-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GeoxZ1Kn/XjNrv0qjD08WE+gh5yfxZriCwRF24mhv4s02T0+3tueWvGV9yfdqt6p rge1u8SEsXvaL38BsIzCYQ== /in/edgar/work/20000814/0001005477-00-005771/0001005477-00-005771.txt : 20000921 0001005477-00-005771.hdr.sgml : 20000921 ACCESSION NUMBER: 0001005477-00-005771 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERNATIONAL BUSINESS MACHINES CORP CENTRAL INDEX KEY: 0000051143 STANDARD INDUSTRIAL CLASSIFICATION: [3570 ] IRS NUMBER: 130871985 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-02360 FILM NUMBER: 698918 BUSINESS ADDRESS: STREET 1: 1 NEW ORCHARD ROAD CITY: ARMONK STATE: NY ZIP: 10504- BUSINESS PHONE: 9144991900 MAIL ADDRESS: STREET 1: ONE NEW ORCHARD RD CITY: ARMONK STATE: NY ZIP: 10504 10-Q 1 0001.txt FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10 - Q QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED JUNE 30, 2000 1-2360 ------ (Commission file number) INTERNATIONAL BUSINESS MACHINES CORPORATION ------------------------------------------- (Exact name of registrant as specified in its charter) New York 13-0871985 -------- ---------- (State of incorporation) (IRS employer identification number) Armonk, New York 10504 ---------------- ----- (Address of principal executive offices) (Zip Code) 914-499-1900 ------------ (Registrant's telephone number) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section l3 or l5(d) of the Securities Exchange Act of 1934 during the preceding l2 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes |X| No |_| The registrant has 1,760,704,711 shares of common stock outstanding at June 30, 2000. Index Page ---- Part I - Financial Information: Item 1. Consolidated Financial Statements Consolidated Statement of Earnings for the three and six months ended June 30, 2000 and 1999 ........................... 1 Consolidated Statement of Financial Position at June 30, 2000 and December 31, 1999 ........................... 3 Consolidated Statement of Cash Flows for the six months ended June 30, 2000 and 1999 .................................. 5 Notes to Consolidated Financial Statements ......................... 6 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition ...... 9 Part II - Other Information .............................................. 19 Part I - Financial Information ITEM 1. Consolidated Financial Statements INTERNATIONAL BUSINESS MACHINES CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENT OF EARNINGS (UNAUDITED)
(Dollars in millions except Three Months Ended Six Months Ended per share amounts) June 30, June 30, ------------------ ---------------- 2000 1999* 2000 1999* -------- -------- -------- -------- Revenue: Hardware $ 9,151 $ 9,622 $ 16,863 $ 18,373 Global Services 8,184 7,988 15,736 15,538 Software 3,182 3,126 6,109 6,046 Global Financing 819 743 1,635 1,448 Enterprise Investments/Other 315 426 656 817 -------- -------- -------- -------- Total revenue 21,651 21,905 40,999 42,222 Cost: Hardware 6,654 6,851 12,247 13,203 Global Services 5,964 5,721 11,561 11,288 Software 557 520 1,141 1,075 Global Financing 369 332 753 643 Enterprise Investments/Other 164 257 343 531 -------- -------- -------- -------- Total cost 13,708 13,681 26,045 26,740 -------- -------- -------- -------- Gross profit 7,943 8,224 14,954 15,482 Expense: Selling, general and administrative 3,867 2,846 7,573 6,783 Research, development and engineering 1,269 1,293 2,441 2,474 Other income (130) (155) (319) (289) Interest expense 164 197 316 371 -------- -------- -------- -------- Total expense 5,170 4,181 10,011 9,339 Income before income taxes 2,773 4,043 4,943 6,143 Income tax provision 832 1,652 1,483 2,282 -------- -------- -------- -------- Net income 1,941 2,391 3,460 3,861 Preferred stock dividends 5 5 10 10 -------- -------- -------- -------- Net income applicable to common shareholders $ 1,936 $ 2,386 $ 3,450 $ 3,851 ======== ======== ======== ========
* Reclassified to conform with 2000 presentation. (The accompanying notes are an integral part of the financial statements.) -1- INTERNATIONAL BUSINESS MACHINES CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENT OF EARNINGS - (CONTINUED) (UNAUDITED)
Three Months Ended Six Months Ended June 30, June 30, ------------------ ---------------- 2000 1999 2000 1999 ---- ---- ---- ---- Earnings per share of common stock - assuming dilution $ 1.06 $ 1.28 $ 1.89 $ 2.05 Earnings per share of common stock - basic $ 1.10 $ 1.32 $ 1.95 $ 2.12 Average number of common shares outstanding: (millions) Assuming dilution 1,818.0 1,870.6 1,824.0 1,876.6 Basic 1,767.6 1,812.1 1,772.4 1,818.0 Cash dividends per common share $ 0.13 $ 0.12 $ 0.25 $ 0.23
(The accompanying notes are an integral part of the financial statements.) -2- INTERNATIONAL BUSINESS MACHINES CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENT OF FINANCIAL POSITION ASSETS
At June 30, At December 31, (Dollars in millions) 2000 1999 ---- ---- (Unaudited) Assets Current assets: Cash and cash equivalents $ 2,987 $ 5,043 Marketable securities -- at fair value, which approximates market 274 788 Notes and accounts receivable -- trade, net of allowances 21,145 21,398 Sales-type leases receivable 5,056 6,220 Inventories, at lower of average cost or net realizable value Finished goods 1,038 1,162 Work in process and raw materials 3,721 3,706 ------- ------- Total inventories 4,759 4,868 Prepaid expenses and other current assets 5,216 4,838 ------- ------- Total current assets 39,437 43,155 Plant, rental machines and other property 38,506 39,616 Less: Accumulated depreciation 21,872 22,026 ------- ------- Plant, rental machines and other property -- net 16,634 17,590 Software 740 663 Investments and sundry assets 26,138 26,087 ------- ------- Total assets $82,949 $87,495 ======= =======
(The accompanying notes are an integral part of the financial statements.) -3- INTERNATIONAL BUSINESS MACHINES CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENT OF FINANCIAL POSITION - (CONTINUED) LIABILITIES AND STOCKHOLDERS' EQUITY
At June 30, At December 31, (Dollars in millions except 2000 1999 per share amounts) ---- ---- (Unaudited) Liabilities and Stockholders' Equity Current liabilities: Taxes $ 3,690 $ 4,792 Accounts payable and accruals 17,857 20,556 Short-term debt 12,315 14,230 -------- -------- Total current liabilities 33,862 39,578 Long-term debt 16,859 14,124 Other long-term liabilities 11,660 11,928 Deferred income taxes 1,394 1,354 -------- -------- Total liabilities 63,775 66,984 Stockholders' equity: Preferred stock - par value $.01 per share 247 247 Shares authorized: 150,000,000 Shares issued and outstanding: 2000 - 2,546,011 1999 - 2,546,011 Common stock - par value $.20 per share 12,570 11,762 Shares authorized: 4,687,500,000 Shares issued: 2000 - 1,887,704,696 1999 - 1,876,665,245 Retained earnings 19,750 16,878 Treasury stock - at cost (11,287) (7,375) Shares: 2000 - 106,999,985 1999 - 72,449,015 Employee benefits trust (2,218) (2,162) Shares: 2000 - 20,000,000 1999 - 20,000,000 Accumulated gains and losses not affecting retained earnings 112 1,161 -------- -------- Total stockholders' equity 19,174 20,511 -------- -------- Total liabilities and stockholders' equity $ 82,949 $ 87,495 ======== ========
(The accompanying notes are an integral part of the financial statements.) -4- INTERNATIONAL BUSINESS MACHINES CORPORATION AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, (UNAUDITED) (Dollars in millions) 2000 1999* ---- ----- Cash flow from operating activities: Net income $ 3,460 $ 3,861 Adjustments to reconcile net income to cash provided from operating activities: Depreciation 2,246 3,669 Amortization of software 220 203 Gain on disposition of fixed and other assets (425) (3,796) Changes in operating assets and liabilities (3,016) (417) ------- ------- Net cash provided from operating activities 2,485 3,520 ------- ------- Cash flow from investing activities: Payments for plant, rental machines and other property, net of proceeds (1,571) (2,155) Investment in software (262) (209) Purchases of marketable securities and other investments (453) (2,292) Proceeds from marketable securities and other investments 880 1,104 Proceeds from sale of the IBM Global Network -- 4,081 ------- ------- Net cash (used in) provided from investment activities (1,406) 529 ------- ------- Cash flow from financing activities: Proceeds from debt issuance 4,796 2,986 Payments to settle debt (4,048) (3,274) Short-term borrowings less than 90 days -- net 290 177 Common stock transactions -- net (3,624) (3,259) Cash dividends paid (458) (433) ------- ------- Net cash used in financing activities (3,044) (3,803) ------- ------- Effect of exchange rate changes on cash and cash equivalents (91) (156) ------- ------- Net change in cash and cash equivalents (2,056) 90 Cash and cash equivalents at January 1 5,043 5,375 ------- ------- Cash and cash equivalents at June 30 $ 2,987 $ 5,465 ======= ======= * Reclassified to conform with 2000 presentation. (The accompanying notes are an integral part of the financial statements.) -5- Notes to Consolidated Financial Statements 1. In the opinion of the management of International Business Machines Corporation (the company), all adjustments necessary to a fair statement of the results for the unaudited three- and six-month periods have been made. 2. The following table summarizes the Accumulated gains and losses not affecting retained earnings.
