IBM Corporation Financial Profile Recent Highlights: July 2011 2Q'11 12% revenue growth driven by Software and Systems & Technology Continued momentum in all four growth initiatives - Growth Markets, Business Analytics, Cloud Computing and Smarter Planet Delivered 18% Yr/Yr Operating (Non-GAAP) EPS growth Returned $5B to shareholders; strong Balance Sheet Raised FY'11 Operating (Non-GAAP) EPS expectations to at least $13.25 ($ in Billions, except per share amounts) ($ in Billions) FY 2010 P&L Highlights Revenue @ constant currency $99.9 Pre-Tax Income - Operating Net Income - Operating EPS (Diluted) - Operating Free Cash Flow* Yr/Yr 2Q YTD Yr/Yr 4% 3% $51.3 $19.9 10% $9.0 11% $15.0 12% $6.8 12% $11.67 16% $5.50 19% $16.3 10% 5% Assets Cash & Marketable Securities Global Financing Assets Non-Global Financing Assets* $4.2 Key P&L Metrics - Operating Gross Profit Margin Expense / Revenue % * Pre-Tax Income Margin Tax Rate Net Income Margin 46.1% 26.2% 19.9% 24.4% 15.0% $11.8 $32.9 $68.8 $113.5 $22.8 $5.8 $61.7 $90.3 $23.4 $6.4 $60.5 $90.3 $23.2 $23.2 Equity * Includes eliminations of inter-company activity Yr/Yr 0.5 0.5 1.0 1.4 1.0 Jun 2011 $11.7 $34.5 $67.3 $113.5 Liabilities Global Financing Debt Non-Global Financing Debt* Other Liabilities * Net Cash from Ops excl GF Receivables, less Capital Expenditures Dec 2010 Dec 2010 Balance Sheet pts pts pts pts pts 2Q YTD Yr/Yr 45.7% 28.1% 17.6% 25.0% 13.2% 1.0 pts 0.9 pts 0.1 pts (0.8 pts) 0.2 pts Dec 2010 Jun 2011 23% 7.0 1.8% Aa3, A+ 24% 7.0 1.7% Aa3, A+ Key Metrics Non GF Debt/Cap Global Financing Leverage Dividend Yield Credit Rating (Moody's, S&P) * Total Operating Expense & Other Income / Revenue 2010 Revenue by Geography (excludes OEM) 2010 Revenue by Business Segment 2010 Pre-Tax (Operating) Profit by Business Segment U.S. Asia Pacific 34% 24% Systems & Financing Comm's Services 20% LA EMEA 38% Services 9% Can/ Software 57% 16% Software 46% 23% 33% Systems & Financing Five Year Summary Operating (Non-GAAP) EPS (1) Operating (Non-GAAP) Margins Free Cash Flow ($B) (2) $16.3 50% 40% Gross Profit Margin 42.2% 42.6% 43.9% $14.3 $11.67 45.7% 46.1% $15.1 $12.4 $10.03 $10.5 $8.86 $7.46 30% $6.31 Pre-Tax Income Margin 20% 10% 15.3% 15.4% 16.0% '06 '07 '08 18.9% 19.9% '09 '10 0% '06 '07 '08 '09 '10 (1) From Continuing Operations 2006-2008 reflects the adoption of amendments to ASC 260, "Earnings Per Share" '06 '07 '08 '09 (2) Net Cash from Operations excluding GF Receivables, less Capital Expenditures In an effort to provide additional and useful information regarding the company’s results as determined by generally accepted accounting principles (GAAP), these materials contain certain non-GAAP financial measures. For reconciliation to GAAP and other information about (i) Operating EPS for 2Q 2011 and YTD 2011, (ii) YTD 2011 (A) revenue at constant currency, (B) operating pre-tax income, operating net income and free cash flow, (C) operating gross profit margin, operating expense/revenue %, operating pre-tax income margin, operating tax rate and operating net income margin, (iii) December 2010 and June 2011 non GF debt-to-capital ratio, see Non-GAAP Supplementary Materials and related information in the Form 8K submitted to the SEC on July 18, 2011. For reconciliation to GAAP and other information about (i) 2010 (A) revenue at constant currency, (B) operating pre-tax income, operating net income, operating EPS and free cash flow, (C) operating gross profit margin, operating expense/revenue %, operating pre-tax income margin, operating tax rate and operating net income margin and (D) operating pre-tax profit by business segment, and (ii) 2006 - 2010 free cash flow, see Non-GAAP Supplementary Materials and related information in the Form 8K submitted to the SEC on January 18, 2011. For reconciliation to GAAP and other information about 2006 to 2010 (i) operating gross profit margin and operating pre-tax income margin and (ii) operating EPS, see IBM Form 10Q (page 62) submitted to the SEC on April 26, 2011 '10 IBM Corporation Key Segment Profiles 2010 Revenue Profile 2015 Roadmap Global Services Initiatives and Objectives Revenue = $56.4B, +3% yr/yr (1% @cc) Global Technology Services $38.2B, +2% yr/yr (1% @cc) Maintenance Global Technology Services Global Business Services Global Business Services $18.2B, +3% yr/yr (2% @cc) • Standardized and automated offerings drive new business and base growth • Aligned to IBM's growth initiatives - Represents over 60% of growth Application Outsourcing Consulting & Sys. Integration • New opportunity from market shifts - Cloud computing • Differentiated cross-IBM solutions - Asset-enabled revenue • Continued productivity through Global Delivery Framework • Margin Expansion enabled by: - Globally Optimized Delivery - Differentiated Solutions - Operational Excellence Integrated Technology Services GTS Outsourcing Revenue growth with or faster than the market Growth Markets continue to drive ~50% of incremental revenue by 2015 Operating Pre-tax income long-term growth model: 8% - 10% Software Initiatives and Objectives Revenue = $22.5B, +5% yr/yr (5% @cc) • Invest in higher value / higher growth areas - Business Analytics and Optimization - Smarter Planet - Big Data PLM (Divested 2010) Other Operating Systems Branded Middleware WebSphere Information Mgmt Tivoli Lotus Rational • Software enabled Cloud Computing - Business Services - Platform - Infrastructure • Acquire to extend capabilities Other Middleware Revenue growth faster than the market Contribute ~50% of IBM's segment profit by 2015 Operating Pre-tax income long-term growth model: 12% - 15% Initiatives and Objectives Systems & Technology Revenue = $18.0B, 11% yr/yr (11% @cc) • Differentiate through integration and optimization - Workload optimized systems - Integrated server, storage and network stacks Retail Store Solutions Microelectronics OEM Servers Storage System z Power Systems System x • Deliver superior economic value - Extend leadersip with new products - Power 7 - Next Generation System z Sustained investments in innovation drive differentiation and value Growth Markets to drive 40% of Revenue by 2015 Operating Pre-tax income long-term growth model: 6% - 8%