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: October 16, 2002
                        (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 October 16, 2002, regarding its
financial results for the periods ended September 30, 2002, including unaudited
consolidated financial statements for the periods ended September 30, 2002, 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 third quarter earnings presentation to securities analysts on
Wednesday, October 16, 2002.

     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:   October 16, 2002

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

                                                                 ATTACHMENT I


     ARMONK, N.Y., October 16, 2002 . . . IBM today announced third-quarter
2002 results from continuing operations of $.99 diluted earnings per common
share compared with $.97 in the third quarter of 2001. Third-quarter income
from continuing operations was $1.7 billion compared with $1.7 billion in the
2001 third quarter. Revenues were $19.8 billion, flat (down 2 percent at
constant currency) compared with the third quarter of 2001.

     Samuel J. Palmisano, IBM president and chief executive officer, said: "We
are encouraged by the solid results the IBM team produced this quarter. In this
difficult economic environment, we delivered a good revenue performance and grew
EPS. In addition, we gained share and momentum in key businesses.

     "Global Services, Storage and IBM eServers, particularly our pSeries UNIX
server and Intel-based xSeries line, performed well, despite the economy. We
believe both WebSphere and DB2 gained share in a difficult software market.
Microelectronics increased revenue for the first time in many quarters and cut
its losses substantially.

     "Our performance was the result of disciplined execution, backed with IBM's
strong strategic position in areas becoming increasingly important in the
information technology industry. Customers continue to value and invest in
integrated solutions, deep industry expertise, comprehensive services
capability, and open enterprise hardware and middleware.

     "We recognized early the fundamental changes now taking place in computing
and did the hard work to prepare ourselves, including the acquisitions of
PricewaterhouseCoopers Consulting and several software companies. As a result,
we are well positioned for the future and believe we will continue to distance
ourselves from the competition."

     From continuing operations in the third quarter, the Americas revenues were
$9.0 billion, a decrease of 2 percent (flat at constant currency) from the 2001
period. Revenues from Europe/Middle East/Africa were $5.7 billion, up 1 percent
(down 8 percent at constant currency). Asia-Pacific revenues grew 3 percent (2
percent at constant currency) to $4.3 billion. OEM revenues increased 1 percent
(1 percent at constant currency) to $867 million compared with the third quarter
of 2001.

     Revenues from Global Services, including maintenance, grew 2 percent (flat
at constant currency) in the third quarter to $8.9 billion. Global Services
revenues, excluding maintenance, increased 2 percent (flat at constant
currency). IBM signed $9 billion in services contracts in the quarter. On
October 1, IBM completed the acquisition of PwC Consulting and announced the new
global business unit, Business Consulting Services.

     Hardware revenues from continuing operations decreased 1 percent (2
percent at constant currency) to $6.8 billion from the 2001 third quarter.
Overall, sequential year-to-year revenue performance for IBM eServers and
storage improved significantly in the quarter. Revenues from pSeries UNIX
servers and xSeries Intel-based servers grew in the quarter, with xSeries
having strong back-to-back quarterly results. Meanwhile, the iSeries had a
difficult quarter. With a single-digit percentage decline in the quarter,
revenues from IBM eServer zSeries mainframe were much improved year to year
compared with the first-half 2002. Total deliveries of zSeries computing
power as measured in MIPS (millions of instructions per second) increased 7

     Also in the third quarter, personal computer revenues declined year over
year but at a slower pace. Revenues from Microelectronics increased from a year
ago after a period of weakness in demand for semiconductor products.

                                     Page 1

     Software revenues decreased 3 percent (5 percent in constant currency)
to $3.1 billion compared to the 2001 third quarter. Middleware products,
which include WebSphere and DB2, declined 5 percent at constant currency in
the third quarter. WebSphere, IBM's family of e-business middleware products,
grew 27 percent from a year ago. IBM's leading database management software,
DB2, grew 2 percent. Revenues from Lotus and Tivoli declined year over year,
as did operating systems revenue. In the third quarter, the company made
several acquisitions to complement the company's software infrastructure
portfolio, improve time to market and gain market share.

     Global Financing revenues decreased 3 percent (4 percent at constant
currency) in the third quarter to $795 million. Revenues from the Enterprise
Investments/Other area, which includes industry-specific IT solutions, increased
5 percent (1 percent at constant currency) compared to the third quarter of 2001
to $257 million.

     The company's overall gross profit margin from continuing operations was
36.9 percent in the third quarter, compared to 37.6 percent in the year-ago

     Third-quarter expense and other income from continuing operations was $4.9
billion, 2 percent lower than the year-earlier period. Selling, general and
administrative and research and development expenses improved 2 percent and 3
percent, respectively. Lower intellectual property and custom development income
was offset partially by a benefit from other income and expense, and lower
interest expense. IBM's improved expense performance benefited additionally from
the company's continuing e-business transformation, productivity enhancements
and focus on discretionary spending.

     IBM's effective tax rate from continuing operations in the third quarter
was 29.5 percent compared with 28.9 percent in the third quarter of 2001.
     IBM spent approximately $600 million on share repurchases in the third
quarter. The average number of basic common shares outstanding in the quarter
was 1.69 billion compared with 1.73 billion shares in the same period of 2001.
There were 1.69 billion basic common shares outstanding at September 30, 2002.

     Cash on the balance sheet was $5.2 billion at September 30, 2002.

     Debt, including global financing, totaled $25.7 billion, a decrease
of $1.4 billion from year-end 2001. The core debt-to-capitalization ratio was 8
percent at the end of the third quarter, and global financing debt declined $1.4
billion from year-end 2001 to a total of $24.1 billion, resulting in a
debt-to-equity ratio of 6.8 to 1.

     As previously announced in June, the company reached an agreement with
Hitachi, Ltd. to sell its hard disk drive business, and, therefore, the results
from continuing operations exclude the HDD business. The HDD business is
presented separately as discontinued operations.

     For the third-quarter 2002, IBM reported a loss from discontinued
operations of $381 million, or $.22 per diluted common share, including $.06 per
diluted share, or $140 million pre-tax loss related to the HDD sale, compared
with a loss from discontinued operations of $118 million, or $.07 per diluted
share in the 2001 third quarter.

     For total operations, net income for the third quarter was $1.3 billion, or
$.76 per diluted common share, compared with $1.6 billion in net income, or $.90
per diluted share in the third quarter of 2001. Total revenues of $20.3 billion,
which includes $498 million of revenues from the HDD unit, declined 1 percent
from the third quarter of 2001.

                            Year-To-Date 2002 Results

     For the nine months ended September 30, 2002, income from continuing
operations was $3.4 billion, or $1.97 per diluted common share, including
$.64 per diluted share, or $1.6 billion in incremental pre-tax charges,
associated with the realignment of the Microelectronics Division and
productivity actions. In the prior-year period, income

                                     Page 2

from continuing operations was $5.6 billion, or $3.14 per diluted share.
Revenues from continuing operations totaled $57.5 billion, a decline of 6
percent (5 percent at constant currency) compared with the first nine months of
     For the first nine months of 2002, the loss from discontinued operations
was $862 million, or $.50 per diluted common share, including $.23 per diluted
share, or $573 million on a pre-tax basis for asset write-offs and the loss
related to the HDD sale, compared with a loss from discontinued operations of
$191 million, or $.11 per diluted share in the prior-year period.
     For total operations, net income for the first nine months of 2002 was
$2.6 billion, or $1.47 per diluted common share, including $.87 per diluted
share, or $2.2 billion in incremental pre-tax charges, associated with the
realignment of the Microelectronics Division, the agreement to sell the HDD
business, and productivity actions. In the prior-year period, net income was
$5.4 billion, or $3.03 per diluted share. Total revenues of $58.9 billion,
which includes $1.4 billion of revenues from the HDD unit, declined 7 percent
from a year ago.

