Financial Model

Mark Loughridge
Senior Vice President and Chief Financial Officer, Finance and Enterprise Transformation

2012 International Business Machines Corporation

2015 Roadmap
Base revenue growth ~2% excluding divestitures Shift to faster growing business mix provides ~1% revenue growth ~$20B of acquisition spend provides ~2% revenue growth Enterprise Productivity yields margin expansion Shift to a higher value portfolio continues to provide leverage ~$50B returned through share repurchase

Shares Enterprise Productivity Acquisitions Base Revenue Growth $11.67 Revenue Mix Margin Mix

11% CAGR At Least $20

~$2.80

Operating Leverage

~$2.50
Revenue Growth

~$3.05

2010 Operating EPS*

2012 International Business Machines Corporation

* Non-GAAP: Excludes acquisition-related charges and non-operating retirement-related expense Assumes current tax policy and Non-GAAP tax rate of 25%

2015 Operating EPS*

2015 Roadmap Progress

Operating EPS*
Revenue

2011 Results
Double-digit performance across growth initiatives Growth Markets +11% Yr/Yr @CC Smarter Planet nearly 50% Yr/Yr Business Analytics +16% Yr/Yr Cloud 2.8x growth in 2011 Strong performance of 22 acquisitions closed through 2011

At Least

$20
2010-15 11% CAGR

15% Yr/Yr

$13.44

$11.67
Operating Leverage

Margin performance in line with model Delivered $1.9 billion of Enterprise Productivity savings

Cash & Shareholder Return

Generated $16.6 billion in free cash flow Returned over 100% to shareholders through share repurchase and dividends

2010

2011
* Non-GAAP: Excludes acquisition-related charges and non-operating retirement-related expense

2015

2012 International Business Machines Corporation

Growth Initiatives
$13.44
15% Yr/Yr
Share Repurchase Operating Leverage

Growth Initiatives Roadmap Objectives

Smarter Planet
Contributes ~$7B of growth over Roadmap

$0.82

Revenue Growth

$11.67

Growth Markets
Approaches 30% of IBMs geographic revenue by 2015

Business Analytics
Contributes ~$6B of growth over Roadmap

Cloud
2011 Operating EPS
2012 International Business Machines Corporation

Contributes ~$7B of revenue, of which ~$3B is incremental growth

Growth Initiatives
$13.44
15% Yr/Yr
Share Repurchase Operating Leverage
Growth Markets

Growth Initiatives Performance

2011 Revenue Growth
Nearly 40 growth market countries grew double digits at constant currency in 2011
2,400 Smarter Cities engagements Nearly 9,000 analytics consultants and 33 closed/announced acquisitions now make up IBMs Analytics business 4.5 million daily client transactions through IBM Public Cloud

16%
(11% @CC)

$0.82

Revenue Growth

$11.67

Smarter Planet

~50%

Business Analytics

16%

Cloud

2.8x

2011 Operating EPS

2012 International Business Machines Corporation

Growth Initiatives
$13.44
15% Yr/Yr
Share Repurchase Operating Leverage
Growth Markets

2011 Revenue Results

Growth Initiatives
Growth Markets
2011 Brand Mix

16%
(11% @CC)

$0.82

Revenue Growth

Hardware/ Financing 29%

~50%

Growth markets mixed to high value-add hardware content

Hardware driven by new customer content Plant the Flag

$11.67

Smarter Planet

Services 51%

Business Analytics

16%

Software 20%
Cloud

Over 1,200 new Power clients in 2011

2.8x

2011 Operating EPS

2012 International Business Machines Corporation

Growth Initiatives
$13.44
15% Yr/Yr
Share Repurchase Operating Leverage
Growth Markets

2011 Revenue Results

Growth Initiatives
Smarter Business Planet Analytics 2011 Brand Mix Cloud Smarter Business Planet Analytics Cloud Yr/Yr at actual rates

16%
(11% @CC)

