IBM Business Perspective 2012

Patricia Murphy Vice President, Investor Relations

2009 IBM Corporation

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 Companys 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 managements 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 Companys 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 Companys investor relations web site at http://www.ibm.com/investor/events/pmurphy0612/.

Agenda

Strategy and Historical Performance 2015 Roadmap

Appendix: IBM Growth Initiatives

The industry economics have changed over time

% Growth

35% 30% 25% 20% 15% 10%

Total IT Growth at Constant Currency

2010-2015 CAGR Growth Markets ~ 8% Total Markets 3-4%

5% 0% '98 -5% -10% '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12

Major Markets ~ 2%
'13 '14 '15

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

IBM has been moving to higher value areas, with more of our revenue and profit in annuity businesses
% of Segment Profit* Annuity vs Transactional Revenue

44%
48% 52%

27% 38% 35%

2000**
Hardware/Financing

41%

Annuity vs Transactional Profit***

16%
2011
Services Software

40%

60%

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

Annuity

We have become a globally integrated enterprise, capitalizing on markets with high growth potential
Growth Markets % of IBM Geographic Revenue*

2011 2010 2009 2008 2007

Major Markets Growth Markets

22%
21% 19% 18% 17%
16% 11%
4

2006 2000
* Revenue mix percentages exclude divestitures (PCD, Printers)

Our shift to higher value, global integration and productivity has driven superior financial results
Operating Pre-tax Income Margin and Free Cash Flow $B
16.6

Primary Uses of Cash $B

20.2%

Share Repurchase

6.7
10.1%

Dividends Acquisitions

Capital

'00

'01

'02

'03

'04

'05

'06

'07

'08

'09

'10

'11

Operating Pre-tax Income Margin

Free Cash Flow

Agenda

Strategy and Historical Performance 2015 Roadmap

Appendix: IBM Growth Initiatives

IBMs 2015 Roadmap: at least $20 of Operating EPS

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

11% CAGR At Least $20

Enterprise Productivity

Margin Mix

Acquisitions Base Revenue Growth Revenue Mix

~$2.80

Operating Leverage
$11.67

~$2.50
Revenue Growth

~$3.05

2010 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 Operating EPS*

Key initiatives support the revenue and profit objectives

Share Repurchase Operating Leverage

Smarter Planet
Contributes ~$7B of growth over roadmap 2011: ~50% yr/yr

Revenue Growth
~$3.05

Growth Markets
Approaches 30% of IBMs geographic revenue by 2015 2011: 16% yr/yr (11% @CC)

Business Analytics
Contributes ~$6B of growth over roadmap 2011: 16% yr/yr

$11.67

Cloud
Contributes ~$7B of revenue, of which ~$3B is incremental growth 2011: 2.8x growth
2015 Operating EPS

and contribute $20B of revenue growth through 2015

$13.44
Share Repurchase Operating Leverage
2011

~$17B

~$7B
~$2B

~$6B
~$2B

~$3B
~$0.2B

~$50B

Revenue Growth
~$3.05

~$3B

Double-digit yr/yr growth

+$6B

~$30B
i

$11.67

2015 Operating EPS

2010 Revenue from Key Initiatives

Growth Markets

Smarter Planet

Business Analytics

Incremental Cloud

2015 Revenue from Key Initiatives

We have allocated $20B for acquisitions

Share Repurchase
45%

Forward Looking Revenue Growth Estimates

Operating Leverage

Revenue Yr/Yr%

30%
30%

20%
15%

Revenue Growth
~$3.05

10%

10%

10%

Scalable intellectual property Key to solutions offerings Drive synergies through global distribution

0%

Yr1

Yr2

Yr3

Yr4

Yr5

Forward Looking PTI Margin Estimates

$11.67
30% 20%
PTI Margin

23% 18% 11%

27%

20% 15% 10%

10% 0% -10%

2%

2%

-20%
-20%
Yr1 Yr2 Yr3 Yr4 Yr5

2015 Operating EPS

PTI Margin

Margin excl. amortization of intangibles and acquisition-related charges

10

with investments aligned to key themes

Acquisitions since 2010
Share Repurchase Operating Leverage
Servers, Networking & Storage Optimization Complements Organic Assets
IBM Hardware Portfolio

IBM Hardware Portfolio

Revenue Growth
~$3.05

Cloud
GTS Service Delivery

Smarter Commerce Smarter Planet

Smarter Cities

Industry Solutions Frameworks

$11.67

GBS Offerings

Business Intelligence & Data Analytics

2015 Operating EPS

Governance, Risk, Compliance & Security

GBS BAO Service Line 8 Analytics Solution Centers

11

IBM expands margins through a shift to higher value

Share Repurchase

% of Operating Segments Profit*

Operating Leverage
~$2.50

~50%

Revenue Growth
~$3.05

44% = $10B

$11.67
27% = $2.6B 38% 35% 16% 41%

~36%

~13%

2000**
H ardware/Financing
2015 Operating EPS

2011
Services

2015e
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

12

and enterprise productivity savings of $8 billion

Share Repurchase

Enterprise Productivity Savings

~$8B
Integrated Operations

Operating Leverage
~$2.50

Revenue Growth
~$3.05

~$6B

Continuous improvement leveraging analytics Locate work to where it best can be performed Focus integrated operations on high value advisory activities 2011: $1.9B gross savings

$11.67

~$85B Spend Base

End-to-End Process Transformation

Shared Services

2006-2010

2011-2015

Balance savings between reinvesting and driving margin performance

2015 Operating EPS

Model assumes 40% of gross savings to the bottom line

13

We are leveraging our strong cash generation to invest in the business and return value to shareholders
Share Repurchase
~$2.80