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.

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

Financial Results Attached

      (Unaudited; Dollars in millions except per share amounts)

                       Three Months               Nine Months
                    Ended September 30,       Ended September 30,

                                   Percent                   Percent
                     2002     2001  Change     2002     2001  Change
                  -------  ------- -------  -------  ------- -------

 Global Services   $8,895   $8,682     2.4% $25,785  $25,895    -0.4%
  Gross margin       26.5%    28.4%            26.3%    27.2%

 Hardware           6,764    6,834    -1.0%  19,320   22,564   -14.4%
  Gross margin       26.7%    26.9%            25.4%    30.5%

 Software           3,110    3,201    -2.9%   9,273    9,155     1.3%
  Gross margin       83.9%    81.5%            83.3%    81.4%

 Global Financing     795      822    -3.2%   2,403    2,499    -3.8%
  Gross margin       56.2%    51.0%            56.5%    48.8%

 Enterprise Investments/
 Other                257      244     5.5%     721      813   -11.4%
  Gross margin       40.2%    40.8%            47.2%    44.6%

                                     Page 3

TOTAL REVENUE      19,821   19,783     0.2%  57,502   60,926    -5.6%

GROSS PROFIT        7,323    7,434    -1.4%  21,093   22,956    -8.1%
  Gross margin       36.9%    37.6%            36.7%    37.7%


 S,G&A              3,987    4,085    -2.4%  13,298   12,350     7.7%
  % of revenue       20.1%    20.6%            23.1%    20.3%

 R,D&E              1,213    1,252    -3.1%   3,546    3,745    -5.3%
  % of revenue        6.1%     6.3%             6.2%     6.1%

 Intellectual property
  and custom development
  income             (232)    (393)  -41.1%    (771)  (1,012)  -23.8%
 Other (income)
   and expense        (83)      29     nm       111     (164)    nm
 Interest expense      34       53   -36.3%      97      181   -46.5%

OTHER INCOME        4,919    5,026    -2.1%  16,281   15,100     7.8%
  % of revenue       24.8%    25.4%            28.3%    24.8%

INCOME TAXES        2,404    2,408    -0.1%   4,812    7,856   -38.7%
  Pre-tax margin     12.1%    12.2%             8.4%    12.9%

Provision for
income taxes          710      695     2.1%   1,389    2,275   -38.9%
  Effective tax
  rate               29.5%    28.9%            28.9%    29.0%

OPERATIONS         $1,694   $1,713    -1.0%  $3,423   $5,581   -38.7%
  Net margin          8.5%     8.7%             6.0%     9.2%

Loss from discontinued
operations           (381)    (118)    nm      (862)    (191)    nm

NET INCOME         $1,313   $1,595   -17.7%  $2,561   $5,390   -52.5%

Preferred stock
dividends             --       --               --        10

SHAREHOLDERS       $1,313   $1,595   -17.7%  $2,561   $5,380   -52.4%
                   ======   ======           ======   ======


   OPERATIONS       $0.99    $0.97     2.1%   $1.97    $3.14   -37.3%
   OPERATIONS       (0.22)   (0.07)    nm     (0.50)   (0.11)    nm
                    ------   ------           ------   ------

                                     Page 4

  TOTAL             $0.76*   $0.90   -15.6%   $1.47    $3.03   -51.5%

   OPERATIONS       $1.00    $0.99     1.0%   $2.01    $3.21   -37.4%
   OPERATIONS       (0.23)   (0.07)    nm     (0.51)   (0.11)    nm
                    ------   ------           ------   ------
  TOTAL             $0.78*   $0.92   -15.2%   $1.50    $3.10   -51.6%
                    ======   ======           ======   ======

   DILUTION       1,711.7  1,767.9          1,731.7  1,775.6
  BASIC           1,690.5  1,731.8          1,704.6  1,737.0

nm - not meaningful

* Does not total due to rounding.


                                         At           At
                               September 30, December 31,  Percent
(Dollars in millions)                  2002         2001    Change
--------------------          ------------- -----------   -------

 Cash, cash equivalents,
 and marketable securities           $5,222       $6,393    -18.3%

 Receivables - net, inventories,
 prepaid expenses                    32,094       36,068    -11.0%

 Plant, rental machines,
 and other property - net            14,451       16,504    -12.4%

 Investments and other assets        30,218       29,348      3.0%

 Assets of discontinued operations    1,971         --

                                   --------     --------
TOTAL ASSETS                        $83,956      $88,313     -4.9%
                                   ========     ========


 Short-term debt                     $7,971      $11,188    -28.8%
 Long-term debt                      17,773       15,963     11.3%
                                   --------     --------
 Total debt                          25,744       27,151     -5.2%

 Accounts payable, taxes,
 and accruals                        22,268       23,931     -6.9%

                                     Page 5

 Other liabilities                   13,667       13,617      0.4%

 Liabilities of discontinued
 Operations                             185         --
                                   --------     --------
TOTAL LIABILITIES                    61,864       64,699     -4.4%

STOCKHOLDERS' EQUITY                 22,092       23,614     -6.4%
                                   --------     --------
STOCKHOLDERS' EQUITY                $83,956      $88,313     -4.9%
                                   ========     ========


                                      THIRD QUARTER 2002
                     ---------- Revenue --------  Continuing     Pre-tax
(Dollars in millions) External Internal    Total  Operations      Margin
--------------------  --------- -------- --------  ----------     -------

Global Services        $8,895     $708   $9,603      $1,259        13.1%
          % change        2.4%     3.5%     2.5%       -8.3%

Enterprise Systems      3,028      200    3,228         381        11.8%
          % change       -0.9%    14.3%    -0.1%       96.4%

Personal and Printing
Systems                 2,736       33    2,769         (20)       -0.7%
          % change       -3.3%    83.3%    -2.7%       71.4%

Technology              1,039      214    1,253         (17)       -1.4%
          % change        3.3%   -48.6%   -11.9%       78.2%

Software                3,110      302    3,412         799        23.4%
          % change       -2.9%    28.0%    -0.7%       13.5%

Global Financing          789      238    1,027         218        21.2%
          % change       -3.1%    16.7%     0.9%      -30.6%

Enterprise Investments    240        1      241         (70)      -29.0%
          % change       -0.8%     0.0%    -0.8%        7.9%

TOTAL SEGMENTS         19,837    1,696   21,533       2,550        11.8%
          % change        0.0%    -2.2%    -0.1%        8.0%

Eliminations / Other      (16)  (1,696)  (1,712)       (146)

TOTAL IBM             $19,821       $0  $19,821      $2,404        12.1%
          % change        0.2%              0.2%       -0.1%

                                     Page 6

                                      THIRD QUARTER 2001
                     ---------- Revenue --------  Continuing     Pre-tax
(Dollars in millions) External Internal    Total  Operations      Margin
-------------------- --------- -------- --------  ----------     -------

Global Services        $8,682     $684   $9,366      $1,373        14.7%

Enterprise Systems      3,056      175    3,231         194         6.0%

Personal and Printing
Systems                 2,829       18    2,847         (70)       -2.5%

Technology *            1,006      416    1,422         (78)       -5.5%

Software                3,201      236    3,437         704        20.5%

Global Financing          814      204    1,018         314        30.8%

Enterprise Investments    242        1      243         (76)      -31.3%

TOTAL SEGMENTS         19,830    1,734   21,564       2,361        10.9%

Eliminations / Other*     (47)  (1,734)  (1,781)         47

TOTAL IBM             $19,783       $0  $19,783      $2,408        12.2%

* Reclassified to conform with 2002 presentation.