$0.82

Revenue Growth

$11.67

Smarter Planet

~50%

Services ~40%

Major Markets

~25%

Business Analytics

Software ~55%
Growth Markets ~35%

16%

Hardware ~5%
Cloud

2.8x

2011 Operating EPS

2012 International Business Machines Corporation

Growth Initiatives Growth Initiatives contributed ~$6 billion of growth in 2011

$13.44
15% Yr/Yr
Share Repurchase Operating Leverage

~$17B

~$7B

~$6B

~$3B

~$50B

~$2B

~$2B

~$0.2B

$0.82

Revenue Growth

~$3B

Double-digit yr/yr growth

i

2011 +$6B

$11.67

~$30B

2011 Operating EPS

2012 International Business Machines Corporation

2010 Revenue from Key Initiatives

Growth Markets

Smarter Planet

Business Analytics

Incremental Cloud

2015 Revenue from Key Initiatives

Acquisitions
$13.44
15% Yr/Yr
Share Repurchase Operating Leverage

Spent $14B in R&D and closed/announced ~$11B for 30 acquisitions since 2010
Servers, Networking & Storage Optimization

Complements Organic Assets

IBM Hardware Portfolio

$0.82

Revenue Growth

IBM Hardware Portfolio

Cloud
GTS Service Delivery

$11.67
Smarter Planet

Smarter Commerce

Smarter Cities

Industry Solutions Frameworks

GBS Offerings

Business Intelligence & Data Analytics

Governance, Risk, Compliance & Security
GBS BAO Service Line 8 Analytics Solution Centers

2011 Operating EPS

2012 International Business Machines Corporation

Acquisitions
$13.44
15% Yr/Yr
Share Repurchase Operating Leverage

Acquisitions have contributed significantly to IBMs growth in key strategic areas Smarter Commerce Acquired Security Expert Integrated

$0.82

Revenue Growth

$11.67

Organic

GBS Offerings
Leadership in B2B integration, Commerce solutions, and Enterprise Marketing Mgmt Comprehensive portfolio across Buy, Market, Sell, and Service

GTS & GBS Services

Integration across a complete solutions framework Capabilities to secure people, data, applications and IT infrastructure Real-time analytics provide visibility into security threats Integrates and tunes hardware and software in ready-to-go workload optimized systems Captures and automates from infrastructure to the application Deploys and runs for rapid time-to-value

2011 Operating EPS

2012 International Business Machines Corporation

$13.44
15% Yr/Yr
Revenue Yr/Yr%
45%

Acquisitions Focus acquisition investments of ~$20B on key growth areas that leverage IBMs global reach and scale
Forward Looking Revenue Growth Estimates
30% 20%
15%

Share Repurchase Operating Leverage

30%

$0.82

Revenue Growth

10%

10%

10%

Scalable intellectual property Key to solutions offerings

$11.67

0%

Yr1

Yr2

Yr3

Yr4

Yr5

Forward Looking PTI Margin Estimates

30% 20%
PTI Margin

23%
18% 11%
2% 2%
PTI Margin

27%
20%

Drive synergies through global distribution

10% 0% -10%

15% 10%

2011 Operating EPS

-20%

-20%
Yr1 Yr2 Yr3

Margin excl. amortization of intangibles and acquisition-related charges

Yr4 Yr5

2012 International Business Machines Corporation

$13.44
15% Yr/Yr
Share Repurchase Operating Leverage

Acquisitions Closed acquisitions through 2011 position us on pace against the 2015 Roadmap objectives
Roadmap Model

Annual Revenue from Closed Acquisitions

Actual Projected

~$11B

~55% Future Acquisitions

~45% Closed Acquisitions

$0.82

Revenue Growth

$11.67
2010 2011 2012 2013 2014 2015

Roadmap Model

Annual Operating EPS from Closed Acquisitions

Actual Projected

~$0.90

~25% Future Acquisitions ~75% Closed Acquisitions

2011 Operating EPS

2012 International Business Machines Corporation

2010

2011

2012

2013

2014

2015

Growth Markets IBMs business mix continues to shift towards the Growth Markets
$13.44
15% Yr/Yr
Share Repurchase Operating Leverage