(Dollars in millions) Three Months Ended Six Months Ended June 30, June 30, ------------------ ---------------- 2000 1999 2000 1999 ---- ---- ---- ---- Net Income $ 1,941 $ 2,391 $ 3,460 $ 3,861 Gains and losses not affecting retained earnings (net of tax): Foreign currency translation adjustments (184) (162) (293) (752) Net unrealized (losses)/gains on marketable securities (363) (24) (756) 2 ------- ------- ------- ------- Accumulated gains and losses not affecting retained earnings $ 1,394 $ 2,205 $ 2,411 $ 3,111 ======= ======= ======= =======
3. In June 1999, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 137, Accounting for Derivative Instruments and Hedging Activities--Deferral of the Effective Date Of FASB Statement No. 133. This statement defers the effective date of SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, to fiscal years beginning after June 15, 2000, although early adoption is encouraged. SFAS No. 133 and SFAS No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities an amendment of FASB Statement No. 133, issued in June 2000, establish accounting and reporting standards for derivative instruments. They require an entity to recognize all derivatives as either assets or liabilities in the statement of financial position and to measure those instruments at fair value. Additionally, the fair value adjustments will affect either stockholders' equity or net income depending on whether the derivative instrument qualifies as a hedge for accounting purposes and, if so, the nature of the hedging activity. The company will adopt these standards as of January 1, 2001. Management does not expect the adoption to have a material effect on the company's results of operations; however, the effect on the company's financial position depends on the fair values of the company's derivatives and related financial instruments at the date of adoption. In December 1999, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin No. 101 (SAB 101), Revenue Recognition in Financial Statements, which provides guidance on the recognition, presentation and disclosure of revenue in financial statements filed with the SEC. The company is currently reviewing the provisions of SAB 101. The company expects to complete its review of SAB 101 by the end of the fourth quarter of 2000. -6- Notes to Consolidated Financial Statements - (continued) 4. The tables on pages 27 through 30 of this Form 10-Q reflect the results of the company's segments consistent with the company's management system. These results are not necessarily a depiction that is in conformity with generally accepted accounting principles, e.g., employee retirement plan costs are developed using actuarial assumptions on a country-by-country basis and allocated to the segments on headcount. A different result could be arrived at for any segment if actuarial assumptions unique to each segment were used. Performance measurement is based on income before income taxes (pre-tax income). These results are used, in part, by management, both in evaluating the performance of, and in allocating resources to, each of the segments. Effective in the first quarter of 2000, results reflect changes the company made in the organization of its business segments, including the transfer of the systems-level product businesses from the Technology segment to the Enterprise Systems segment and the transfer of point-of-sale products from the Enterprise Investments segment to the Personal Systems segment. Also reflected are changes the company made in its expense allocation methodology, allocating expense items previously unallocated and enhancing shared expense allocations. Second-quarter and first-half 1999 results have been reclassified to conform with the 2000 presentation. 5. The second quarter 1999 results include a pre-tax benefit of $1,610 million ($687 million after tax, or $.37 per diluted common share) related to the sale of IBM's Global Network, a change in estimate related to the depreciable life of personal computers used within the company and actions within the company's Technology Group. That benefit is reflected in Selling, general and administrative expense. Sale of IBM Global Network. In December 1998, the company announced that it would sell its Global Network business to AT&T for $5 billion. During the second quarter of 1999, the company completed the sales of its Global Network businesses in the United States, Japan, the United Kingdom, and Ireland, for approximately $4,192 million. The company recognized a pre-tax gain of $3,430 million on the sales ($2,102 million after tax, or $1.12 per diluted common share). Change in Estimate. As a result of a change in estimate of the useful life of personal computers (PCs), from five years to three years, the company recognized a charge in the second quarter of 1999 for $404 million ($241 million after tax, $.13 per diluted common share). The company wrote off the net book value of PCs that were 3 years or older and therefore, had no remaining useful life. The remaining book value of the assets will be depreciated over the remaining new useful life. The net effect on future operations is expected to be minimal as the increased depreciation due to the shorter life will be offset by the lower depreciable base attributable to the write-off of PCs older than three years. Technology Group Actions. During the second quarter of 1999, the company implemented actions that were designed to better align the operations and cost structure of IBM's Technology Group with that group's strategic direction in view of the competitive environment, overcapacity in the industry and resulting pricing pressures. The actions affected the Microelectronics Division (MD) and the Storage Systems Division (SSD) of the company's Technology Group. -7- Notes to Consolidated Financial Statements - (continued) During the second quarter of 1999, the company recorded a charge of $1,416 million ($1,174 million after tax, or $.62 per diluted common share) related to the Technology Group actions. The charge included $190 million related to employee termination benefits and $1,226 million of other costs as described below. Summary. The following table identifies the significant components of the pre-tax charge related to Technology Group actions, the investments and other asset write-downs in the quarter, and the liability as of June 30, 1999:
Liability Investment & Created Liability (Dollars in millions) Total Pre- Other Asset in the as of tax Write- Second June 30, Charges Downs Quarter 1999 MD Actions: DRAM Equipment (1) $ 662 $ 662 $ -- $ -- Employee Terminations (2) 167 -- 167 167 Dominion Investment (3) 171 171 -- -- MiCRUS Investment (4) 152 -- 152 152 SSD Actions: Equipment (5) 241 241 -- -- Employee Terminations (6) 23 -- 23 23 ------ ------ ------ ------ Total Actions $1,416 $1,074 $ 342 $ 342 ====== ====== ====== ======
(1) Represents (a) the difference between net book value and fair value of assets that were contributed to a joint venture, (b) the book value of assets that were idled as a result of the MD actions and that were scrapped and (c) the difference between the net book value and the appraised fair value of test equipment subject to sale-leaseback agreements. The leased test equipment is being used and appropriately expensed. (2) Workforce reductions that affect approximately 790 employees (455 direct manufacturing and 335 indirect manufacturing) in France. (3) Write-off of investment in joint venture at the signing of the agreement with Toshiba Corporation. (4) Acquisition of minority interest in MICRUS and charges for equipment leasehold cancellation liabilities and lease rental payments for idle equipment. (5) Represents (a) the book value of assets that were idled as a result of the SSD actions and scrapped, (b) write-downs to fair value of equipment under contract for sale and delivery by December 31, 1999, and March 31, 2000, and (c) the difference between the net book value and the appraised fair value of equipment subject to sale-leaseback agreements. The leased equipment is being used and appropriately expensed. (6) Workforce reductions that affect approximately 900 employees (780 direct manufacturing and 120 indirect manufacturing) in the United States. -8- Notes to Consolidated Financial Statements - (continued) The following table provides the liability balances at June 30, 2000 for actions that the company took in 1999:
Liability Liability as of as of 12/31/1999 Payments Other Adj.* 6/30/2000 ---------- -------- ----------- --------- MD Actions: DRAM Employee Terminations (1) $149 $ 32 $ 5 $112 MiCRUS Investment (2) 152 152 -- -- SSD Actions: Employee Terminations (3) 7 7 -- -- ---- ---- ---- ---- Total $308 $191 $ 5 $112 ==== ==== ==== ====