                                  SEGMENT DATA

                                      NINE MONTHS 2002
                     ---------- Revenue --------  Continuing     Pre-tax
(Dollars in millions) External Internal    Total  Operations      Margin
-------------------- --------- -------- --------  ----------     -------

Global Services       $25,785   $2,089  $27,874      $3,038        10.9%
          % change       -0.4%     8.6%     0.2%      -18.9%

Enterprise Systems      8,446      526    8,972         740         8.2%
          % change      -12.6%    -3.8%   -12.2%      -33.4%

Personal and Printing
Systems                 8,047       79    8,126          10         0.1%
          % change      -11.3%    58.0%   -10.9%      107.4%

Technology              2,972      649    3,621      (1,099)      -30.4%
          % change      -24.9%   -43.2%   -29.0%        nm

Software                9,273      844   10,117       2,272        22.5%
          % change        1.3%    23.0%     2.8%       13.5%

                                     Page 7

Global Financing        2,375      617    2,992         677        22.6%
          % change       -4.5%    -4.6%    -4.5%      -22.9%

Enterprise Investments    694        3      697        (204)      -29.3%
          % change      -11.3%    50.0%   -11.1%       16.0%

TOTAL SEGMENTS         57,592    4,807   62,399       5,434         8.7%
          % change       -5.6%    -3.8%    -5.5%      -27.7%

Eliminations / Other      (90)  (4,807)  (4,897)       (622)

TOTAL IBM             $57,502       $0  $57,502      $4,812         8.4%
          % change       -5.6%             -5.6%      -38.7%

nm - not meaningful

                                      NINE MONTHS 2001
                      ---------- Revenue --------  Continuing     Pre-tax
(Dollars in millions)  External Internal    Total  Operations      Margin
--------------------  --------- -------- --------  ----------     -------

Global Services       $25,895   $1,923  $27,818      $3,748        13.5%

Enterprise Systems      9,669      547   10,216       1,111        10.9%

Personal and Printing
Systems                 9,072       50    9,122        (136)       -1.5%

Technology *            3,960    1,143    5,103         161         3.2%

Software                9,155      686    9,841       2,001        20.3%

Global Financing        2,486      647    3,133         878        28.0%

Enterprise Investments    782        2      784        (243)      -31.0%

TOTAL SEGMENTS         61,019    4,998   66,017       7,520        11.4%

Eliminations / Other*     (93)  (4,998)  (5,091)        336

TOTAL IBM             $60,926       $0  $60,926      $7,856        12.9%

* Reclassified to conform with 2002 presentation.

Contacts:  IBM
           Bill Hughes, 914-499-6565
           Carol Makovich, 914-499-6212
                                     Page 8

                                                                  ATTACHMENT II

Thank you,  Mandy.  Good  afternoon.  This is Hervey Parke, Vice President of
Investor Relations for IBM, thank you all for joining us. Let me quickly give
you a few pieces of information.

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 bar.

For printing slides, there are two alternatives:

As in the previous quarter, 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 about 45 minutes, 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.

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

Thanks Hervey.  Good afternoon everyone.  Thank you for joining us today.
We have a lot to cover, so let's get started.

In one of the toughest operating and spending environments we have ever seen, we
are pleased that we delivered both modest revenue and profit growth.

3rd-quarter revenues from Continuing Operations were $19.8 billion, up 2 tenths
of a percent from 3rd quarter 2001 -- and up 9 tenths of a percent sequentially
from 2nd quarter 2002.

Earnings per share for Continuing Operations were 99 cents, up 2 cents from last
year. Key to this was that good revenue performance, the actions we began taking
in the 2nd quarter, along with our ongoing focus on cost and expense. So EPS
grew 11% from the 2nd quarter, excluding the charges in the 2nd quarter.

As a result, we exceeded average Street expectations in both Revenue and
Earnings Per Share.

In addition, we believe we have gained or held share in our key business
segments, including Global Services, Storage, WebSphere and DB2 Software and
Servers, particularly Intel-based servers.

We generated Free Cash Flow of $1.5 billion, with cash on hand at $5.2 billion.
Our balance sheet remained strong.

Our financial performance in the 3rd quarter is the result of a carefully
executed plan that we put in place at the beginning of the year.

These were not just a series of tactical moves made month-to-month in response
to a volatile worldwide economy. We have made these strategic moves because we
know that the current economic issues are accelerating the shift to a new
computing model.

Please turn to Chart 4.



The new model is based on Business Insight, Infrastructure, and Technology,
built on customer insight, solutions and research and development.

In fact, what you have been seeing IBM do over the past six months is all aimed
at leading in this new model of computing.

We began this year cautiously optimistic about the economy and the overall
information technology industry. But almost immediately, we saw the economy
slowing, and customers rethinking their information technology spending

In fact, back in February at our PartnerWorld Conference, Sam Palmisano warned
that 2002 could be a very tough economic year. And he was right.

But, we did not sit back and wait to see what would happen in the IT industry.
We began executing a game plan -- aligned with our strategy and vision to offset
the impact of a downturn in overall demand. We took major steps in each quarter
of 2002 to begin positioning the company for profitable growth.

     o    In January, we announced our plans to outsource desktop manufacturing
          operations to reduce costs.

     o    In May, we took a hard look at additional, economy-driven cost
          savings, pared back operations in the weakest sectors, and rebalanced
          our workforce.

     o    In June, we announced a deal with Hitachi to sell our HDD business and
          realigned our Microelectronics Division, increasing our focus on
          emerging growth opportunities.

          Just last week, you saw our announcement of the new Engineering and
          Technology Services Unit, a move which will keep IBM in the center of
          custom-chip design and manufacturing, the most profitable segment of

     o    In June, we also announced the sale of our Endicott low-tech OEM
          business, and in July the outsourcing of some of our human resources
          administration to Fidelity, such as call centers.


     o    At the same time as we were lowering costs through these specific
          actions, we also continued our relentless focus on cost containment
          and expense reductions throughout the company. In fact, we work at
          productivity improvements throughout the company all the time. I've
          covered many times with you the progress of our IBM-dot-com coverage
          or other tools like e-Learning.

All of these actions will enable us to continue to invest in the future.

Now, please turn to Chart 5.


We've been building our businesses through smart acquisitions.

     o    In Software, we made important acquisitions, primarily to improve our
          speed-to-market as well as fill in gaps in our portfolio, starting
          with Informix, followed by CrossWorlds, Metamerge, Holosofx,
          Trellisoft, and Access360 .

     o    In Services, we acquired the PricewaterhouseCoopers Consulting unit. I
          will talk more about that in a minute. And we just announced an
          agreement to acquire Matra Datavision, an engineering consultant and
          software design firm with 900 engineers in Europe and North America.

Now, before reviewing our overall business results, let me give you a brief
update on the PwC Consulting acquisition and integration into IBM.