Revenue Growth @ CC
11% 11%

Growth Markets % of IBM Geographic Revenue*

2015 2011 2010 2009
Approaches

$0.82

10%
Revenue Growth

30%
22% 21%
19%
18%
17% 16% 11%

+8 pts

+10 pts
1%

+10 pts

$11.67
2%

1%

2%

+8 pts
-6% 2008 2009 Major Markets 2010 Growth Markets 2011

2008
2007 2006

2011 Operating EPS

2012 International Business Machines Corporation

* Revenue mix percentages exclude PCD and Printers divestitures

2000

Growth Markets We have accelerated investment in Growth Markets expansion

$13.44
15% Yr/Yr
Share Repurchase Operating Leverage

2011 Revenue Growth

Yr/Yr at constant currency

Branch Office Growth

Branch Office Acceleration Branch Office Plan

2015 Roadmap

~$17B
Revenue Growth from Growth Markets
Market Expansion

~2X

$0.82

Revenue Growth

Overall Growth Markets

11% 2%
Major Markets Growth Markets Market Expansion
2010 2011 2012 2013 2014 2015

$11.67

~40%

Branch offices grew about twice the growth rate of the overall Growth Markets in 2011

Market expansion enabled by globally integrated enterprise Investment focused on client-facing resources Back office delivered through global shared services model

Market expansion enables ~40% of Roadmap for Growth Markets

2011 Operating EPS

2012 International Business Machines Corporation

Operating Leverage
$13.44
15% Yr/Yr
Share Repurchase

Growth Markets delivered over 45% of IBMs Geographic Gross Profit growth in 2011
Geographic Gross Profit Bridge*
$2.2B $1.9B ~$47B
Growth Markets Major Markets

Revenue Growth
~$51B
Growth Markets

$0.18 $0.82

Operating Leverage

Revenue Growth

45%

55%

Major Markets

$11.67

Gross Profit Growth

Growth Markets

47%

53%

Major Markets

2010

Geographic Gross Profit

2011

2011 Operating EPS

2012 International Business Machines Corporation

* Sum of geographic gross profit not equal to IBM gross profit

Investing for Growth

$13.44
15% Yr/Yr
Share Repurchase
6,180

We will continue to focus our investments on higher value businesses

2011 US Patents
4,894

$0.18 $0.82

Research & Development

2006 - 2010 2015 Roadmap

Operating Leverage

Revenue Growth

$30B

~$35B

$11.67
2,821 2,559 2,483 2,311 2,286 1,533 1,514 1,465 1,308

1,244

980

918

676 282 127

IB M

Samsung Cano n P anaso nicTo shiba M icro so ft

So ny

Seiko Ho n Hai Epso n

Hitachi

HP

Intel

Cisco

Oracle

A pple

EM C A ccenture

2011 Operating EPS

2012 International Business Machines Corporation

Top 10
Source: IFI CLAIMS Patent Services

Other IT Companies

Operating Leverage
$13.44
15% Yr/Yr
Share Repurchase

IBM expands margins in 2015 Roadmap through a continuation of our shift to higher value
% of Operating Segments Profit*

$0.18 $0.82

Operating Leverage

Revenue Growth

~50%

$11.67
40%
27% = $2.6B 38% 35%

44% = $10B
~36% 41% 16%
2011
Services

37% 23%
2006
Hardware/Financing

~13%
2015e
Software

2000**

2011 Operating EPS

* Sum of operating segment pre-tax income not equal to IBM operating pre-tax income ** Stock-based compensation expense was not recorded at the segment level and excludes Enterprise Investments

2012 International Business Machines Corporation

Operating Leverage
$13.44
15% Yr/Yr
Share Repurchase

In 2011 IBM delivered first installment against $8B 2015 objective

Enterprise Productivity Savings ($B)
1.9 1.7 1.5 1.5 1.0

$0.18 $0.82

Operating Leverage

Continuous improvement leveraging analytics Locate work to where it best can be performed

Revenue Growth

$11.67

0.5

Focus integrated operations on high value advisory activities

2009 2010 2011

2006

2007

2008

Shared Services

End-to-End Process Transformation

Balance savings between reinvesting and driving margin performance

2011 Operating EPS

2012 International Business Machines Corporation

Integrated Operations

Operating Leverage
$13.44
15% Yr/Yr
Share Repurchase

Enterprise Productivity provides flexibility and leverage across the business model
Enterprise Productivity Savings ($B)