Free Cash Flow $B

Primary Uses of Cash $B

Operating Leverage
~$2.50

2015 Roadmap
16.6

Revenue Growth
~$3.05

~$10B

$11.67

Approaches $100B
Free Cash Flow

6.7

'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12e'13e'14e'15e
2015 Operating EPS

Supports ~$40B of Financial Flexibility in 2015 14

Our 2011 performance puts us on track to our 2015 objective

At Least

$20
Operating EPS* 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 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

2010 2011

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

2015
* Non-GAAP: Excludes acquisition-related charges and non-operating retirement-related expense

15

The IBM transformation continues in the 2015 Roadmap

Operating PTI / EPS *
Segment Operating PTI Operating EPS

At Least $20

2015 Objectives
Software contributes about half of our segment profit Growth initiatives deliver $20B in revenue growth Growth markets revenue approaches 30% of IBMs geographic total Enterprise productivity delivers $8B in gross savings

At Least $15.10 $13.44

$3.32 $1.81

IBM returns $70B to shareholders over the roadmap

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

Hardware / Financing

Services

Software

* Non-GAAP: Excludes acquisition-related charges and non-operating retirement-related charges 2000 & 2001 segments not restated for stock based compensation Sum of external segment pre-tax income not equal to IBM pre-tax income

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
Become the premier Globally Integrated Enterprise Focus on open technologies and high-value solutions Deliver integration and innovation to clients

Smarter Planet
Contributes ~$7B of growth over roadmap

Growth Markets
Approaches 30% of IBMs geographic revenue by 2015

Business Analytics
Contributes ~$6B of growth over roadmap

Cloud
Grows to ~$7B business by 2015, of which ~$3B is incremental 19

Growth Markets provide an opportunity to capture growth and drive productivity

In 2012, growth markets economies will become the worlds largest importers and consumers Asia and Africa will add 874 million urban residents and expand their gross regional domestic product by $20.7 trillion from 2010 to 2025

Growth Markets

Economic Rebalancing
hic ap gr t mo hif De S

The worlds 10 fastest growing economies are all from the growth markets countries

ati o

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

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

Ur ba

niz

By 2030, 93% of the worlds middle class will be from emerging markets

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

> 3x major market growth rate
* IBM Market Insights analysis, using GMV1H12, Jan 2012

20

IBMs business mix is shifting to the growth markets

Market Expansion IT Infrastructure Development Industry Leadership
20102015 ~ $17B incremental revenue Grow faster than market Outpace Major Markets growth > 8 points Drive margin expansion

Growth Markets

Approach 30% of IBM geographic revenue

Revenue Growth @ CC
10% 11% 11%

Geographic Gross Profit Bridge*

$2.2B $1.9B ~$51B

+8 pts
2%

1%

+10 pts
1%

+10 pts
2%

~$47B

Growth Markets

Major Markets

+8 pts
-6% 2008 2009 2010 2011
2010

Geographic Gross Profit

2011

Growth Markets

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

21

Smarter Planet describes the emerging era of computing

By 2015,

Smarter Planet

Instrumented

1 Trillion
connected devices

In 5 years,

5.6 Billion
personal devices sold
Unstructured data growing

Interconnected

90%
of the worlds data was created in the past 2 years By 2020, business transactions over the internet =

800%
in the next 5 years

Intelligent

10,000
messages/second from 100 million active users per source

450 Billion per day

22

IBMs Smarter Planet is a collection of markets were making by driving new value for clients
Focus Industries
Expanded from 9 18 industries 52 industry solutions areas 2,400 Smarter Cities engagements 8 key portfolio areas

Smarter Planet

Smarter Cities Business Functions

Smarter Commerce portfolio 17 solution areas, 5 software acquisitions

Chief Procurement Officer Chief Marketing Officer

Reaching new buyers 2011 Progress

Buy Service

Market Sell

~50%
revenue growth

90%
growth in software content

8,000
engagements

VP of Customer Loyalty

VP of Commerce Stores & Operations

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

23

Analytics has evolved from business initiative to business imperative

Enabling our clients to turn oceans of data into predictive models and actionable decisions

Business Analytics

Why analytics matters... 33% more

Revenue Growth

$234 billion
32% more
Return on Invested Capital
in total IT opportunity by 2015

> 12x more

Profit Growth

$76 billion
in software opportunity by 2015

12.5% 9.4% 7.3% 0.6%

Finance organizations with business insight All other enterprises

11.9% 9.0%

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

24

IBM has built a broad portfolio of business analytics capabilities

$16 billion
More than $16B in acquisitions to build the industry's most comprehensive analytics portfolio

Business Analytics

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

9,000
Supported by nearly 9,000 consultants, 10,000 technical professionals and 500+ patents

27,000
Working with 27,000 partners and 5,000 universities to develop skills

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

IBMs analytics business grows $6B to more than $16B by 2015

25

Cloud is transforming IT and opening new opportunities for IBM

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
$217 B $130 B

Cloud Computing

... and 25% growth

in the cloud opportunity through 2015*

2001
New server spending Power and cooling costs

2011
Server management & administration costs

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

26

IBM is leading the enterprise cloud market

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 IBMs addressable market opportunity and margin opportunity

Cloud Computing

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

~4,000
successful cloud engagements in FY 2011

4.5M
daily client transactions through IBMs public cloud

cloud revenue growth in 2011

2.8X

$100B
in commerce transactions analyzed per year in the cloud

1M
enterprise application users working on the IBM cloud

Foundation

Services

Solutions

Private & Hybrid Clouds

Cloud Enablement Technologies

Managed Cloud Services

Infrastructure and Platform as a Service

Cloud Business Solutions

Software and Business Process as a Service

Commitment to open standards and a broad ecosystem

Cloud contributes ~$7B revenue ($3B incremental) to IBM in 2015

27