As you know, on October 1st we completed the acquisition of PwC Consulting.
Approximately 30,000 partners and consultants in more than 50 countries have
joined IBM, the leading business consulting and technology services organization
in the world.

And all of us are very pleased with progress we've made so far in the
integration of this world-class company.

Please turn to the next chart ... Chart 6.



In addition to the business process expertise that IBM gains from this
acquisition, we go to market with an even stronger customer and industry

For example, in a short period of time we have already developed unique Joint
Value Propositions for 15 key industries served by Business Consulting Services,
based on exploiting the best practices of each company before the integration.

And this is also supported by our being recognized by industry analysts as #1 in
SAP, J.D. Edwards, and PeopleSoft implementations.

PwC Consulting will add about a billion dollars of net revenue to our 4th
quarter results.

As we've stated before, our investment strategy supports our view that, over the
long term, the profit opportunity in Information Technology is shifting towards
Services and Software.

So we look for acquisitions of skills and technology principally in these areas
to support our ability to deliver integrated solutions, enhance our market
leadership, produce growth, and drive profitability and financial returns.

The reason we have been able to make these acquisitions now is because we did
not speculate during the dot-com bubble. During that time, we remained focused
on returns and did not acquire overvalued companies.

This has allowed us to become more active with acquisitions now as valuations
have become more reasonable. More importantly, this will allow us to invest for
improved growth and, at the same time, continue to achieve reasonable returns.

In the late 90's, we would routinely pass on opportunities because we believed
the valuations were out of line with the expected returns. As valuations have
dropped, we have been ready to move quickly.

Having talked about our acquisition strategy, let me now share with you our
Return on Invested Capital performance, and provide you with some expanded
perspective on this important metric.


Please turn to Chart 7.


Our approach to acquisitions is driven by a discipline that we apply to all of
our investments. It is this focus that kept us from making acquisitions during
the dot-com craze. All of our investments are reviewed on an ROIC basis and our
historic performance consistently demonstrates that we have benefited from this

IBM's ROIC relative to other companies are extremely compelling and demonstrate
our effective allocation of investments. We'll talk more about this in our
November 13 analyst meeting.

Please turn to Chart 8.


Now, as you know, we have been increasing our transparency. For instance, we now
show IP income separately on the income statement and, each quarter, I take you
through a detailed "road map" of our expenses.

In that spirit, I want to go into a little more detail about our pension plan

As many of you know, the pension assumptions for 2003 will be determined at the
beginning of the year.

For 2002, you already know that we changed the expected rate of return from 10
percent to 9.5 percent, consistent with return assumptions of many other

While we have realized net pension income reflected by Generally Accepted
Accounting Principles in recent years, we cannot speculate on what the markets
will do for the full year 2002 and beyond.

However, given the current market trends and historical trends, we are looking
at reducing our expected return assumption for 2003 in the range of 8 percent to
8.5 percent. We believe that this will affect the income statement by roughly
$700 million next year.


We expect to more than offset this impact through $900 million in productivity
savings from the restructuring actions we took in the 2nd quarter.

Regarding funding: It should come as no surprise that the market's downturn this
year has resulted in a drop in the value of our pension plan assets. Our current
working assumption is that we will start contributing as much as $1.5 billion to
the U.S. pension plan, targeting the plan to be fully funded by 2005. We will
not finalize this funding decision until the end of the year.

Outside the U.S., we expect we will make contributions similar to the levels
we've made in the past few years, so no change there.

With our strong cash flow, we believe these changes will not be an issue for us.

Now let's get into the 3rd-quarter results for Continuing Operations -- starting
with Revenue -- Chart 9.


Total Revenue from Continuing Operations was up 2 tenths of a percent as
reported, and down 2 percent at constant currency.

Note that Revenue grew sequentially from the 2nd quarter to the 3rd quarter,
driven by Global Services and Hardware.

Revenue for Global Services was up 2 percent year-to-year as reported, and
unchanged at constant currency.

This is 2 points better than the 2nd quarter's decline, reflecting improvement
in Business Consulting Services and Integrated Technology Services.

Hardware revenue in the 3rd quarter declined 2 percent at constant currency, but
this is a significant improvement over the 2nd quarter, which was down 17

The segment data shows that it was a broad improvement:


     o    Technology, now primarily our Microelectronics Division, grew 4
          percent after declining 30 percent in the 2nd quarter and 42 percent
          in the 1st quarter.

     o    Enterprise, servers plus storage, declined only 3 percent, after a 17
          percent decline in the 2nd quarter.

     o    And Personal and Printing Systems was down 5 percent, versus down 10
          percent in the 2nd quarter.

Software had a good quarter against competition, but its revenue declined 5
percent at constant currency.

Global Financing, revenues declined 4 percent at constant currency, consistent
with recent quarters. Income-generating assets were down 10 percent 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. What you'll see is that, on a year-to-year basis at constant currency:

     o    Americas has steadily improved each quarter, from a decline of 8
          percent in the 1st quarter to flat revenue in the 3rd quarter. That a
          reflects improved execution, more competitive offerings, and share

     o    Asia Pacific grew 2 percent in the 3rd quarter, after a 3 percent
          decline in the 1st half.

     o    But Europe fell off a little more, with an 8 percent decline in the
          3rd quarter. We saw continued weakness in the U.K. and in the
          Communications sector.

Note that currency was a 2-point help to revenue.

Now let me give you an additional view of our revenue, by Industry Sector,
Chart 10.


This chart shows the size of our five worldwide industry sectors, as well as our
important Small and Medium Business customers. While we report our results by


brand and by geography, our go-to-market strategy is based on customer
requirements, to enable us to put the right focus on solutions.

As you might expect, Financial Services is the largest at $5 billion of revenue
in the 3rd quarter, and IBM has the largest share of this sector.

We are also industry leaders in the Industrial, Distribution, and Communications
sectors. And we are gaining share in the Public Sector where we grew 12 percent
in the 3rd quarter, led by Education and Federal Government.

We have seen continued improvement in growth rates each quarter for the past
year with our Small and Medium Business customers, despite the difficult
economic environment. Customer satisfaction of our small and medium business
customers was up, reflecting our increased focus on this segment.

Our strength is our focus on customer solutions. And as the rest of the IT
industry moves this way, we expect this customer view of revenue will become a
more important metric.

Now let's turn to Gross Profit, Chart 11.


Total gross profit margin for Continuing Operations in the 3rd quarter was 36.9
percent, down 7 tenths of a point from last year, but about the same as the 2nd
quarter, so gross profit dollars also grew sequentially.

Most notable was the sequential improvement in Hardware gross profit margin, 2

There were two factors that stand out:

First, we started to see the benefits from our aluminum capacity reductions in
our Microelectronics Division as products rolled through inventory.

Second, our storage products are benefiting from the cost effectiveness of our
new high-end Shark models, known as Silvertip.


Now let's turn to Expense because we have a lot to cover there, Chart 12.


Total expense and other income declined 2 percent in the 3rd quarter. And total
expense to revenue improved by 6 tenths of a point. The major categories, SG&A
and R&D, both contributed to that improvement.

As we have pointed out every quarter this 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, on the hurt side there were four key factors:

     Bad debt expense was up $79 million, -- the eighth straight quarter we have
     absorbed a year-to-year increase in reserves for Accounts Receivable.

     Let me add that, year-to-date, we have absorbed $480 million in A/R
     provisions, up $180 million from the first three quarters of last year.

