INTERNATIONAL BUSINESS MACHINES CORPORATION COMPARATIVE FINANCIAL RESULTS (Unaudited; Dollars in millions except per share amounts) Three Months Six Months Ended June 30, Ended June 30, Percent Percent 2003 2002 Change 2003 2002 Change ------- ------- ------- ------- ------- ------- REVENUE Global Services $10,635 $8,661 22.8% $20,804 $16,890 23.2% Gross margin 25.9% 26.3% 25.4% 26.1% Hardware 6,613 6,672 -0.9% 12,421 12,556 -1.1% Gross margin 26.9% 24.8% 26.8% 24.6% Software 3,471 3,266 6.2% 6,600 6,163 7.1% Gross margin 86.2% 84.7% 85.4% 83.0% Global Financing 672 825 -18.4% 1,377 1,608 -14.4% Gross margin 54.6% 56.8% 56.8% 56.7% Enterprise Investments/ Other 240 227 5.8% 494 464 6.6% Gross margin 41.9% 45.8% 39.2% 51.1% TOTAL REVENUE 21,631 19,651 10.1% 41,696 37,681 10.7% GROSS PROFIT 7,998 7,270 10.0% 15,231 13,770 10.6% Gross margin 37.0% 37.0% 36.5% 36.5% EXPENSE AND OTHER INCOME S,G&A 4,460 5,288 -15.7% 8,675 9,311 -6.8% % of revenue 20.6% 26.9% 20.8% 24.7% R,D&E 1,226 1,198 2.3% 2,421 2,333 3.8% % of revenue 5.7% 6.1% 5.8% 6.2% Intellectual property and custom development income (199) (243) -18.0% (481) (539) -10.8% Other (income) and expense 4 399 -98.9% 88 194 -54.6% Interest expense 41 33 25.1% 81 63 28.6% TOTAL EXPENSE AND OTHER INCOME 5,532 6,675 -17.1% 10,784 11,362 -5.1% % of revenue 25.6% 34.0% 25.9% 30.2% INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 2,466 595 314.4% 4,447 2,408 84.6% Pre-tax margin 11.4% 3.0% 10.7% 6.4% Provision for income taxes 741 150 392.1% 1,335 679 96.4% Effective tax rate 30.0% 25.3% 30.0% 28.2% INCOME FROM CONTINUING OPERATIONS $1,725 $445 288.1% $3,112 $1,729 80.0% Net margin 8.0% 2.3% 7.5% 4.6% DISCONTINUED OPERATIONS Loss from discontinued operations (20) (389) (23) (481) NET INCOME $1,705 $56 2,951.4% $3,089 $1,248 147.5% ====== ====== ====== ====== EARNINGS/(LOSS)PER SHARE OF COMMON STOCK: ASSUMING DILUTION CONTINUING OPERATIONS $0.98 $0.25 292.0% $1.77 $0.98 80.6% DISCONTINUED OPERATIONS (0.01) (0.22) (0.01) (0.28) ------ ------ ------ ------ TOTAL $0.97 $0.03 3,133.3% $1.75* $0.71* 146.5% ====== ====== ====== ====== BASIC CONTINUING OPERATIONS $1.00 $0.26 284.6% $1.80 $1.01 78.2% DISCONTINUED OPERATIONS (0.01) (0.23) (0.01) (0.28) ------ ------ ------ ------ TOTAL $0.99 $0.03 3,200.0% $1.79 $0.73 145.2% ====== ====== ====== ====== AVERAGE NUMBER OF COMMON SHARES OUT- STANDING (M's) ASSUMING DILUTION 1,763.7 1,730.4 1,761.1 1,741.7 BASIC 1,729.8 1,705.0 1,727.6 1,711.7 * Does not total due to rounding. INTERNATIONAL BUSINESS MACHINES CORPORATION CONSOLIDATED STATEMENT OF FINANCIAL POSITION (Unaudited) At At (Dollars in millions) June 30, December 31, Percent 2003 2002 Change --------- ----------- ------- ASSETS Cash, cash equivalents, and marketable securities $5,821 $5,975 -2.6% Receivables - net, inventories, prepaid expenses 33,974 35,677 -4.8% Plant, rental machines, and other property - net 14,560 14,440 0.8% Investments and other assets 42,583 40,392 5.4% -------- -------- TOTAL ASSETS $96,938 $96,484 0.5% ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Short-term debt $4,873 $6,031 -19.2% Long-term debt 18,972 19,986 -5.1% -------- -------- Total debt 23,845 26,017 -8.3% Accounts payable, taxes, and accruals 26,638 28,519 -6.6% Other liabilities 19,882 19,166 3.7% -------- -------- TOTAL LIABILITIES 70,365 73,702 -4.5% STOCKHOLDERS' EQUITY 26,573 22,782 16.6% -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $96,938 $96,484 0.5% ======== ======== INTERNATIONAL