© 2009 IBM Corporation

IBM Business Perspective 2012

Patricia MurphyVice President, Investor Relations

Certain comments made in this presentation may be characterized as forward looking under the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on the Company's current assumptions regarding future business and financial performance. Those statements by their nature address matters that are uncertain to different degrees. 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 presentation 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. Information regarding the Company's financial roadmap including interim periods, which was previously communicated to investors, is being presented for purposes of historical information and is not being updated during this presentation.

In an effort to provide additional and useful information regarding the Company’s financial results and other financial information as determined by generally accepted accounting principles (GAAP), these materials contain certain non-GAAP information including "operating earnings" and other "operating" financial measures. The rationale for management’s use of this non-GAAP information, the reconciliation of that information to GAAP, and other related information are included as Attachment II (“Non-GAAP Supplemental Materials”) to the Company’s Form 8-K dated May 9, 2012, Form 8-K dated July 18, 2012, and in the information entitled “Non-GAAP Supplemental Materials” that is posted on the Company’s investor relations web site at http://www.ibm.com/investor/events/pmurphy0612/.

Agenda

�Strategy and Historical Performance

�2015 Roadmap

�Appendix: IBM Growth Initiatives

1

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

'98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15

Growth Markets

Major Markets

2010-2015CAGR

~ 8%

3-4%

~ 2%

Source: IBM Market Insights analysis, using GMV1H12 (Jan 2012)

% Growth

Total Markets

The industry economics have changed over time

Total IT Growth at Constant Currency

2

IBM has been moving to higher value areas, with more of our revenue and profit in annuity businesses

** Stock-based compensation expense was not recorded at the segment level and excludes Enterprise Investments

% of Segment Profit*

2000** 2011

Hardware/Financing Services Software

35%

38%

27%

16%

41%

44%

Annuity vs Transactional Revenue

60%40%

Transactional Annuity

52%48%

Annuity vs Transactional Profit***

* Sum of external segment pre-tax income not equal to IBM pre-tax income

*** Certain expenses allocated 3

We have become a globally integrated enterprise, capitalizing on markets with high growth potential

Growth Markets % of IBM Geographic Revenue*

2010

17%

18%

19%

21%

22%

2007

2008

2009

16%2006

11%2000

2011

* Revenue mix percentages exclude divestitures (PCD, Printers)

Major Markets Growth Markets

4

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11

Our shift to higher value, global integration and productivity has driven superior financial results

Acquisitions

Capital

Share Repurchase

Dividends

Primary Uses of Cash $BOperating Pre-tax Income Margin and Free Cash Flow $B

6.7

16.6

10.1%

20.2%

Free Cash FlowOperating Pre-tax Income Margin

5

Agenda

�Strategy and Historical Performance

�2015 Roadmap

�Appendix: IBM Growth Initiatives

6

11%

CAGR

~$50B returned through share

repurchase

Revenue Growth

2010 Operating

EPS*

Revenue Mix

Enterprise

Productivity

Margin Mix

Shares

2015 Operating

EPS*

$11.67

At Least

$20

Operating Leverage

~$2.50

~$3.05

IBM’s 2015 Roadmap: at least $20 of Operating EPS

Acquisitions

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

Assumes current tax policy and Non-GAAP tax rate of 25%

Enterprise Productivity

yields margin expansion

Shift to a higher value portfolio continues to

provide leverage

Shift to faster growing business mix provides ~1% revenue growth

Base revenue growth ~2%excluding

divestitures

~$20B of acquisition spend

provides ~2% revenue growth

Base Revenue

Growth

7

~$2.80

$11.67

2015Operating EPS

Revenue Growth

~$3.05

Share Repurchase

Operating Leverage

Key initiatives support the revenue and profit objectives…

Business AnalyticsGrowth Markets

Smarter Planet

Cloud

Contributes ~$7B of growth over roadmap

2011: ~50% yr/yr

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

2011: 2.8x growth

Approaches 30% of IBM’s geographic revenue by 2015

2011: 16% yr/yr(11% @CC)

Contributes ~$6B of growth over roadmap

2011: 16% yr/yr

8

~$6B ~$3B ~$7B ~$17B

~$50B

i

2010Revenue from Key Initiatives

2015Revenue from Key Initiatives

Double-digit yr/yr growth

2011~$3B

~$2B~$2B

~$0.2B

+$6B

Incremental Cloud

GrowthMarkets

SmarterPlanet

Business Analytics

$13.44

…and contribute $20B of revenue growth through 2015

~$30B

$11.67

2015Operating EPS

Revenue Growth

~$3.05

Share Repurchase

Operating Leverage

9

10%15%

20%

2%2%

-20%

-10%

0%

10%

20%

30%

Yr1 Yr2 Yr3 Yr4 Yr5

PTI

Ma

rgin

� Scalable intellectual property

� Key to solutions offerings

� Drive synergies through global distribution

-20%

Forward Looking Revenue Growth Estimates

Forward Looking PTI Margin Estimates

We have allocated $20B for acquisitions…

$11.67

2015Operating EPS

RevenueGrowth

~$3.05

Share Repurchase

Operating Leverage

10

20%

30%

10% 10% 10%

0%

15%

30%

45%

Yr1 Yr2 Yr3 Yr4 Yr5

Re

ve

nu

e Y

r/Y

r%

27%23%

18%

11%

PTI Margin Margin excl. amortization of intangibles and acquisition-related charges

