043        $  1,157    $    708
                                             --------       --------    --------
Net investment in sales-type leases           11,743          12,314      12,340
Equipment under operating leases:
  External customers                           1,787           1,922       2,036
  Internal customers*                          1,667           1,701       1,639
Customer loans                                 9,342           9,621       8,863
                                            --------        --------    --------
Total customer financing assets               24,539          25,558      24,878
Commercial financing receivables               4,336           5,525       5,119
Intercompany financing receivables*            1,725           1,616       1,781
Other receivables                                414             445         497
Other assets                                   1,007             941         741
                                            --------        --------    --------
Total financing assets                      $ 33,064        $ 35,242    $ 33,724
                                            --------        --------    --------
Intercompany payables*                      $  3,117        $  5,383    $  3,512
Debt **                                       24,134          23,828      24,377
Other liabilities                              2,288           2,556       2,124
                                            --------        --------    --------
Total financing liabilities                   29,539          31,767      30,013
Total financing equity                         3,525           3,475       3,711
                                            --------        --------    --------
Total financing liabilities and equity      $ 33,064        $ 35,242    $ 33,724
                                            --------        --------    --------

* Amounts eliminated for purposes of IBM's consolidated results. These assets,
along with the other assets in this table, are however, leveraged using Global
Financing debt.

** Global Financing debt includes debt of the company and of the Global
Financing units that support the Global Financing business.

The company's Global Financing business provides funding predominantly for
the company's external customers but also provides internal financing for the
company. Internal financing is predominantly in support of Global Services'
long-term customer service contracts. Global Financing also factors a
selected portion of the company's accounts receivable, primarily for cash
management purposes. Conversely, Global Financing also owes the non-Global
Financing businesses amounts primarily for the purchase of products to be
leased externally. In the company's Consolidated Statement of Earnings, the
interest expense supporting Global Financing's internal financing to the
company is reclassified from Cost of financing to Interest expense.