BUSINESS MACHINES CORPORATION SEGMENT DATA (Unaudited) SECOND QUARTER 2003 ---------------------------------------------- Pre-tax Income (Loss) From (Dollars in millions) --------- Revenue -------- Continuing Pre-tax External Internal Total Operations Margin -------- -------- ------- ---------- ------- SEGMENTS Global Services $10,635 $695 $11,330 $1,168 10.3% % change 22.8% -6.2% 20.5% 65.4% Systems Group 3,221 182 3,403 396 11.6% % change 9.8% 13.8% 10.0% 117.6% Personal Systems Group 2,723 44 2,767 (8) -0.3% % change -2.7% 33.3% -2.3% 77.1% Technology Group 659 237 896 (111) -12.4% % change -34.3% 19.1% -25.5% 88.2% Software 3,471 390 3,861 850 22.0% % change 6.2% 23.8% 7.8% -6.9% Global Financing 681 307 988 296 30.0% % change -16.7% 59.1% -2.3% 24.9% Enterprise Investments 227 1 228 (87) -38.2% % change 1.8% 0.0% 1.8% -7.4% TOTAL SEGMENTS 21,617 1,856 23,473 2,504 10.7% % change 9.7% 13.0% 10.0% 155.8% Eliminations / Other 14 (1,856) (1,842) (38) TOTAL IBM $21,631 $0 $21,631 $2,466 11.4% % change 10.1% 10.1% 314.4% SECOND QUARTER 2002 ---------------------------------------------- Pre-tax Income (Loss) From (Dollars in millions) --------- Revenue -------- Continuing Pre-tax External Internal Total Operations Margin -------- -------- ------- ---------- ------- SEGMENTS Global Services $8,661 $741 $9,402 $706 7.5% Systems Group 2,934 160 3,094 182 5.9% Personal Systems Group 2,800 33 2,833 (35) -1.2% Technology Group 1,003 199 1,202 (943) -78.5% Software 3,266 315 3,581 913 25.5% Global Financing 818 193 1,011 237 23.4% Enterprise Investments 223 1 224 (81) -36.2% TOTAL SEGMENTS 19,705 1,642 21,347 979 4.6% Eliminations / Other (54) (1,642) (1,696) (384) TOTAL IBM $19,651 $0 $19,651 $595 3.0% INTERNATIONAL BUSINESS MACHINES CORPORATION SEGMENT DATA (Unaudited) SIX MONTHS 2003 ---------------------------------------------- Pre-tax Income (Loss) From (Dollars in millions) --------- Revenue -------- Continuing Pre-tax External Internal Total Operations Margin -------- -------- ------- ---------- ------- SEGMENTS Global Services $20,804 $1,394 $22,198 $2,151 9.7% % change 23.2% 0.9% 21.5% 20.9% Systems Group 5,867 362 6,229 591 9.5% % change 8.3% 11.0% 8.4% 64.6% Personal Systems Group 5,113 80 5,193 (77) -1.5% % change -3.7% 73.9% -3.1% -356.7% Technology Group 1,401 411 1,812 (122) -6.7% % change -27.5% -5.5% -23.5% 88.7% Software 6,600 777 7,377 1,489 20.2% % change 7.1% 43.4% 10.0% 1.1% Global Financing 1,382 602 1,984 569 28.7% % change -12.9% 58.8% 1.0% 24.0% Enterprise Investments 468 2 470 (154) -32.8% % change 3.1% 0.0% 3.1% -14.9% TOTAL SEGMENTS 41,635 3,628 45,263 4,447 9.8% % change 10.3% 16.6% 10.8% 54.2% Eliminations / Other 61 (3,628) (3,567) 0 TOTAL IBM $41,696 $0 $41,696 $4,447 10.7% % change 10.7% 10.7% 84.6% SIX MONTHS 2002 ---------------------------------------------- Pre-tax Income (Loss) From (Dollars in millions) --------- Revenue -------- Continuing Pre-tax External Internal Total Operations Margin -------- -------- ------- ---------- ------- SEGMENTS Global Services $16,890 $1,381 $18,271 $1,779 9.7% Systems Group 5,418 326 5,744 359 6.3% Personal Systems Group 5,311 46 5,357 30 0.6% Technology Group 1,933 435 2,368 (1,082) -45.7% Software 6,163 542 6,705 1,473 22.0% Global Financing 1,586 379 1,965 459 23.4% Enterprise Investments 454 2 456 (134) -29.4% TOTAL SEGMENTS 37,755 3,111 40,866 2,884 7.1% Eliminations / Other (74) (3,111) (3,185) (476) TOTAL IBM $37,681 $0 $37,681 $2,408 6.4%