…with investments aligned to key themes

$11.67

2015Operating EPS

RevenueGrowth

~$3.05

Share Repurchase

Operating Leverage

11

Servers, Networking &

Storage Optimization

Cloud

Smarter Planet

Governance, Risk,

Compliance & Security

Smarter Cities

Complements Organic Assets

GTS Service Delivery

IBM Hardware Portfolio

GBS BAO Service Line

8 Analytics Solution Centers

Industry Solutions Frameworks

IBM Hardware Portfolio

GBS Offerings

Business Intelligence & Data Analytics

Smarter Commerce

Acquisitions since 2010

2000** 2011 2015eHardware/Financing Services Software

* 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

IBM expands margins through a shift to higher value…

$11.67

2015Operating EPS

Revenue Growth

~$3.05

~$2.50

Operating Leverage

Share Repurchase

% of Operating Segments Profit*

12

35%

38%

~13%

~36%

~50%

27% = $2.6B41%

44% = $10B

16%

Enterprise Productivity Savings

� Continuous improvement leveraging analytics

� Locate work to where it best can be performed

� Focus integrated operations on high value advisory activities

2006-2010 2011-2015

$11.67

2015Operating EPS

Revenue Growth

~$3.05

~$2.50

Operating Leverage

Share Repurchase

…and enterprise productivity savings of $8 billion

~$6B

~$8B

~$85BSpendBase

13

End-to-End Process

Transformation

Shared Services

Integrated Operations

2011: $1.9B gross savings

Balance savings between reinvesting and driving margin performance

Model assumes 40% of gross savings to the bottom line

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12e'13e'14e'15e

Primary Uses of Cash $BFree Cash Flow $B

Approaches $100BFree Cash Flow

Supports ~$40B of Financial Flexibility

in 2015

2015 Roadmap

~$10B

6.7

16.6

We are leveraging our strong cash generation to invest in the business and return value to shareholders

$11.67

Revenue Growth

Share Repurchase

~$3.05

~$2.50

~$2.80

Operating Leverage

2015Operating EPS

14

2010 2011 2015

15% Yr/Yr

$11.67

$13.44

“At Least”

$20

2010-15 11% CAGR

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

Our 2011 performance puts us on track to our 2015 objective

Revenue � 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

� Strong performance of 22 acquisitions closed through 2011

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

Operating EPS*

15

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12e '13e '14e '15e

Hardware / Financing Services Software

Sum of external segment pre-tax income not equal to IBM pre-tax income

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

2000 & 2001 segments not restated for stock based compensation

Operating PTI / EPS *

Segment Operating PTI

Operating EPS

� Software contributes about half of our segment profit

� Growth initiatives deliver $20B in revenue growth

� Growth markets revenue approaches 30% of IBM’s geographic total

� Enterprise productivity delivers $8B in gross savings

� IBM returns $70B to shareholders over the roadmap

2015 Objectives

$3.32

$1.81

$13.44

“At Least”

$15.10

“At Least”

$20

The IBM transformation continues in the 2015 Roadmap

16

17

Agenda

�Strategy and Historical Performance

�2015 Roadmap

�Appendix: IBM Growth Initiatives

18

Over the 2015 Roadmap our growth initiatives deliver ~$20B of revenue growth

Business AnalyticsGrowth Markets

Smarter Planet

Cloud

Contributes ~$7B of growthover roadmap

Deliver integration and innovation to clients

Become the premier Globally Integrated Enterprise

Focus on open technologies and high-value solutions

19

Approaches 30% of IBM’s geographic revenue

by 2015

Contributes ~$6B of growthover roadmap

Grows to ~$7B business by 2015, of which ~$3B is incremental

Economic Rebalancing

Dem

ograp

hic

Shift

Urb

aniz

atio

n

8% growth in the growth markets IT opportunity through 2015*

> 3x major market growth rate

The world’s 10 fastest growing economies are all from

the growth markets countries

Asia and Africa will add 874 million urban residents

and expand their gross regional domestic product

by $20.7 trillion from 2010 to 2025

Over the next 5 years, China and India will each spend $1 trillion on infrastructure

Growth markets citizens are more mobile than ever - 90% of phones in Africa are cell phones

and ~2.4 billion mobile phone users are in BRIC countries

By 2030, 93% of the world’s middle class will be from emerging markets

Growth Markets provide an opportunity to capture growth and drive productivity

Growth Markets

20* IBM Market Insights analysis, using GMV1H12, Jan 2012

In 2012, growth markets economies will become the world’s largest importers and consumers

