© 2009 IBM Corporation

IBM Business Perspective

Patricia Murphy, Vice President Investor Relations

September 2009

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Certain comments made in the 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 filings with the SEC. Copies are available from the SEC, from the IBM web site, or from IBM Investor Relations.

These charts and the associated remarks and comments are integrally related, and are intended to be presented and understood together.

In an effort to provide additional and useful information regarding the company’s results as determined by generally accepted accounting principles (GAAP), certain materials presented include non-GAAP information. The rationale for management’s use of this non-GAAP information, the reconciliation of that information to GAAP, and other related information is included in supplementary materials entitled “Non- GAAP Supplementary Materials” that are posted on the Company’s investor relations web site at http://www.ibm.com/investor/events/analyst0509/The Non-GAAP Supplementary Materials are also included as Attachment II to the Company’s Form 8-K dated May 13, 2009.

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Agenda

Strategy and Transformation

2010 Roadmap

Driving Long Term Performance

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Individual/ Consumer Focused

Enterprise Focused

TraditionalIT Industry

High Business Value

Lowest Cost IT Producer

The traditional IT industry is undergoing fundamental shifts

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I. Changes in world markets: We are at the forefront of global integration

II. Changes in client needs: We are focused on integration and innovation

III. Changes in IT: We are shifting to higher value segments

IBM strategy addresses shifts in IT industry

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We remixed our businesses in order to move to the emerging higher-value spaces

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We became a globally integrated enterprise in order to capture the best growth opportunities and improve IBM’s profitability

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GROSS MARGIN TREND

37.1%

38.4%

36.6% 36.5% 36.9%

40.1%

41.9% 42.2%

44.1%

30%

32%

34%

36%

38%

40%

42%

44%

46%

48%

50%

00 01 02 03 04 05 06 07 08

PRE-TAX INCOME MARGIN TREND

The mix to higher value segments, global integration and productivity have driven margin expansion

12.0%11.8%

10.6%11.1%

13.4%

14.6%14.7%

16.1%

7.2%

5%

7%

9%

11%

13%

15%

17%

19%

00 01 02 03 04 05 06 07 08

9

As a result, IBM is a higher-performing enterprise today than it was a decade ago

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We have been able to invest in future sources of growth and provide record return to investors...

...while continuing to invest in R&D

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Agenda

Strategy and Transformation

2010 Roadmap

Driving Long Term Performance

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$6.05

~$11~$10

~$9

2006 EPS Estimated 2010 EPS

(Base)

2010 EPS w/o

Retirement Related

Costs Yr/Yr

2010 EPS Objective

Retirement Related

Costs Yr/Yr

Historical Revenue

Growth of 3%

Margin Expansion

Share Repurchases

Growth Initiatives

Future Acquisitions

~$1.20

~$0.90

~$0.75

~$1.00

~$1.10

5% Revenue Growth

+1 to 2 pts Revenue Growth

Long Term EPS Roadmap: May 200710%CGR

14%CGR

16%CGR

10% - 12% CGR EPS Model

Note: EPS has been restated to reflect the adoption of EITF 03-6-1

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$6.05

~$11

~$10

~$9

2006 EPS Estimated 2010 EPS

(Base)

2010 EPS w/o

Retirement Related

Costs Yr/Yr

2010 EPS Objective

Retirement Related

Costs Yr/Yr

Historical Revenue

Growth of 3%

Margin Expansion

Share Repurchases

Growth Initiatives

Future Acquisitions

~$1.20

~$0.90

~$0.75~$1.00

~$1.10

5% Revenue Growth

+1 to 2 pts Revenue Growth

Exceeded revenue growth of 3% in 2007 and achieved 2.3%

in 2008 @ CC

Net margin expansion in model

Share repurchases of ~ $30 B

Revenue growth and margin expansion

above model

Will vary based on interest rates and

market performance

~ 0.35 ~ 0.90 ~ 0.65 ~ 0.45

Long Term EPS Roadmap: Progress through 2008~ 0.50

EPS of $8.89 through 2008

Total ~ 2.85

Progress through 2008 Note: EPS has been restated to reflect the adoption of EITF 03-6-1

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We are well ahead of pace to achieve the 2010 roadmap objective