(1) The liability as of June 30, 2000, relates to future payments to those terminated employees over their remaining lives. (2) The MiCRUS semiconductor operation was sold to Philips Semiconductors during June 2000. (3) The company completed the workforce reductions for the 210 U.S. employees who were remaining at December 31, 1999. * Represents translation adjustments due to currency fluctuations. In June 2000, the company reached an agreement to sell its MiCRUS semiconductor operations to Philips Semiconductors, an affiliate of Royal Philips Electronics. In the second quarter of 1999 the company accrued shutdown costs associated with the MiCRUS operations. The liability created was primarily for lease termination charges for equipment under the MiCRUS operation. Since June 1999, shutdown activities have been underway and were completed in June 2000. The liabilities accrued for in the second quarter of 1999 have been utilized during the second quarter of 2000. In addition, the company recorded a gain of $40 million from the sale of assets associated with this sale in the second quarter of 2000. 6. Subsequent Event: On July 25, 2000, the company announced that Samuel J. Palmisano and John M. Thompson had been elected to the IBM Board of Directors. In addition, the company announced on July 24, 2000, that Mr. Palmisano had been named president and chief operating officer of IBM and Mr. Thompson had been named IBM Vice Chairman, reporting to IBM Chairman and Chief Executive Officer Louis V. Gerstner, Jr. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2000 The company's second-quarter and first-half results were in line with the company's expectations. The company had experienced three quarters of slow revenue growth, driven by a combination of Y2K slowdown and a series of actions taken to improve the company's business portfolio and long-term profitability. Revenue performance for the second quarter was constrained by several factors: currency negatively affected revenue growth by one point, hard disk drives (HDDs) and personal -9- computers while improving quarter to quarter were a drag on revenue growth, as were some parts of the company's server business. During the second quarter the company began to see a shift in momentum in several areas. The services business saw significant increases in new contract signings which totaled $20 billion for the quarter. A number of product areas also experienced strong growth, including Web management software, e-business consulting, Web hosting, systems integration and wireless chips. The company also experienced a firming of its server business, particularly Web servers which showed strong revenue growth, as well as high-end disk drive revenue, led by the company's advanced Shark product. Result of Operations (Dollars in millions) Three Months Ended Six Months Ended June 30, June 30, -------- -------- 2000 1999 2000 1999 ---- ---- ---- ---- Revenue $21,651 $21,905 $40,999 $42,222 Cost 13,708 13,681 26,045 26,740 ------- ------- ------- ------- Gross profit $ 7,943 $ 8,224 $14,954 $15,482 Gross profit margin 36.7% 37.5% 36.4% 36.7% Net income $ 1,941 $ 2,391 $ 3,460 $ 3,861 Earnings per share of common stock: Assuming dilution $ 1.06 $ 1.28 $ 1.89 $ 2.05 Basic $ 1.10 $ 1.32 $ 1.95 $ 2.12 As a result of the company's share repurchase program, the average number of common shares outstanding assuming dilution was lower by 52.6 million than the second quarter in 1999 and the first six months of 1999. The average number of shares assuming dilution was 1,818.0 million in the second quarter of 2000 and 1,824.0 million for the first six months of 2000. There were 1,760.7 million shares outstanding at June 30, 2000. Revenue for the three months ended June 30, 2000 decreased 1.2 percent versus the same period last year (flat at constant currency). Hardware revenue declined 4.9 percent driven by lower System/390, AS/400 and storage revenue partially offset by increased microelectronics and Web server revenue. Revenue from Global Services increased 2.4 percent in the quarter but was adversely affected by the sale of the IBM Global Network to AT&T in 1999 and by a year-over-year decline in Y2K services. Software revenue increased 1.7 percent as middleware software showed growth, partially offset by lower operating systems revenue primarily due to lower AS/400 software revenue. Revenue from Global Financing increased 10.1 percent and revenue from Enterprise Investments/Other declined 25.9 percent year-over-year. Revenue for the second quarter of 2000 from the company's end-user businesses totaled $9.7 billion from the Americas, a decrease of 3.1 percent (3 percent decrease at constant currency) compared with the same period last year. Revenue from Europe/Middle East/Africa was $5.9 billion, down 8.5 percent (flat at constant currency). Asia-Pacific revenue grew 19.9 percent (13 percent at constant currency) to $4.3 billion. OEM revenue across all -10- Results of Operations - (continued) geographies was $1.8 billion, a 6.2 percent decrease (7 percent in constant currency) compared with the second quarter of 1999. The company's overall gross profit margin was 36.7 percent in the second quarter compared with 37.5 percent in the same period of 1999. The decline in gross profit margin continues to reflect the changing mix of the company's business to services, and a decline in margins in the company's hardware business related to a shift from servers to microelectronics products which have a lower gross profit margin. The company's second quarter expenses were $5.2 billion and the expense to revenue ratio was 23.9 percent compared with 19.1 percent in the year earlier period (or 26.4 percent after excluding a 7.3 point improvement from the IBM Global Network sale and other 1999 actions). The actions are described in Note No. 5 to the Consolidated Financial Statements on pages 7 through 9. The company's tax rate was 30.0 percent in the second quarter compared with 40.8 percent in the year-earlier period. The decrease was principally due to the IBM Global Network sale and other 1999 actions. Hardware (Dollars in millions) Three Months Ended Six Months Ended June 30, June 30, 2000 1999 2000 1999 ---- ---- ---- ---- Total revenue $ 9,151 $ 9,622 $16,863 $18,373 Total cost 6,654 6,851 12,247 13,203 ------- ------- ------- ------- Gross profit $ 2,497 $ 2,771 $ 4,616 $ 5,170 Gross profit margin 27.3% 28.8% 27.4% 28.1% Revenue from hardware for the second quarter and first six months of 2000 decreased 4.9 percent and 8.2 percent, respectively, when compared with the same periods in 1999. Enterprise Systems revenue declined for both the second quarter and first six months of 2000. Revenue from the Web server product line, which includes RS/6000 S80 models and NUMA-Q products increased as customer acceptance of the S80 model continued to be strong. At the end of the second quarter, the company began shipping mid-range servers using copper technology. In addition, revenue from the company's enterprise storage products including Shark accelerated in the second quarter showing growth for the second quarter and first six months of 2000 compared to year-ago periods. These increases were offset by lower revenue from System/390, other storage products (specifically tape products) and AS/400. Although System/390 revenue declined, computing power as measured in MIPS (millions of instructions per second) increased 1 percent reversing the trend of decline that started in the back half of 1999 and concluded with an 8 percent decline in the first quarter of 2000. In the second quarter of 2000, the company announced new models of the AS/400 which began shipping at the end of July 2000. As a result, second-quarter revenue declined as customers awaited the availability of the new models. -11- Results of Operations - (continued) Technology revenue increased for the second quarter and declined for the six months of 2000 when compared with year-ago periods. The increase for the second quarter was driven by strong growth in custom logic products partially offset by lower revenue for HDDs, as a result of not shipping the company's new 10,000 RPM drives. The decline in revenue for the first six months of 2000 was driven by lower HDD revenue, partially offset by strong revenue growth from microelectronics products primarily custom logic chips. Personal Systems revenue declined for the second quarter and first six months of 2000 versus the same periods in 1999 as the company continued to take initiatives to improve long-term profitability. During the second quarter, the company replaced or refreshed over 50 percent of its product offerings with new, lower cost products that better match customers' needs. In addition, revenue was affected by the constrained supply from one of the company's major suppliers of planar boards used on the Netfinity and ThinkPad lines. The company is aggressively addressing this problem and expects resolution by the end of the third quarter of 2000. Hardware sales gross profit for the second quarter and first six months of 2000 