$0.18 $0.82

Operating Leverage

Revenue Growth

$8B
Integrated Operations

$8B
Software

$8B
Revenue Productivity

$11.67

End-to-End Process Transformation

Services
Cost & Expense Reduction

Shared Services

Hardware / Financing

2011 Operating EPS

2012 International Business Machines Corporation

Revenue and Operating Leverage

Segment Revenue and Operating Pre-Tax Income
$13.44
15% Yr/Yr
Share Repurchase
50%
IGF $2B

$0.18 $0.82

Operating Leverage

40%
Software $10B

Revenue Growth
PTI Margin

30%

$11.67

20%

2011 IBM Operating PTI % $13.44 2011 EPS GBS $3B STG $2B GTS $6B

10%

0% $0B $25B

2011 Operating EPS

2012 International Business Machines Corporation

$50B $75B Sum of Segment Revenue

$100B

$125B

2015 Operating EPS

Revenue and Operating Leverage

Segment Revenue and Operating Pre-Tax Income
$13.44
15% Yr/Yr
Share Repurchase
50%

Remaining $35B of share repurchase delivers ~$2.05 EPS

IGF

$0.18 $0.82

Operating Leverage

40%
Software PTI Margin

Revenue Growth
30%
Share Repurchase ~$2.05 2011 IBM Operating PTI % $13.44 2011 EPS GBS GTS

$11.67

20%

10%
STG

0% $0B $25B

2011 Operating EPS

2012 International Business Machines Corporation

$50B $75B Sum of Segment Revenue

$100B

$125B

2015 Operating EPS

Revenue and Operating Leverage

Segment Revenue and Operating Pre-Tax Income
$13.44
15% Yr/Yr
Share Repurchase
50%

Software profit at historical growth delivers ~$3.30 EPS

IGF Software Growth ~$3.30

$0.18 $0.82

Operating Leverage

40%
Software PTI Margin

Revenue Growth
30%
2015 IBM Operating PTI % 2011 IBM Operating PTI % Share Repurchase ~$2.05

$11.67

20%

+3pts
$13.44 2011 EPS GTS

GBS

10%
STG

0% $0B $25B

2011 Operating EPS

2012 International Business Machines Corporation

$50B $75B Sum of Segment Revenue

$100B

$125B

2015 Operating EPS

Revenue and Operating Leverage

Segment Revenue and Operating Pre-Tax Income
$13.44
15% Yr/Yr
Share Repurchase
50%