Transformed business mix

Significant annuity content

Competitive cost structure

Strong cash generation

Financial flexibility

EPS

2006

2010

$6.05

$10-$11

2007 $7.15

2008 $8.89

Note: EPS has been restated to reflect the adoption of EITF 03-6-1

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Agenda

Strategy and Transformation

2010 Roadmap

Driving Long Term Performance

• Growth Markets

• Acquisitions

• Technology Leadership

• Margin Expansion

• New Growth Initiatives

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Growth Markets: Leading future growth requires differentiated strategies and approaches based on market stages and client needs

*Served IT Market Opportunity is IBM Global Market View, 2H09 at constant currency

GDP (2009) $3.2T GDP (2009) $1.5TGDP Growth (2008 - 2012) 1% GDP Growth (2008 - 2012) 3%Served IT Market (2009)* $799B Served IT Market (2009)* $139BServed IT Market Growth (2008 - 2012) 2% Served IT Market Growth (2008 - 2012) 6%

# of Countries ~ 30 # of Countries ~ 140% of IBM Revenue 82% % of IBM Revenue 18%Yr/Yr Revenue Growth 5% Yr/Yr Revenue Growth 10% Yr/Yr Growth @ CC 2% Yr/Yr Growth @ CC 10%

Manage for productivity

FY08 Results

Growth MarketsKey Market Statistics

IBM Focus

Invest for growth

FY08 Results

Major MarketsKey Market Statistics

IBM Focus

17 Note: Includes 2002-2005 acquisitions less than $500M, and all 2006 & 2007 acquisitions

0%

10%

20%

30%

40%

Yr 1 Yr 2 Yr 3 Yr 4 Yr 5

ProjectedActual Without amortization of acquired intangibles

ESTIMATED ACQUISITION REVENUE GROWTH

-20%

-10%

0%

10%

20%

30%

Yr 1 Yr 2 Yr 3 Yr 4 Yr 5

25%

35%

14% 13% 13%

24%21%

20%

11%

-13%

-2% 3%

13%

19%22%

ESTIMATED ACQUISITION PRE-TAX INCOME MARGIN

Acquisitions: Our acquisition portfolio continues to deliver attractive revenue and profit growth

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Technology Leadership: R&D spending enables technology leadership

36

30

2018

10

0

5

10

15

20

25

30

35

40

MSFT IBM Cisco HP Oracle

R&D SPENDINGLast 5 fiscal years ($B)

IBM spends more on R&D than most of our Tech peers– Enhancing our leadership in

enterprise servers & software– Leveraging IP assets to remain the

#1 provider of IT services

Making the right organic investments– Virtualization– Cloud Computing– SOA– Service Product Lines & Quality– Business Analytics– Smarter Planet

Note: As of May 7, 2009

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Margin Expansion: We have further opportunity to expand margin

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

IBM

S&P 500

PRE-TAX INCOME MARGIN

Tech Universe *

*Note: As of April 21, 2009. Includes 333 worldwide technology companies with market cap > $1B

30% of companies in Tech Universe have PTI margins in excess of 20%

25% of companies in S&P 500 have PTI margins in excess of 20%

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New Growth Initiatives: We are investing to capture future growth

IBM is leading the charge to think and act in new ways –

Economically, Socially, and Technically

Smarter Planet Cloud Computing

Benefits:

Self-serviceRapid ProvisioningAutomationStandardizationEconomies-of-scale

Business Analytics & Optimization

Smarter Traffic SystemsSmarter OilSmarter Energy Grids Smarter HealthcareSmarter Cities

Business Optimization

Business Intelligence

Resource planning

Business Automation

Business Optimization

Business Intelligence

Resource planning

Business Automation

The Enterprise Cloud

What’s required? The world is getting smarter New consumption & delivery model

Insight on our clients and industry

Foundational software platforms

Mathematical and analytical skills of IBM Research

Balanced price performance and scale

Market validating client experience

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Well ahead of pace for 2010 Well ahead of pace for 2010 roadmaproadmap0%

5%

10%

15%

20%

25%

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09e

PTI M

argi

n %

$2

$3

$4

$5

$6

$7

$8

$9

$10

$11

EPS

PTI Margin %

EPS

IBM’s strategy and execution drives improved financial performance

Objective$10 to $11

in 2010

Divested Revenue: PC, HDD, Printers, Displays, EDI, Interconnectivity ProductsRevenue

Shifting portfolio to higher value spaces with greater opportunity for margin expansion

Driving productivity and efficiency in our cost structure

Investing in skills and capabilities to drive future growth

Returning capital to shareholders

Significant operating leverage in businesses with improved long-term growth prospects

Note: EPS has been restated to reflect the adoption of EITF 03-6-1

Transformation

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