decreased 9.8 percent and 10.7 percent, respectively, from comparable periods in 1999. The hardware gross profit margin decreased 1.5 points and 0.7 points, respectively, from the prior year although microelectronics gross profit margin improved as a result of actions taken within the company's DRAM business in 1999. Gross profit margins improved for the second quarter and first six months of 2000 for AS/400 and Personal Systems products. These increases were offset by lower gross profit margins associated with System/390, Web Server, storage products and OEM storage technology. In addition, in the second quarter of 2000, there was a shift away from server revenue towards microelectronics which has a lower gross profit margin. Global Services (Dollars in millions) Three Months Ended Six Months Ended June 30, June 30, -------- -------- 2000 1999 2000 1999 ---- ---- ---- ---- Total revenue $ 8,184 $ 7,988 $15,736 $15,538 Total cost 5,964 5,721 11,561 11,288 ------- ------- ------- ------- Gross profit $ 2,220 $ 2,267 $ 4,175 $ 4,250 Gross profit margin 27.1% 28.4% 26.5% 27.4% Global Services revenue increased 2.4 percent and 1.3 percent, respectively, in the second quarter and first six months of 2000, when compared with the same periods of last year. Revenue was affected by two events: the sale of the IBM Global Network to AT&T and a decline in Y2K services activity. After adjusting for those factors, Global Services revenue (excluding maintenance) increased 10 percent and 9 percent for the second quarter and first six months of 2000 versus the same periods of 1999. Growth in Strategic Outsourcing Services and Integrated Technology Services revenue in the second quarter and first six months of 2000 was partially offset by lower revenue from Business Innovation Services (primarily due to a decline in Y2K activity) and the sale of the IBM Global Network. Maintenance revenue grew 1 percent in the second quarter of 2000 and was flat for the first six months of 2000 when compared to the same periods of 1999. New contract signings in the second quarter were over $20 billion and the -12- Results of Operations - (continued) backlog is now at $75 billion. Those signings included 20 deals that individually were valued at over $100 million and three deals individually valued at over $1 billion. The company's discrete e-business services revenue grew very strongly in the second quarter and first six months of 2000 when compared with the year-earlier periods. The company continued to invest in the required skills and capabilities by hiring 1,800 people to address e-business and high growth offerings, while retraining almost 3,000 employees through its e-mobilization efforts. In addition, the company has opened 12 of 16 e-business innovation centers in the U.S., Europe and Asia. The company continues to invest in the development of solutions such as e-commerce, e-marketplaces and web hosting. The company also provides more e-enablement by building and supporting customers' web infrastructures and storage area networks. Global Services gross profit dollars decreased in the second quarter and first six months of 2000 by 2.1 percent and 1.7 percent, respectively, when compared with year-ago periods. The decline in gross profit dollars and margin was a result of lower utilization rates in Business Innovation Services and Integrated Technology Services due to the rapid hiring and retraining the company has been doing to rebalance its skills towards e-business. The maintenance margin declined 1 point in the second quarter of 2000 and was flat for the first six months of 2000 when compared to the same periods of 1999. Software (Dollars in millions) Three Months Ended Six Months Ended June 30, June 30, 2000 1999 2000 1999 ---- ---- ---- ---- Total revenue $3,182 $3,126 $6,109 $6,046 Total cost 557 520 1,141 1,075 ------ ------ ------ ------ Gross profit $2,625 $2,606 $4,968 $4,971 Gross profit margin 82.5% 83.4% 81.3% 82.2% Revenue from software for the second quarter and first six months of 2000 increased 1.7 percent and 1.0 percent, respectively, over comparable periods in 1999. The company's middleware products (which comprise data management, transaction processing, Tivoli systems management, and Lotus Notes messaging and collaboration across both IBM and non-IBM platforms) had revenue growth of 7 percent and 6 percent, respectively, for the second quarter and first six months of 2000 versus comparable periods of 1999. Middleware is the software that powers the infrastructure of the company's e-business solutions. The company continues to focus on helping customers use its software to transform their businesses to e-businesses, particularly in collaboration with Global Services and channel partners. Operating-systems software revenue declined 12 percent for the second quarter and first six months of 2000, when compared with year-ago periods. The decreases were primarily due to lower AS/400 software revenue as a result of product transitions. -13- Results of Operations - (continued) Software gross profit dollars for the second quarter of 2000 increased 0.7 percent and were flat for the six months of 2000 versus the same periods in 1999. The increase in gross profit dollars in the second quarter of 2000 was due to increased revenue and lower levels of amortization costs, partially offset by higher services costs and vendor royalty payments. The year-to-date dynamics reflected a similar pattern as the second quarter, except the services costs and royalty payments more closely offset the increase in revenue and lower amortization costs. Global Financing (Dollars in millions) Three Months Ended Six Months Ended June 30, June 30, -------- -------- 2000 1999 2000 1999 ---- ---- ---- ---- Total revenue $ 819 $ 743 $1,635 $1,448 Total cost 369 332 753 643 ------ ------ ------ ------ Gross profit $ 450 $ 411 $ 882 $ 805 Gross profit margin 55.0% 55.3% 53.9% 55.6% Global Financing revenue increased 10.1 percent and 12.9 percent, respectively, for the second quarter and first six months of 2000, when compared with the same periods of 1999. The increases in revenue were primarily driven by growth in used equipment sales and commercial financing. Global Financing gross profit dollars increased 9.4 percent and 9.5 percent, respectively, for the second quarter and first six months of 2000, versus the same periods of 1999. The increase in gross profit dollars was primarily driven by higher sales of used equipment and an improving gross profit margin on these sales. The gross profit margins declined 0.3 points and 1.7 points, respectively, for the second quarter and first six months of 2000 versus the same periods of 1999. The declines were primarily driven by the mix towards more used equipment sales. Enterprise Investments / Other (Dollars in millions) Three Months Ended Six Months Ended June 30, June 30, 2000 1999 2000 1999 ---- ---- ---- ---- Total revenue $315 $426 $656 $817 Total cost 164 257 343 531 ---- ---- ---- ---- Gross profit $151 $169 $313 $286 Gross profit margin 47.9% 39.6% 47.7% 34.8% Revenue from Enterprise Investments/Other decreased 25.9 percent and 19.5 percent, respectively, for the second quarter and first six months of 2000, versus comparable periods in 1999. The decreases were driven primarily by the company's decision in 1999 to discontinue certain product lines such as automated teller machines. -14- Results of Operations - (continued) The Enterprise Investments/Other gross profit dollars decreased 10.3 percent and increased 10.2 percent, respectively, in the second quarter and first six months of 2000, versus the same periods of 1999. The decrease in the second quarter of 2000 was primarily driven by lower revenue associated with product lines discontinued in the second quarter of 1999. The increase in gross profit dollars for the first six months of 2000 was primarily due to the shift in mix of revenue to software products, which have a higher gross profit margin than the hardware product lines the company discontinued in 1999. Expenses
(Dollars in millions) Three Months Ended Six Months Ended June 30, June 30, 2000 1999 2000 1999 ---- ---- ---- ---- Selling, general and administrative $ 3,867 $ 2,846 $ 7,573 $ 6,783 Percentage of revenue 17.9% 13.0% 18.5% 16.1% Research, development and engineering $ 1,269 $ 1,293 $ 2,441 $ 2,474 Percentage of revenue 5.9% 5.9% 6.0% 5.9%