     Our A/R coverage ratio is up, and the credit quality of our Receivables
     portfolio has remained relatively constant.

     In this environment, we are being very careful to have adequate coverage.

     IP Income was down $161 million. With economic uncertainty and
     consolidation, there is not as much opportunity to monetize our
     intellectual property.

     Net pension income was a $88 million hurt to cost and expense.

     And as in the 2nd quarter, we were also impacted year-to-year in cost and
     expense by our currency hedging contracts as the dollar weakened.

On the other hand, there were some expenses or losses that were lower this

     Continued workforce rebalancing costs were down $89 million from last year.
     This quarter, our rebalancing actions were a little lower than usual as we
     sorted through the just-completed acquisition of PwC Consulting.


     Equity transactions net of impairments were actually a loss of $6 million
     this quarter, but last year we had a net loss of $133 million.

     Elimination of goodwill amortization was another $63 million, consistent
     with past quarters, and

     We had a year-to-year benefit of $29 million from real estate transactions,
     which included a land sale in Japan of about $50 million. We are not in the
     real estate business, but, for example, we are in the business of buying
     and consolidating assets through our Outsourcing contracts.

As we've said before, these "road map" factors may help or hurt in any given
quarter, but it's our job to deal with these events over time, within the
context of our business model.

This quarter, if we added up all these factors and backed them out of our
results, we would have had even stronger profit growth, either year to year or
quarter to quarter.

We feel very confident about the quality of our earnings.

Now let's turn to Cash Flow, Chart 13.


Free Cash Flow was $1.4 billion through the 3rd Quarter.

Despite a weak economy, lower net income, and $500 million of restructuring
payments, we generated good cash flow due to continued focus on working capital
and capital expenditures.

Our receivable performance continues to be strong with a year-to-year reduction
in Days Sales Outstanding of 9 percent.

Inventories also improved, with an increase in inventory turns of 18 percent.
Inventory now stands at a long-term low for the company, and turns continue to
increase both sequentially and year to year.

We also continue to focus on capital expenditure control and have reduced
expenditures both year to year for the quarter, and year to date.


Cash flow also benefited from changes in the structure of our fixed-term debt

Share repurchase remains an important part of our financial model. In the 3rd
quarter, our buy-back was reduced because of IBM stock used as part of our
purchase of PwC Consulting, as well as for retention programs. This required us
to be out of the market for over a month leading up to the closing date. We
returned to the market as soon as the transaction closed.

Year-to-date, we've spent $4.1 billion to buy back about 47 million shares, with
$3.9 billion remaining in our last Board authorization at the end of the

Now let's look at that Balance Sheet, Chart 14.


The Balance Sheet remains very strong.

We ended the quarter with $5.2 billion in cash, which was up from $4 billion in
the 3rd quarter of 2001. The increase was in anticipation of the acquisition of
PwC Consulting that we closed on October 1.

Total debt decreased $2.9 billion from a year ago.

Global Financing debt decreased by $2.3 billion, consistent with the reduction
in Global Financing assets. Global Financing was leveraged at a comfortable 6.8
to 1.

Core debt was reduced by $600 million year-to-year to $1.6 billion, and stands
at a conservative 8 percent debt-to-capital.

This year's 4th quarter has some key dynamics.

We have just closed the PwC Consulting transaction which included $2.7 billion
in cash.


We expect this to be partially offset with the sale of our HDD transaction which
will generate well over $1 billion in cash.

Debt-to-capital levels may rise in the 4th quarter, but with our continued focus
on cash flow, financial strength and flexibility, we expect any increase in
debt-to-capital to return to our typical low levels over time.

Now let me turn to a discussion of some of our individual businesses, starting
with Global Services, Chart 15.


IBM Global Services, at $8.9 billion, was flat at constant currency, and grew 2
percent as reported.

Maintenance grew 1 percent, while Services was flat.

Given the current Services environment, we believe IBM held share versus

Total signings for Services were $9 billion, down from last quarter due to the
continued deferral of multiple long-term outsourcing contracts.

This quarter we did sign nine deals greater than $100 million, of which one deal
was greater than $1 billion.

I will review the three major segments of IGS first, and then discuss some of
the dynamics facing IGS.

Strategic Outsourcing, which was more than 40 percent of Global Services, grew 1
percent at constant currency.

The pipeline remains strong due to our strong value proposition to customers in
both good and bad economies.

But customers still remained cautious about signing.

E-Business hosting continued its strong pattern of growth, up greater than 20
percent, as we continue to extend our market and technology leadership with our
new e-business on-demand offerings, such as:


     Linux Virtual Services, where customers consolidate UNIX and Intel
     environments onto a networked-based Linux computing environment, paying for
     only what they use.

     Also, Leveraged Procurement services, where customers are charged by the
     purchase order, without retaining a procurement infrastructure of their

Integrated Technology Services grew 5 percent at constant currency. ITS was
about one third of Global Services, and includes product support services and

ITS services, without maintenance, grew 8 percent, partly due to increased
deployments of network hardware.

Business Consulting Services, formerly BIS, was about a quarter of Global
Services revenue. Starting in the 4th quarter, we will consolidate PwC
Consulting into BCS's results. At constant currency, this unit declined 8
percent for the quarter, a slight improvement from the second quarter when we
declined 11 percent. Sequentially, BCS was up slightly.

We believe we beat the average street revenue estimates for services, based on
the BCS Americas performance which posted its 1st quarter of growth in five
quarters. They grew 3 percent in constant currency, coming from strength in the
public and industrial sectors.

Also, let me give you a couple of additional specifics on the progress of the
PwC Consulting acquisition:

     We are pleased to report that roughly 1,100 partners joined IBM.

     To date, we have closed local purchase agreements for country partnerships
     representing 99 percent of the value of the transaction, and anticipate
     closing the remainder by November 1st.

In terms of the 4th quarter financials, we continue to expect an impact of
about 30 cents per share, with the following composition:


     About a 5-cent hit to ongoing operations, including amortization of

     About 8 or 9 cents related to the deal proceeds, including the restricted
     stock units used for retention.

     And, approximately 15 to 16 cents for transition charges associated with
     integration and restructuring.

For 2003, we continue to expect that PwC Consulting will be accretive during the
second half of the year, and break-even for the full year.

Now let me expand a bit more on the signings I mentioned earlier.

     Demand remains strong.

     As you see on the chart, our signings of short-term contracts remained flat
     year-to-year despite a difficult quarter.

     Regarding longer-term contracts, customers deferred signing 11 deals, each
     greater than $250 million, several of which were greater than $1 billion,
     mostly due to increased internal review and analysis.

     And although our pipeline of new deals for short-term contracts at the end
     of the quarter remains relatively stable, our pipeline for key, long-term
     contracts was significantly larger than it has been at any time in the last
     four quarters.

Regarding changes in scope to existing contracts, this quarter, we experienced
about the same level as last quarter.

The net of signings, revenue and scope changes is that the backlog for Global
Services, including Strategic Outsourcing, BCS, and IT Services and Maintenance,
was estimated at $103 billion at the end of the quarter.

Before I close the discussion on Services, let me address our accounting
policies for Services.

     For the vast majority of our Services business, our revenue recognition
     reflects those services we actually deliver in the period.


     We do use Percentage of Completion or POC accounting for some of our
     contracts, primarily short-term contracts.

     We tightly control the use of POC accounting. Included is a thorough,
     ongoing review of our unbilled services revenue.