~40% yield on Enterprise Productivity spending reduction delivers ~$1.20 EPS

IGF

Enterprise Prod ~$1.20 Software Growth ~$3.30

$0.18 $0.82

Operating Leverage

40%
Software PTI Margin

Revenue Growth
30%
2015 IBM Operating PTI % Share Repurchase ~$2.05

$11.67

20%

2011 IBM Operating PTI %

+4pts
$13.44 2011 EPS

GBS

GTS

10%
STG

0% $0B $25B

2011 Operating EPS

2012 International Business Machines Corporation

$50B $75B Sum of Segment Revenue

$100B

$125B

2015 Operating EPS

Revenue and Operating Leverage

Segment Revenue and Operating Pre-Tax Income
$13.44
15% Yr/Yr
Share Repurchase

Software delivers profit growth from new markets

50%

IGF

At Least $20
Enterprise Prod ~$1.20 Software Growth ~$3.30

Services captures growth from key market transitions

40%

$0.18 $0.82

Operating Leverage

STG / IGF capitalize on technology leadership

Software

Revenue Growth
PTI Margin

30%
2015 IBM Operating PTI % 2011 IBM Operating PTI %

$11.67

Share Repurchase ~$2.05 $13.44 2011 EPS

20%

GBS

GTS

10%
STG

0% $0B $15B $30B $45B

2011 Operating EPS

2012 International Business Machines Corporation

$60B $75B $90B Sum of Segment Revenue

$105B

$120B

$135B

2015 Operating EPS

Cash Generation and Usage

Free Cash Flow* $B
$13.44
15% Yr/Yr
Share Repurchase
Operating Leverage

About $150 billion of free cash flow generated over past fifteen years

$0.77 $0.18 $0.82

Fueled organic and acquisition investments Returned over 100% to shareholders

+$6.1B +$1.2B/Yr
16.3 16.6 15.1

Revenue Growth

+$3.7B +$740M/Yr +$0.5B +$100M/Yr

6.3 6.3 6.7 5.8 5.9 6.8 5.9 10.5 8.7 9.1 9.6

14.3 12.4

~$10B

$11.67

2011 Operating EPS

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
* Excluding GF Receivables

2012 International Business Machines Corporation

Cash Generation and Usage

Free Cash Flow* $B
$13.44
15% Yr/Yr
Share Repurchase
Operating Leverage

Approaches $100B $69B

$B $25

$20 $15 $10 $5 $0

2006 2007 2008 2009 2010 2011 2012e 2013e 2014e 2015e

$0.77 $0.18 $0.82

Revenue Growth

$11.67
2006 - 2010
$B

Primary Uses of Cash

2011- 2015
$B

Share Repurchase

Share Repurchase

$60
Capital

~$50
Capital Dividends

2011 Operating EPS

2012 International Business Machines Corporation

Dividends $12 Acquisitions

$22

~$25
Acquisitions

~$40B Cash & Balance Sheet Flexibility in 2015

~$20
* Excluding GF Receivables

$18

~$20

2015 Roadmap
Base revenue growth ~2% excluding divestitures Shift to faster growing business mix provides ~1% revenue growth ~$20B of acquisition spend provides ~2% revenue growth Enterprise Productivity yields margin expansion Shift to a higher value portfolio continues to provide leverage ~$50B returned through share repurchase

At Least $20
Shares Enterprise Productivity

$0.77
Margin Mix

+10% CAGR to go 15% Yr/Yr

Base Revenue Growth

Revenue Mix

Acquisitions

$13.44

$0.18

~$2.80

$11.67

2011 Performance: $0.82 Operating Leverage Revenue Growth

~$2.50

~$3.05
2010 Operating EPS*
2012 International Business Machines Corporation

2015 Operating EPS*

* Non-GAAP: Excludes acquisition-related charges and non-operating retirement-related expense Assumes current tax policy and Non-GAAP tax rate of 25%

2015 Roadmap

Operating PTI / EPS *

Segment Operating PTI$ Operating EPS

At Least $20

2015 Objectives
Software contributes about half of our segment profit

At Least $15 $13.44

Growth initiatives deliver $20B in revenue growth

Growth markets revenue approaches 30% of IBMs total Enterprise productivity delivers $8B in gross savings

$3.32

$1.81

IBM returns $70B to shareholders over the roadmap

'03 '04 '05 '06 '07 '08 '09 '10 '11 '12e '13e '14e '15e

'00

'01

'02

Hardware / Financing
2012 International Business Machines Corporation

Services

Software
Sum of external segment pre-tax income not equal to IBM pre-tax income 2000 & 2001 segments not restated for stock based compensation

* Non-GAAP: Excludes Acquisition-related charges and non-operating retirement-related expense

 2012 International Business Machines Corporation

 2012 International Business Machines Corporation

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. Any forward-looking statement made during this event or in these presentation materials speaks only as of the date on which it is made. The Company assumes no obligation to update or revise any forward-looking statements. These charts and the associated remarks and comments are integrally related, and they are intended to be presented and understood together. In an effort to provide additional and useful information regarding the Companys financial results and other financial information as determined by generally accepted accounting principles (GAAP), certain materials presented during this event include non-GAAP information. The rationale for managements use of this non-GAAP information, the reconciliation of that information to GAAP, and other related information is included in supplemental materials entitled Non-GAAP Supplemental Materials that are posted on the Companys investor relations web site at [Link] The NonGAAP Supplemental Materials are also included as Attachment II to the Companys Form 8-K dated May 9, 2012.

2012 International Business Machines Corporation

 2012 International Business Machines Corporation