Selling, general and administrative (SG&A) expense for the second quarter and first six months of 2000 increased 35.9 percent and 11.7 percent, respectively, from the same periods in 1999. The increases were driven by the net benefit of $1,610 million associated with the sale of the IBM Global Network and other actions taken in the second quarter of 1999. (See Note No. 5 to the Consolidated Financial Statements on pages 7 through 9 for further information). Excluding the 1999 actions, SG&A expense decreased 13.2 percent for the second quarter of 2000 and 9.8 percent for the first six months of 2000 compared with the same periods of 1999. The company continues to manage aggressively its infrastructure expense and its overall portfolio to allow for investment in growth segments of the business. The company remains focused on maintaining affordable expense levels. The company continues to benefit from growth in licensing its intellectual property, as well as lower expenses from the sale of the IBM Global Network and actions taken in 1999 to exit businesses like networking hardware and DRAM. Expense benefited from gains associated with asset sales related to the MiCRUS semiconductor operations (See Note No. 5 to the Consolidated Financial Statements on page 9 for further information) and the sale of various parcels of land. Commission and compensation related expenses in the second quarter of 2000 were lower in some of the business units reflecting their year-to-year dynamics, particularly against a strong second quarter last year and the effect of currency which also was a benefit to SG&A expense in both the second quarter and first six months of 2000. Research, development and engineering expense decreased 1.8 percent and 1.3 percent, respectively, for the second quarter and first six months of 2000, when compared with the same periods of 1999. Interest on total borrowings of the company and its subsidiaries, which includes interest expense and interest costs associated with rentals and financing, amounted to $351 million and -15- Results of Operations - (continued) $699 million for the second quarter and first six months of 2000, respectively. Of these amounts, the company capitalized $8 million for the second quarter and $15 million for the first six months of 2000. For the twelve months ended December 31, 1999, the company realized cost and expense reductions of $762 million (as noted in Footnote W on pages 86-88 of the 1999 IBM Annual Report) due to the funded status of its pension plans. Of the total 1999 annual savings, the conversion to the amended U.S. pension plan, the Personal Pension Account (PPA), which was announced in the second quarter of 1999, contributed an estimated $167 million. In 2000, the company continues to benefit from the returns generated by its pension plan assets. Through the first six months of 2000, the benefit was approximately $606 million which represented an increase of $261 million over the same period in 1999, with only $20 million of the increase due to the PPA conversion. These cost and expense reductions were offset by other salary and benefit increases. Future effects of pension plans on the operating results of the company depend on economic conditions and investment performance. The effective tax rate for the quarter ended June 30, 2000, was 30.0 percent versus 40.8 percent for the same period in 1999 (or 30.0 percent after excluding 10.8 points due to the IBM Global Network sale and other second-quarter actions taken by the company in 1999). The effective tax rate for the first six months of 2000 was 30.0 percent versus 37.1 percent for the same period in 1999. The 7.1 point decrease from the 1999 rate was primarily a result of the same factors that affected the second quarter effective tax rate. Financial Condition During the first half of 2000, the company continued to make significant investments to fund its future growth and increase shareholder value. These investments included expenditures of $2,688 million for Research, development and engineering, $2,372 million for Plant, rental machines and other property and $3,906 million for the repurchase of the company's common shares. The company had $3,261 million in Cash and cash equivalents and Marketable securities at June 30, 2000. Cash Flow (Dollars in millions) Six Months Ended June 30, -------- 2000 1999 ---- ---- Net cash provided from (used in): Operating activities $ 2,485 $ 3,520 Investing activities (1,406) 529 Financing activities (3,044) (3,803) Effect of exchange rate changes on cash and cash equivalents (91) (156) ------- ------- Net change in cash and cash equivalents $(2,056) $ 90 ======= ======= -16- Financial Condition - (continued) Cash flows from operating activities in the first half of 2000 declined $1,035 million from the 1999 period primarily due to tax payments made in 2000 relating to the sale of the IBM Global Network in 1999. Cash flows from investing activities declined $1,935 million from the comparable 1999 period. The 1999 period included the proceeds from the sale of the IBM Global Network partially offset by payments to purchase marketable securities and other investments. Payments for plant, rental machines and other property net of proceeds declined $584 million from the 1999 period. Cash flows from financing activities increased $759 million due primarily to an increase in debt financing in the first half of 2000. Working Capital (Dollars in millions) At June 30, At December 31, 2000 1999 ---- ---- Current assets $39,437 $43,155 Current liabilities 33,862 39,578 ------- ------- Working capital $ 5,575 $ 3,577 Current ratio 1.16:1 1.09:1 Current assets declined $3,718 million from year-end 1999 with decreases of $2,570 million in Cash and cash equivalents and Marketable securities, $1,417 million in accounts receivable ($253 million in Notes and accounts receivable and $1,164 million in Sales-type leases receivable) and $109 million in Inventories offset by an increase of $378 million in Prepaid expenses and other current assets. The decrease in Cash and cash equivalents and Marketable securities resulted primarily from capital expenditures and stock repurchases partially offset by cash generated from operations and the net proceeds from the issuances of debt and the disposition of marketable securities and other investments. The decline in accounts receivable is attributable to the collection of traditionally higher year-end accounts receivable balances. Inventory declines primarily resulted from inventory reductions within the Enterprise Systems and Technology Groups. The increase in Prepaid expenses and other current assets reflects seasonal increases from year-end levels. Current liabilities declined $5,716 million with declines of $2,699 million in Accounts payable and accruals (resulting primarily from seasonal declines in these balances from their normally higher year-end levels), $1,915 million in Short-term debt and $1,102 million in Taxes payable primarily due to a large tax payment made in the first quarter of 2000, relating to the IBM Global Network sale in 1999. -17- Financial Condition - (continued) Investments During the first half of 2000, the company invested $2,372 million in Plant, rental machines and other property, a decline of $493 million from the comparable 1999 period. The company's investments were in its services business, primarily in the management of customers' information technology, as well as in manufacturing capacity for HDDs and microelectronics. In addition to software development expense included in Research, development and engineering expense, the company capitalized $262 million of software costs (both internal use and licensed programs) during the first half of 2000, an increase of $53 million from the comparable period in 1999. Amortization of capitalized software costs was $220 million during the first half of 2000, an increase of $17 million from the comparable 1999 period. Investments and sundry assets were $26,138 million at June 30, 2000, an increase of $51 million from year-end 1999, resulting primarily from increases in non-current sales-type lease receivables and prepaid pension assets offset by decreases in alliance investments and non-current customer loan receivables and installment receivables. Debt and Equity (Dollars in millions) At June 30, At December 31, 2000 1999 ---- ---- Global financing debt $26,687 $26,799 Non-global financing debt 2,487 1,555 ------- ------- Total debt $29,174 $28,354 Stockholders' equity $19,174 $20,511 Debt/capitalization 60.3% 58.0% EBITDA / interest expense 10x 9x Non-global financing: Debt/capitalization 14.6% 9.0% EBITDA/interest expense 21x 19x Global financing debt/equity 5.7:1 5.5:1 Total debt increased $820 million from year-end 1999 as non-global financing debt increased $932 million and debt supporting the growth in global financing assets decreased $112 million. Stockholders' equity declined $1,337 million from December 31, 1999, resulting primarily from the common share repurchases and the decrease in the accumulated gains and losses not affecting retained earnings partially offset by the increase in retained earnings. -18- Financial Condition - (continued) Liquidity The company maintains a $10.0 billion committed global credit facility as part of its ongoing efforts to ensure appropriate levels of liquidity. As of June 30, 2000, $8,931 million of this confirmed line of credit remained unused