     We track the percentage of our total services revenue that remains unbilled
     during each quarter. Over the last two years, this percentage has stayed
     relatively level.

     In addition, we monitor the age of our unbilled services revenue. Two
     thirds of it is less than 30 days old.

     Finally, our Days Sales Outstanding measurement for Services has steadily

Now let me wrap up Global Services. In the 3rd quarter, we initiated and signed
an acquisition of PwC Consulting, as well as made significant progress in its
integration. Executed on the restructuring actions announced in the 2nd quarter,
and delivered good revenue performance, highlighted by the results in the
Americas BCS organization.

Now, click on the NEXT button for Chart 16, and I'll discuss eServers and


IBM's servers and storage had a good quarter, with share gains driven by growth
in xSeries and pSeries servers as well as disk storage.

And in an environment recently referred to as "brutal" by one of our competitors
during their preannouncement, revenue and gross margin for both our server and
storage businesses grew sequentially.

First, mainframe revenue was down 8 percent while MIPS grew 7 percent against a
strong 3rd quarter a year ago.

This platform continued to benefit from new workloads driven by Linux which was
up 45 percent year-to-year.


Our pSeries UNIX servers grew 1 percent year-to-year and gained share.

Sequentially from the second quarter, they were up 13 percent, driven by the
high-end. Our p670 and p690 models grew over 20 percent sequentially.

And in the 3rd quarter, we began shipping the p630, our first low-end model with
Power4 technology.

iSeries revenue was down 20 percent year-to-year, and down 2 percent

We began shipping the high-end i890 which brings Regatta's Power4 technology to
the iSeries. This model gives our high-end customers more scalability and
mainframe-like features, including dynamic partitioning and the flexibility of
capacity on demand.

Total xSeries grew 15 percent year-to-year.

Servers were up 22 percent. This was fueled by the high end where we took share
from every major competitor, again.

Professional Work Stations were down 12 percent.

Leveraging IBM's extensive Research and Development, we have differentiated
these standards-based servers by offering scalability and manageability tools
not available from any other vendor. Customers value the flexibility and total
cost of ownership benefits that these servers offer for large enterprise
workloads and server consolidation. Similar advanced features will be available
on our blade servers later this year.

In storage, we did not see the same industry softness recently referenced by our
competition. Revenue for disk storage was up 11 percent year-to-year. While
price was down about 30 percent year to year, it was stable from last quarter.

Gross margins went up both year-to-year and sequentially, despite the
year-to-year price decline.

Clearly, we are taking share. We've made up an incredible amount of ground
since Shark was first introduced. And, with our ability to deliver total
storage solutions, we believe we have caught up to EMC on a total revenue
basis, even with tape storage down 30 percent in the quarter. Now our intent
is to catch them in disk storage solutions.


Helping drive this growth was our new Shark Silvertip, with double the processor
speed and double the cache over prior Shark models, and with better costs. Sales
exceeded our expectations.

We also expect good growth in our SAN and NAS products, which grew 19 percent
in the third quarter.

Now click on the NEXT button for Personal and Printing Systems, Chart 17.


Revenue from our Personal and Printing Systems Group was down 5 percent
year-to-year. We believe this will be consistent with the industry decline when
that data becomes available.

This segment did lose $20 million, but it was a $50 million improvement from a
year ago and a $15 million improvement from last quarter.

We continue to execute on the financial management initiatives we have discussed
in the past. Plant and field inventories were down over 30 percent from a year
ago. Channel inventories were down over 10 percent from a year ago. Expenses
were also down over 10 percent from a year ago.

These actions have resulted in margin improvement both year to year and
sequentially. In addition, this segment continued to have strong cash flow

Now if you'll move to Chart 18, we'll cover Technology.


Four months ago, we announced our intention to sell our hard disk drive business
and realign our Microelectronics Division.

In the 3rd quarter, our loss in the HDD business, which is now reported in
Discontinued Operations, below Continuing Operations, was 22 cents per share.


The Technology Segment is now principally our Microelectronics Division. I told
you about the actions we were taking to lower the break-even point for this
Group. We have made good progress.

Revenue for this segment was up 4 percent year-to-year, and 3 percent
sequentially, driven by OEM logic revenue growth of 27 percent year-to-year and
12 percent sequentially.

Gross profit was up 9 points sequentially, and the segment loss of $17 million
was an improvement of $123 million from last quarter, and $61 million better
than last year.

These results reflect the actions we took in the 2nd quarter and the improved
utilization of our copper assets.

The new 300 millimeter plant is in test production and on schedule. We have
orders that would fully load the facility well into midyear of 2003. From what
we can tell about our competition, we may be the only manufacturer capable of
130 and 90 nanometer technologies.

Also this month, we announced IBM's new Engineering & Technology Services. By
leveraging IBM's unique technical abilities, this group will assist customers by
reducing their costs, time to market, and the complexities associated with
technology integration.

Initial customers of these services are Sony Computer Entertainment, Medtronics,
and the New York Stock Exchange for development and delivery of customized
desktop computers used on the trading floor.

Now click on the NEXT button for Software, Chart 19.


Our software business, at $3.1 billion, declined 3 percent as reported and 5
percent at constant currency.

Operating System revenue, which represents 20 percent of total software,
declined 2 percent.


Middleware revenue declined 5 percent.

Yet, we believe that, in this tough environment, IBM continued to gain share
against its primary competitors.

The software market is extremely difficult. Customer decision-making processes
have gotten even longer. And the siz e of individual software deals declined as
customers make smaller investments for quick returns. Revenue from deals in
excess of a million dollars accounted for only 34 percent of new customer sales
versus 39 percent from a year ago.

We are focused on expanding our customer base, including mid-sized customers,
but so far, that growth has not been sufficient to offset other customer trends,
given the environment.

So we had mixed results across our product portfolio:

Software revenue for our WebSphere family grew 27 percent in an environment
where its principal competitors declined. There are six key components to this
family. Let me touch on three:

     o    WebSphere Business Integration, which facilitates the use of WebSphere
          in various vertical industries, grew 34 percent.

     o    WebSphere Portals, providing web-based application user interfaces,
          more than doubled revenue.

     o    And our WebSphere Application Server grew 25 percent in license
          revenue, our 14th consecutive quarter of double-digit growth.

Meanwhile, our largest competitor had declining license revenue of 28 percent in
their latest reported results. Regardless of how you view it, we continued our
consecutive share gains against them.

Our Data Management software declined overall by 5 percent, but key products
performed well:

     o    DB2, our leading database, grew 2 percent. This is in sharp contrast
          to our nearest competitor which recently announced at least an
          11 percent decline in database license revenue, its fifth
          consecutive quarter of decline.


Lotus software declined 15 percent, driven primarily by messaging, which
includes Notes and Domino. We just started delivering our new Release 6 on
October 1st.

While customers continue to make upgrades for improved features and function,
new license sales in this mature market have slowed, as customers restructure
their own businesses.

And overall, Tivoli software declined 16 percent, partly driven by Tivoli
Systems Management's decline of 21 percent this quarter.

Year-to-date, growth for Tivoli System Management is 14 percent, good
performance when Industry analysts expect no growth in this market.

But, as we continued to leverage productivity initiatives such as shared
component development, the overall Software Segment pre-tax income was up 14
percent year-to-year, generating strong cash flow.

So overall, Software had a challenging 3rd quarter, although we believe that we
continued to gain share against our primary competitors.