~$51B

~$47B

$1.9B

$2.2B

2010 2011

IBM’s business mix is shifting to the growth markets

10%

1%

11% 11%

2%

-6%

1% 2%

2008 2009 2010 2011

Growth Markets Major Markets

+8 pts

+8 pts

+10 pts +10 pts

Revenue Growth @ CC Geographic Gross Profit Bridge*

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

Growth Markets

Geographic Gross Profit

Growth Markets

Major Markets

Market Expansion

IT InfrastructureDevelopment

Industry Leadership

2010–2015 ~ $17B incremental revenue

Grow faster than market

Outpace Major Markets growth > 8 points

Drive margin expansion

Approach 30% of IBM geographic revenue

21

10,000messages/second from 100 million

active usersper source

By 2015,

1 Trillion connected

devices

In 5 years,

5.6 Billion personal

devices sold

Smarter Planet describes the emerging era of

computing

Unstructured data growing

800% in the next

5 years

Instrumented

Interconnected

Intelligent By 2020,business

transactions over the internet =

450 Billionper day

90% of the world’s data was created in the

past 2 years

Smarter Planet

22

• Expanded from 9 ���� 18 industries

• 52 industry solutions areas

• Smarter Commerce portfolio

• 17 solution areas, 5 software acquisitions

• 2,400 Smarter Cities engagements

• 8 key portfolio areas

IBM’s Smarter Planet is a collection of markets we’re making by driving new value for clients

Smarter Planet contributes $7B in revenue growth over the roadmap

Smarter Planet

2011 Progress…

BuyBuy MarketMarket

SellSellServiceServiceVP of

Customer Loyalty

Focus Industries

Smarter Cities

Business Functions

8,000engagements

~50%revenue growth

90%growth in software content

Reaching new buyers

Chief Procurement

Officer

Chief Marketing Officer

VP of Commerce Stores & Operations

23

Why analytics matters...

Finance organizations with business insight

All other enterprises

> 12x moreProfit

Growth

33% moreRevenue Growth

32% moreReturn on

Invested Capital

12.5%

9.4%7.3%

0.6%

11.9%

9.0%

Enabling our clients to turn oceans of data into

predictive models and actionable decisions

Source: IBM Global Business Services, The Global CFO Study 2010, 1H12 IBM Market Insights

Business Analytics

24

Analytics has evolved from business initiative to business imperative

$234 billionin total IT

opportunity by 2015

$76 billionin software opportunity

by 2015

IBM has built a broad portfolio of business analytics capabilities

A broad, deep set of analytics offerings

integrated by design

An enterprise-class big data platform that supports an end-to-end information management foundation

Integrated decision management capabilities that embed predictive analytics directly into organizational processes

$16 billionMore than $16B in acquisitions

to build the industry's most comprehensive

analytics portfolio

Business Analytics

20,000Unmatched experience gained from 20,000 client engagements

9,000Supported by nearly 9,000 consultants,

10,000 technical professionals

and 500+ patents

27,000Working with

27,000 partners and 5,000

universities to develop skills

IBM’s analytics business grows $6B to more than $16B by 201525

Cloud is transforming IT and opening new opportunities for IBM

Cloud Computing

Server management & administration costs

New server spending

2001

$130 B

2011

$217 B

Power and cooling costs

... and 25% growthin the

cloud opportunity through 2015*

Source: IDC Directions 2011: Game Changing Virtual Technology: Major Shifts and Innovations that will Forever Change your IT Business, March, 2011

* IBM Market Insights analysis, using GMV1H12, Jan 2012

Cloud delivers real value to clients ...

�Natural evolution of services delivery

�Enables self-service, sourcing options, and economies of scale

�Helps reduce growing server management and admin costs through automation and integration

26

IBM is leading the enterprise cloud market

4.5M daily client

transactions through IBM’s public cloud

~4,000successful

cloud engagements

in FY 2011

1Menterprise

application users working on the

IBM cloud

2.8X cloud revenue

growth in 2011

$100Bin commerce transactions

analyzed per year in the cloud

Cloud Computing

Commitment to open standards and a broad ecosystem

Private & Hybrid CloudsCloud Enablement Technologies

Managed Cloud ServicesInfrastructure and Platform as a Service

Cloud Business SolutionsSoftware and Business Process as a Service

Foundation Services Solutions

Cloud contributes ~$7B revenue ($3B incremental) to IBM in 201527

IBM brings unique capabilities

� Expertise across Services, Software, Hardware and Research

� Unified cloud platform with seamless integration across Private, Public and Hybrid

Cloud expands both IBM’s addressable

market opportunity and margin opportunity

� Both “born on the cloud” and traditional IT to cloud transformations

� Driving infrastructure and labor savings with standardization and automation of delivery, combined with a deep collection of value add offerings