and available for future use. Forward Looking and Cautionary Statements Except for the historical information and discussions contained herein, statements contained in this Form 10-Q may constitute "forward looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially, including the company's failure to continue to develop and market new and innovative products and services and to keep pace with technological change; competitive pressures; failure to obtain or protect intellectual property rights; quarterly fluctuations in revenues and volatility of stock prices; the company's ability to attract and retain key personnel; currency and customer financing risks; dependence on certain suppliers; changes in the financial or business condition of the company's distributors or resellers; the company's ability to successfully manage acquisitions and alliances; legal, political and economic changes and other risks, uncertainties and factors discussed elsewhere in this Form 10-Q, in the company's other filings with the Securities and Exchange Commission or in materials incorporated therein by reference. Part II - Other Information ITEM 4. Submission of Matters to a Vote of Security Holders The International Business Machines Corporation held its Annual Meeting of Stockholders on April 25, 2000. For more information on the following proposals, refer to the company's proxy statement dated March 13, 2000, the relevant portions of which are incorporated herein by reference. (1) The stockholders elected each of the twelve nominees to the Board of Directors for a one-year term: DIRECTOR FOR WITHHELD -------------- ------------- -------- C. Black 1,404,881,977 30,200,208 K. I. Chenault 1,387,020,375 48,061,810 J. Dormann 1,388,002,008 47,080,177 L. V. Gerstner, Jr. 1,403,310,759 31,771,426 N.O. Keohane 1,404,163,447 30,918,738 C. F. Knight 1,402,530,650 32,551,535 M. Makihara 1,404,360,928 30,721,257 L. A. Noto 1,404,837,803 30,244,382 J. B. Slaughter 1,403,940,049 31,142,136 A. Trotman 1,403,718,749 31,363,436 L. C. van Wachem 1,402,844,191 32,237,994 C. M. Vest 1,404,600,103 30,482,082 -19- ITEM 4. Submission of Matters to a Vote of Security Holders - (continued) (2) The stockholders ratified the appointment of PricewaterhouseCoopers LLP as independent accountants of the company: For 1,398,698,173 Against 27,495,262 Abstain 8,888,750 ------------- Total 1,435,082,185 (3) The stockholders approved the adoption of the IBM 2000 Employee Stock Purchase Plan: For 1,342,388,113 Against 80,401,645 Abstain 12,292,427 ------------- Total 1,435,082,185 (4) The stockholders defeated a shareholder proposal on Executive Compensation: For 84,596,479 Against 976,858,872 Abstain 39,910,004 Broker No Vote 333,716,830 ------------- Total 1,435,082,185 (5) The stockholders defeated a shareholder proposal on Pension and Retirement Medical: For 299,799,711 Against 763,637,144 Abstain 37,928,500 Broker No Vote 333,716,830 ------------- Total 1,435,082,185 -20- ITEM 6 (a). Exhibits Exhibit Number 3 The By-laws of IBM as amended through July 25, 2000. 11 Statement re: computation of per share earnings. 12 Statement re: computation of ratios. 22 The company's proxy statement dated March 13, 2000, containing the full text of the proposals referred to in Item 4, which was previously filed electronically, is hereby incorporated by reference. 27 Financial Data Schedule ITEM 6 (b). Reports on Form 8-K The company filed Form 8-K on April 13, 2000, to incorporate by reference into Registration Statement No. 333-70521 on Form S-3, effective March 9, 1999, the Underwriting Agreement dated April 6, 2000, among International Business Machines Corporation, Morgan Stanley & Co. International Limited, Tokyo-Mitsubishi International PLC, Bear, Stearns & Co. Inc., Daiwa Securities SB Capital Markets Europe Limited, Deutsche Bank AG London, J.P. Morgan Securities Ltd., Nomura International PLC and Salomon Brothers International Limited. In addition, the Form of the 0.9% Note due 2003 was filed. No financial statements were filed with this Form 8-K. The company filed Form 8-K on April 19, 2000, with respect to the company's financial results for the period ended March 31, 2000 and included unaudited Consolidated Statement of Earnings, Consolidated Statement of Financial Position and Segment Data for the periods ended March 31, 2000. The company filed Form 8-K on May 5, 2000, in order to reflect: (i) the number of common shares carried over from a prior registration statement to the registration statement for the 1995 IBM Employees Stock Purchase Plan (ESPP); (ii) the balance of ESPP shares available as of March 31, 2000 after giving effect to two common stock splits and to the utilization of ESPP shares through such date, and (iii) the company's intent to carry over and utilize all common shares remaining available under the 1995 ESPP registration statement in future registration statements under Rule 429. No financial statements were filed with this Form 8-K. The company filed Form 8-K on June 28, 2000, to incorporate by reference into Registration Statement No. 333-37034 on Form S-3, effective June 20, 2000, the Agency Agreement dated June 22, 2000, among International Business Machines Corporation, Chase Securities Inc., Credit Suisse First Boston Corporation, Goldman, Sachs & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co. Incorporated, and Salomon Smith Barney Inc. No financial statements were filed with this Form 8-K. -21- SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. International Business Machines Corporation (Registrant) Date: August 14, 2000 By: Mark Loughridge ----------------------------------- Mark Loughridge Vice President and Controller -22- EX-3 2 0002.txt BY-LAWS BY-LAWS of INTERNATIONAL BUSINESS MACHINES CORPORATION Adopted April 29, 1958 As Amended Through July 25, 2000 TABLE OF CONTENTS ARTICLE I PAGE Definitions 1 ARTICLE II MEETINGS OF STOCKHOLDERS SEC. 1. Place of Meetings 1 SEC. 2. Annual Meetings 1 SEC. 3. Special Meetings 2 SEC. 4. Notice of Meetings 2 SEC. 5. Quorum 2 SEC. 6. Organization 3 SEC. 7. Items of Business 3 SEC. 8. Voting 4 SEC. 9. List of Stockholders 5 SEC. 10. Inspectors of Election 5 ARTICLE III BOARD OF DIRECTORS SEC. 1. General Powers 6 SEC. 2. Number; Qualifications; Election; Term of Office 6 SEC. 3. Place of Meetings 6 SEC. 4. First Meeting 6 SEC. 5. Regular Meetings 6 SEC. 6. Special Meetings 6 SEC. 7. Notice of Meetings 6 SEC. 8. Quorum and Manner of Acting 7 SEC 9. Organization 7 SEC. 10. Resignations 7 SEC. 11. Vacancies 7 SEC. 12. Retirement of Directors 7 - i - ARTICLE IV EXECUTIVE AND OTHER COMMITTEES SEC. 1. Executive Committee 8 SEC. 2. Powers of the Executive Committee 8 SEC. 3. Meetings of the Executive Committee 8 SEC. 4. Quorum and Manner of Acting of the Executive Committee 9 SEC. 5. Other Committees 9 SEC. 6. Changes in Committees; Resignations; Removals; Vacancies 10 ARTICLE V OFFICERS SEC. 1. Number and Qualifications 10 SEC. 2. Resignations 10 SEC. 3. Removal 11 SEC. 4. Vacancies 11 SEC. 5. Chairman of the Board 11 SEC. 6. Vice Chairman of the Board 11 SEC. 7. President 11 SEC. 8. Designated Officers 12 SEC. 9. Executive Vice Presidents, Senior Vice Presidents and Vice Presidents 12 SEC. 10. Treasurer 12 SEC. 11. Secretary 13 SEC. 12. Controller 14 SEC. 13. Compensation 14 - ii - ARTICLE VI CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC. SEC. 1. Execution of Contracts 14 SEC. 2. Loans 14 SEC. 3. Checks, Drafts, etc 15 SEC. 4. Deposits 15 SEC. 5. General and Special Bank Accounts 15 SEC. 6. Indemnification 15 ARTICLE VII SHARES SEC. 1. Stock Certificates 16 SEC. 2. Books of Account and Record of Stockholders 16 SEC. 3. Transfers of Stock 16 SEC. 4. Regulations 17 SEC. 5. Fixing of Record Date 17 SEC. 6. Lost, Destroyed or Mutilated Certificates 17 SEC. 7. Inspection of Records 18 SEC. 8. Auditors 18 ARTICLE VIII OFFICES SEC. 1. Principal Office 18 SEC. 2. Other Offices 18 ARTICLE IX Waiver of Notice 18 - iii - ARTICLE X Fiscal Year 19 ARTICLE XI Seal 19 ARTICLE XII Amendments 19 - iv - BY-LAWS OF INTERNATIONAL BUSINESS MACHINES CORPORATION ARTICLE I DEFINITIONS In these By-laws, and for all purposes hereof, unless there be something in the subject or context inconsistent therewith: (a) 'Corporation' shall mean International Business Machines Corporation. (b) 'Certificate of Incorporation' shall mean the restated Certificate of Incorporation as filed on May 27, 1992, together with any and all amendments and subsequent restatements thereto. (c) 'Board' shall mean the Board of Directors of the Corporation. (d) 'stockholders' shall mean the stockholders of the Corporation. (e) 'Chairman of the Board', 'Vice Chairman of the Board', 'Chairman of the Executive Committee', 'Chief Executive Officer,' 'Chief Financial Officer', 'Chief Accounting Officer', 'President', 'Executive Vice President', 'Senior Vice President', 'Vice President', 'Treasurer', 'Secretary', or 