IBM's middleware business has grown year-to-date by nearly $300 million, or 4

Meanwhile, our primary competitors in database and application server software
have seen revenue decline in the same time period by more than $1 and a quarter
billion, or 13 percent.

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

Before I take your questions, I have a few comments on the current business

I have just returned from Asia and Europe where I have been meeting with
customers. I got feedback similar to that of my colleagues and the sales team.

What we are hearing is that the environment remains tough. However customers are
continuing to support and work on IT projects. And more importantly, they have
not stopped investing in technology, as evidenced by our $19.8 billion in
revenues this quarter.


Customers recognize the value and competitive advantage that information
technology brings to their businesses. And they understand that great companies
invest for the future during tough economic periods.

Importantly, customers are still spending. However, their focus is not on this
piece of hardware or that piece of software, but on business solutions that
provide returns on their IT investments.

Looking to the 4th quarter, we will now begin to benefit from the added revenue
from our enhanced Business Consulting Services. Most Street models have not yet
taken this into account. After adjusting for that revenue and the earnings
impact, I am generally comfortable with the range of expectations for our
performance in the 4th quarter.

And looking ahead to 2003:

It is a bit early to give you a meaningful reading on the next fiscal year.
Everyone is trying to read the current economic environments. I may be able to
provide more on 2003 at our fall analyst session on November 13.

But regardless of the economy, we know exactly what we have to do as we head
into 2003:

          o    leverage our strong market position,

          o    continue to focus on cost, expense and cash flow,

          o    and then build on our leadership role when the market turns.

We do have an incredible market position and the financial resources to put to

I am confident about our industry and IBM's prospects going forward.

Now Hervey and I will take your questions.



IBM 3Q 2002
Earnings Presentation

October 2002


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 3Q 2002 RESULTS

                           (CONTINUING OPERATIONS)

                                  Actual   Yr/Yr   Qtr/Qtr
                                  ------   -----   -------
Revenue                           $19.8B   0.2%     0.9%
EPS                               $0.99      2%      11%*

* Excluding 2nd Quarter Charges


                          THE IT INDUSTRY LANDSCAPE

Business            Services enabling customers to
Insight             exploit innovative business models


Software            Hardware, software and
Hardware            services integrated into a
                    secure, reliable, scalable
                    information infrastructure

Technology          Technology optimized for a
                    distributed network




 -PwC Consulting


                        BUSINESS CONSULTING SERVICES

PwCC                             +              Business Innovation Services

-Deep business process expertise        -Leader in technology and integration
-Strong industry skills                 -Largest IT consultant
-Solid relationships at the business    -Building its business process
 buyer level                             expertise
-Building its technology skills

                        Business Consulting Services
                        #1 Consulting & Integration

                            IBM Global Services
                     BCS + Outsourcing + IT Services
                       #1 End-to-End Services Company


           [GRAPHIC OMITTED]


                             TRANSPARENCY IMPROVEMENTS

          Issue                      Response
          -----                      --------
        -IP Detail                   Breakout on Income Statement
        -Expense Detail              Roadmap included in
                                       Annual Report and Quarterly
        -Pension                     3Q Update


                                    IBM REVENUE
                             (CONTINUING OPERATIONS)

                      1Q02                 2Q02              3Q02
                      ----                 ----              ----
                      B/(W)   Yr/Yr        B/(W)  Yr/Yr      B/(W)  Yr/Yr
                      --------------       ------------      ------------  % of
                $B    Rptd    @CC    $B    Rptd   @CC   $B   Rptd   @CC    Rev
                ----  ----    ---    ---   ----  ----   --   ----   ---    ----
Global Services 8.2   (3%)    1%     8.7   (1%)   (2%)  8.9   2%    --      45%
Hardware        5.9  (25%)  (23%)    6.7  (16%)  (17%)  6.8  (1%)  (2%)     34%
Software        2.9   (1%)    3%     3.3    8%     7%   3.1  (3%)  (5%)     16%
  Financing     0.8   (6%)   (3%)    0.8   (2%)   (3%)  0.8  (3%)  (4%)      4%

Other          0.2   (14%)  (10%)    0.2  (23%)  (22%)  0.3   5%    1%       1%
              ----   -----  -----   ----   ----   ----  ---   --   ---     ----
IBM           18.0   (11%)   (8%)   19.7   (6%)   (6%) 19.8*  --   (2%)    100%
              ----   -----  -----   ----   ----   ----  ---   --   ---     ----



                         IBM REVENUE - INDUSTRY SECTOR

                                                   3Q Revenue
Financial Services                                   $5.0B
Public                                                3.2
Industrial                                            2.6
Distribution                                          1.9
Communications                                        1.8
Small / Medium Business                               4.4


                                 IBM GROSS PROFIT MARGIN
                                 (CONTINUING OPERATIONS)

                                        B/(W)               B/(W)                B/(W)
                               1Q02     Yr/Yr      2Q02     Yr/Yr       3Q02     Yr/Yr
                               ----     -----      ----     -----       ----     -----

Global Services               26.0%    0.5 pts     26.3%  (1.3 pts)     26.5%  (1.9 pts)
Hardware                      24.5%   (7.6 pts)    24.8%  (7.3 pts)     26.7%  (0.2 pts)
Software                      81.1%    0.9 pts     84.7%   2.3 pts      83.9%   2.4 pts
Global Financing              56.6%    9.3 pts     56.8%   8.6 pts      56.2%   5.2 pts
Enterprise Inv./Other         56.2%    6.7 pts     45.8%   2.5 pts      40.2%  (0.6 pts)
IBM                           36.1%   (1.0 pts)    37.0%  (1.3 pts)     36.9%  (0.7 pts)


                                      IBM EXPENSE SUMMARY - AS REPORTED
                                             (CONTINUING OPERATIONS)

                                                1Q02                 2Q02                            3Q02
                                            --------------        -----------                    --------------
                                                      B/(W)              B/(W)      Charges               B/(W)
                                            $B        Yr/Yr       $B     Yr/Yr        $B         $B       Yr/Yr
                                          -----     --------    -----   ------     --------     ----    --------
SG&A                                      4.0          1%        5.3     (26%)        1.1*       4.0        2%
RD&E                                      1.1          6%        1.2       7%                    1.2        3%
IP and Custom Dev. Income                (0.3)        12%       (0.2)    (31%)                  (0.2)     (41%)
Other Income and Expense                 (0.2)                   0.4                  0.5       (0.1)
Interest Expense                           --                     --                              --
Total Expense and Other Income            4.7          7%        6.7     (32%)        1.6        4.9       2%
E/R%                                     26.0%     (1.2 pts)    34.0%    (9.7 pts)              24.8%    0.6 pts