'Controller', as the case may be, shall mean the person at any given time occupying the particular office with the Corporation. ARTICLE II MEETINGS OF STOCKHOLDERS SECTION 1. Place of Meetings. Meetings of the stockholders of the Corporation shall be held at such place either within or outside the State of New York as may from time to time be fixed by the Board or specified or fixed in the notice of any such meeting. SECTION 2. Annual Meetings. The annual meeting of the stockholders of the Corporation for the election of directors and for the transaction of such other business as may properly come before the meeting shall be held on the last Tuesday of April of each year, if not a legal holiday, or, if such day shall be a legal holiday, then on the next succeeding day not a legal holiday. If any annual meeting shall not be held on the day designated herein, or if the directors to be elected at such annual 1 meeting shall not have been elected thereat or at any adjournment thereof, the Board shall forthwith call a special meeting of the stockholders for the election of directors to be held as soon thereafter as convenient and give notice thereof as provided in these By-laws in respect of the notice of an annual meeting of the stockholders. At such special meeting the stockholders may elect the directors and transact other business with the same force and effect as at an annual meeting of the stockholders duly called and held. SECTION 3. Special Meetings. Special meetings of the stockholders, unless otherwise provided by law, may be called at any time by the Chairman of the Board or by the Board. SECTION 4. Notice of Meetings. Notice of each meeting of the stockholders, annual or special, shall be given in the name of the Chairman of the Board, a Vice Chairman of the Board or the President or a Vice President or the Secretary. Such notice shall state the purpose or purposes for which the meeting is called and the date and hour when and the place where it is to be held. A copy thereof shall be duly delivered or transmitted to all stockholders of record entitled to vote at such meeting, and all stockholders of record who, by reason of any action proposed to be taken at such meeting, would be entitled to have their stock appraised if such action were taken, not less than ten or more than sixty days before the day on which the meeting is called to be held. If mailed, such copy shall be directed to each stockholder at the address listed on the record of stockholders of the Corporation, or if the stockholder shall have filed with the Secretary a written request that notices be mailed to some other address, it shall be mailed to the address designated in such request. Nevertheless, notice of any meeting of the stockholders shall not be required to be given to any stockholder who shall waive notice thereof as hereinafter provided in Article IX of these By-laws. Except when expressly required by law, notice of any adjourned meeting of the stockholders need not be given nor shall publication of notice of any annual or special meeting thereof be required. SECTION 5. Quorum. Except as otherwise provided by law, at all meetings of the stockholders, the presence of holders of record of a majority of the outstanding shares of stock of the Corporation having voting power, in person or represented by proxy and entitled to vote thereat, shall be necessary to constitute a quorum for the transaction of business. In the absence of a quorum at any such meeting or any adjournment or adjournments thereof, a majority in voting interest of those present in person or represented by proxy and entitled to vote thereat, or, in the absence of all the stockholders, any officer entitled to preside at, or to act as secretary of, such meeting, may adjourn such meeting from time to time without further notice, other than by announcement at the meeting at which such adjournment shall be taken, until a quorum shall be present thereat. At any adjourned meeting at which a quorum shall be present any business may be transacted which might have been transacted at the meeting as originally called. 2 SECTION 6. Organization. At each meeting of the stockholders, the Chairman of the Board, or in the absence of the Chairman of the Board, the President, or in the absence of the Chairman of the Board and the President, a Vice Chairman of the Board, or if the Chairman of the Board, the President, and all Vice Chairmen of the Board shall be absent therefrom, an Executive Vice President, or if the Chairman of the Board, the President, all Vice Chairmen of the Board and all Executive Vice Presidents shall be absent therefrom, a Senior Vice President shall act as chairman. The Secretary, or, if the Secretary shall be absent from such meeting or unable to act, the person whom the Chairman of such meeting shall appoint secretary of such meeting shall act as secretary of such meeting and keep the minutes thereof. SECTION 7. Items of Business. The items of business at all meetings of the stockholders shall be, insofar as applicable, as follows: -- Call to order. -- Proof of notice of meeting or of waiver thereof. -- Appointment of inspectors of election, if necessary. -- A quorum being present. -- Reports. -- Election of directors. -- Other business specified in the notice of the meeting. -- Voting. -- Adjournment. Any items of business not referred to in the foregoing may be taken up at the meeting as the chairman of the meeting shall determine. No other business shall be transacted at any annual meeting of stockholders, except business as may be: (i) specified in the notice of meeting (including stockholder proposals included in the Corporation's proxy materials under Rule 14a-8 of Regulation 14A under the Securities Exchange Act of 1934), (ii) otherwise brought before the meeting by or at the direction of the Board of Directors, or (iii) a proper subject for the meeting which is timely submitted by a stockholder of the Corporation entitled to vote at such meeting who complies fully with the notice requirements set forth below. For business to be properly submitted by a stockholder before any annual meeting under subparagraph (iii) above, a stockholder must give timely notice in writing of such business to the Secretary of the Corporation. To be considered timely, a stockholder's notice must be received by the Secretary at the principal executive offices of the Corporation not less than 120 calendar days nor more than 150 calendar days before the date of the Corporation's proxy statement released to stockholders in connection with the prior year's annual meeting. 3 However, if no annual meeting was held in the previous year, or if the date of the applicable annual meeting has been changed by more than 30 days from the date contemplated at the time of the previous year's proxy statement, a stockholder's notice must be received by the Secretary not later than 60 days before the date the Corporation commences mailing of its proxy materials in connection with the applicable annual meeting. A stockholder's notice to the Secretary to submit business to an annual meeting of stockholders shall set forth: (i) the name and address of the stockholder, (ii) the number of shares of stock held of record and beneficially by such stockholder, (iii) the name in which all such shares of stock are registered on the stock transfer books of the Corporation, (iv) a representation that the stockholder intends to appear at the meeting in person or by proxy to submit the business specified in such notice, (v) a brief description of the business desired to be submitted to the annual meeting, including the complete text of any resolutions intended to be presented at the annual meeting, and the reasons for conducting such business at the annual meeting, (vi) any personal or other material interest of the stockholder in the business to be submitted, and (vii) all other information relating to the proposed business which may be required to be disclosed under applicable law. In addition, a stockholder seeking to submit such business at the meeting shall promptly provide any other information reasonably requested by the Corporation. The chairman of the meeting shall determine all matters relating to the efficient conduct of the meeting, including, but not limited to, the items of business, as well as the maintenance of order and decorum. The chairman shall, if the facts warrant, determine and declare that any putative business was not properly brought before the meeting in accordance with the procedures prescribed by this Section 7, in which case such business shall not be transacted. Notwithstanding the foregoing provisions of this Section 7, a stockholder who seeks to have any proposal included in the Corporation's proxy materials shall comply with the requirements of Rule 14a-8 under Regulation 14A of the Securities Exchange Act of 1934, as amended. SECTION 8. Voting. Except