* Incremental

                                              IBM CASH FLOW - YTD

($B)                                                     3Q01YTD                   FY01                   3Q02YTD
----                                                     -------                   ----                   -------
Net Income from Continuing Ops.                            5.6                     8.1                       3.4
Depreciation/Amortization                                  3.4                     4.5                       3.8
Working Capital / Other                                   (2.9)                   (0.0)                     (2.1)
                                                          -----                   -----                     -----
Total Operating Sources                                    6.1                    12.6                       5.1
                                                          -----                   -----                     -----
Capital Expenditures, Net                                 (3.8)                   (4.9)                     (3.3)
Other Operating Uses                                      (0.2)                   (0.4)                     (0.5)
                                                          -----                   -----                     -----
Total Operating Uses                                      (4.0)                   (5.3)                     (3.8)
                                                          -----                   -----                     -----
Free Cash Flow                                             2.1                     7.3                       1.4
                                                          -----                   -----                     -----
Acquisitions                                              (0.9)                   (0.9)                     (0.2)
Global Financing Assets*                                   2.9                     1.8                       4.5
Total Debt                                                  --                    (0.5)                     (2.2)
Discontinued Operations                                    0.2                     0.1                      (0.6)
Dividends                                                 (0.7)                   (1.0)                     (0.8)
Share Repurchase                                          (4.3)                   (5.3)                     (4.1)
Other                                                      1.0                     1.1                       0.7
                                                          -----                   -----                     -----
Net Cash Flow                                              0.3                     2.7                      (1.2)
                                                          =====                   =====                     =====

* Excludes Fixed Assets


                                    IBM BALANCE SHEET

                                   Sept                     Dec                   Sept
($B)                               2001                     2001                  2002
                                  ------                   -----                 ------
Cash                                4.0                     6.4                     5.2
Core Assets*                       45.7                    46.0                    44.5
Global Fin. Assets*                35.4                    35.9                    32.3
Disc. Ops. Assets                                                                   2.0
                                 -------                 ------                  ------
Total Assets                       85.1                    88.3                    84.0

Other Liabilities                  34.6                    37.5                    35.9
Disc. Ops. Liabilities                                                              0.2
Core Debt                           2.2                     1.6                     1.6
Global Fin. Debt                   26.4                    25.5                    24.1
                                 -------                 ------                  ------
Total Debt                         28.6                    27.2                    25.7
                                 -------                 ------                  ------
Total Liabilities                  63.1                    64.7                    61.9

Equity                             22.0                    23.6                    22.1

Core Debt/Cap                       11%                     7%                      8%
Global Fin. Leverage                6.7                     6.8                     6.8

*Excluding Cash

                                      GLOBAL SERVICES

                                    Revenue $8.9B, 0% @CC

Services        0%                                           Signings  $  9B
Maintenance    +1%                                           Backlog   $103B

                    -Revenue growth:
                       -Strategic Outsourcing: 1%
                       -Integrated Technology Services: 5%
                       -Business Consulting Services: -8%
                         -Americas leading BCS recovery

                          IGS WW Contract Signings

                             [GRAPHIC OMITTED]


                                      eSERVERS AND STORAGE

                                  Revenue $3.0B, -3% yr/yr @CC

                                           Yr/Yr                  Qtr/Qtr
                                           ------                 -------
IBM eServers                                (3%)                    1%        Taking share
   zSeries                                  (8%)                   (6%)
   pSeries                                   1%                    13%
   iSeries                                 (20%)                   (2%)
   xSeries                                  15%                     3%

-Storage: Revenue down 5% yr/yr

  -Disk storage up 11% yr/yr, taking share
    -SAN / NAS up 19%
    -Margins up qtr/qtr and yr/yr

  -Tape down 30% yr/yr


                             PERSONAL AND PRINTING SYSTEMS

                             Revenue $2.7B, -5% yr/yr @CC

  -Segment loss of $20M, improved $50M yr/yr

  -Continued focus on operational efficiency
     -Plant / field inventory down > 30% yr/yr
     -Channel inventory down > 10% yr/yr
     -Expenses down > 10% yr/yr

  -Margin improvement yr/yr, flat qtr/qtr

  -Net contributor of cash


                      Revenue $0.9B, +4% yr/yr @cc

-Segment loss of $17M, improved $123M qtr/qtr (excluding 2Q charges)

-OEM Logic revenue  up 27% yr/yr, up 12% qtr/qtr

-Gross margin improved 5 points yr/yr and 9 points qtr/qtr

-300mm plant opened

-Engineering and Technology Services launched
  -Leveraging unique IBM technology and skills



                            Revenue $3.1B, -5% @CC

              Continued share gains in difficult market
                -Lengthened purchase decision times
                -Focus on smaller, fast payback, investments

                                   Yr/Yr Revenue Growth
                                     QTR       YTD
                                     ---       ---
         WebSphere Family           27%        34%
           WebSphere App Server     25%        29%
         Data Management            (5%)       15%
           DB2                       2%         8%
         Tivoli                    (16%)        2%
         Lotus                     (15%)       (6%)

                      3Q02 Revenue Dynamics

Systems       -2% yr/yr   ----------> Middleware

Middleware    -5% yr/yr                          UNIX/NT -13% yr/yr

                          ---------->            Host -1% yr/yr



                                 IBM GEOGRAPHIC REVENUE
                                 (CONTINUING OPERATIONS)

                       1Q02                      2Q02                      3Q02
                       ----                      ----                      ----
                       B/(W)  Yr/Yr              B/(W)   Yr/Yr             B/(W)   Yr/Yr
                       ------------              -------------             -------------  % of
               $B      Rptd    @CC       $B      Rptd    @CC       $B      Rptd    @CC     Rev
               --      ----    ---       --      ----    ---       --      ----    ---     ---
Americas       8.1     (9%)     (8%)     9.0     (5%)     (4%)     9.0     (2%)     --     45%

Europe/ME/A    5.1     (8%)     (4%)     5.6     (3%)     (7%)     5.7      1%      (8%)   29%

Asia Pacific   3.9     (9%)     (3%)     4.1     (3%)     (2%)     4.3      3%       2%    22%

OEM            0.8    (41%)    (41%)     0.8    (32%)    (31%)     0.9      1%       1%     4%

IBM           18.0*   (11%)     (8%)    19.7*    (6%)     (6%)    19.8*    --       (2%)   100

* Rounding


                             CURRENCY: YEAR-TO-YEAR COMPARISON

                                 QUARTERLY AVERAGES PER US$

                                                      10/15   Spot
                 1Q02         2Q02         3Q02       Spot    4Q02
              ---------     ---------    ---------    ----    ----
Euro          1.14          1.09         1.02         1.02

  Yr/Yr             -5%           5%           10%             9%

Pound         0.70          0.68         0.65         0.64

  Yr/Yr             -2%           3%            7%             7%

Yen            132           127          119          125

  Yr/Yr            -12%          -3%            2%            -1%

IBM Revenue
Impact           (3 pts)        0.6 pts      2 pts        2-3 pts

Negative Yr/Yr growth signifies a translation hurt

                                IBM CASH FLOW - 3Q

($B)                                        3Q01     FY01     3Q02
                                            ----     ----     ----
Net Income from Continuing Ops.             1.7      8.1      1.7

Depreciation/Amortization                   1.1      4.5      1.1

Working Capital / Other                     0.3     (0.0)    (0.1)
Total Operating Sources                     3.2     12.6      2.7
Capital Expenditures, Net                  (1.2)    (4.9)    (0.9)

Other Operating Uses                         --     (0.4)    (0.3)
Total Operating Uses                       (1.2)    (5.3)    (1.2)
Free Cash Flow                              1.9      7.3      1.5
Acquisitions                               (0.9)    (0.9)      --

Global Financing Assets*                    0.7      1.8      1.3

Total Debt                                  0.4     (0.5)    (0.2)

Discontinued Operations                     0.1      0.1     (0.1)

Dividends                                  (0.2)    (1.0)     (0.3)

Share Repurchase                           (1.8)    (5.3)     (0.6)

Other                                        --      1.1       0.1
Net Cash Flow                               0.2      2.7       1.7

* Excludes Fixed Assets