as otherwise provided by law, each holder of record of shares of stock of the Corporation having voting power shall be entitled at each meeting of the stockholders to one vote for every share of such stock standing in the stockholder's name on the record of stockholders of the Corporation: (a) on the date fixed pursuant to the provisions of Section 5 of Article VII of these By-laws as the record date for the determination of the stockholders who shall be entitled to vote at such meeting, or 4 (b) if such record date shall not have been so fixed, then at the close of business on the day next preceding the day on which notice of such meeting shall have been given, or (c) if such record date shall not have been so fixed and if no notice of such meeting shall have been given, then at the time of the call to order of such meeting. Any vote on stock of the Corporation at any meeting of the stockholders may be given by the stockholder of record entitled thereto in person or by proxy appointed by such stockholder or by the stockholder's attorney thereunto duly authorized and delivered or transmitted to the secretary of such meeting at or prior to the time designated in the order of business for turning in proxies. At all meetings of the stockholders at which a quorum shall be present, all matters (except where otherwise provided by law, the Certificate of Incorporation or these By-laws) shall be decided by the vote of a majority in voting interest of the stockholders present in person or represented by proxy and entitled to vote thereat. Unless required by law, or determined by the chairman of the meeting to be advisable, the vote on any question need not be by ballot. On a vote by ballot, each ballot shall be signed by the stockholder voting, or by the stockholder's proxy as such, if there be such proxy. SECTION 9. List of Stockholders. A list, certified by the Secretary, of the stockholders of the Corporation entitled to vote shall be produced at any meeting of the stockholders upon the request of any stockholder of the Corporation pursuant to the provisions of applicable law, the Certificate of Incorporation or these By-laws. SECTION 10. Inspectors of Election. Prior to the holding of each annual or special meeting of the stockholders, two inspectors of election to serve thereat shall be appointed by the Board, or, if the Board shall not have made such appointment, by the Chairman of the Board. If there shall be a failure to appoint inspectors, or if, at any such meeting, any inspector so appointed shall be absent or shall fail to act or the office shall become vacant, the chairman of the meeting may, and at the request of a stockholder present in person and entitled to vote at such meeting shall, appoint such inspector or inspectors of election, as the case may be, to act thereat. The inspectors of election so appointed to act at any meeting of the stockholders, before entering upon the discharge of their duties, shall be sworn faithfully to execute the duties of inspectors at such meeting, with strict impartiality and according to the best of their ability, and the oath so taken shall be subscribed by them. Such inspectors of election shall take charge of the polls, and, after the voting on any question, shall make a certificate of the results of the vote taken. No director or candidate for the office of director shall act as an inspector of an election of directors. Inspectors need not be stockholders. 5 ARTICLE III BOARD OF DIRECTORS SECTION 1. General Powers. The business and affairs of the Corporation shall be managed by the Board. The Board may exercise all such authority and powers of the Corporation and do all such lawful acts and things as are not by law, the Certificate of Incorporation or these By-laws, directed or required to be exercised or done by the stockholders. SECTION 2. Number; Qualifications; Election; Term of Office. The number of directors of the Corporation shall be fourteen, but the number thereof may be increased to not more than twenty-five, or decreased to not less than nine, by amendment of these By-laws. The directors shall be elected at the annual meeting of the stockholders. At each meeting of the stockholders for the election of directors at which a quorum is present, the persons receiving a plurality of the votes at such election shall be elected. Each director shall hold office until the annual meeting of the stockholders which shall be held next after the election of such director and until a successor shall have been duly elected and qualified, or until death, or until the director shall have resigned as hereinafter provided in Section 10 of this Article III. SECTION 3. Place of Meetings. Meetings of the Board shall be held at such place either within or outside State of New York as may from time to time be fixed by the Board or specified or fixed in the notice of any such meeting. SECTION 4. First Meeting. The Board shall meet for the purpose of organization, the election of officers and the transaction of other business, on the same day the annual meeting of stockholders is held. Notice of such meeting need not be given. Such meeting may be held at any other time or place which shall be specified in a notice thereof given as hereinafter provided in Section 7 of this Article III. SECTION 5. Regular Meetings. Regular meetings of the Board shall be held at times and dates fixed by the Board or at such other times and dates as the Chairman of the Board shall determine and as shall be specified in the notice of such meetings. Notice of regular meetings of the Board need not be given except as otherwise required by law or these By-laws. SECTION 6. Special Meetings. Special meetings of the Board may be called by the Chairman of the Board. SECTION 7. Notice of Meetings. Notice of each special meeting of the Board (and of each regular meeting for which notice shall be required) shall be given by the Secretary as hereinafter provided in this Section 7, in which notice shall be stated the time, place and, if required by law or these By-laws, the purposes of such meeting. Notice of each such meeting shall be mailed, postage prepaid, to each director, by first-class mail, at least four days before the day on which such meeting is to be held, or shall be sent by facsimile transmission or comparable medium, or be delivered personally or by telephone, at least twenty-four hours before the time at which such meeting is to be held. Notice of any such meeting need not be given to any director who shall waive notice thereof as provided in Article IX of these By-laws. Any 6 meeting of the Board shall be a legal meeting without notice thereof having been given, if all the directors of the Corporation then holding office shall be present thereat. SECTION 8. Quorum and Manner of Acting. A majority of the Board shall be present in person at any meeting of the Board in order to constitute a quorum for the transaction of business at such meeting. Participation in a meeting by means of a conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other shall constitute presence in person at a meeting. Except as otherwise expressly required by law or the Certificate of Incorporation and except also as specified in Section 1, Section 5, and Section 6 of Article IV, in Section 3 of Article V and in Article XII of these By-laws, the act of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board. In the absence of a quorum at any meeting of the Board, a majority of the directors present thereat may adjourn such meeting from time to time until a quorum shall be present thereat. Notice of any adjourned meeting need not be given. At any adjourned meeting at which a quorum is present, any business may be transacted which might have been transacted at the meeting as originally called. The directors shall act only as a Board and the individual directors shall have no power as such. SECTION 9. Organization. At each meeting of the Board, the Chairman of the Board, or in the case of the Chairman's absence therefrom, the President, or in the case of the President's absence therefrom, a Vice Chairman, or in the case of the absence of all such persons, another director chosen by a majority of directors present, shall act as chairman of the meeting and preside thereat. The Secretary, or if the Secretary shall be absent from such meeting, any person appointed by the chairman, shall act as secretary of the meeting and keep the minutes thereof. SECTION 10. Resignations. Any director of the Corporation may resign at any time by giving written notice of resignation to the Board or the Chairman of the Board or the Secretary. Any such resignation shall take effect at the time specified therein, or if the time when it shall become effective shall not be specified therein, then it shall take effect immediately upon its receipt; and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. SECTION 11. Vacancies. Any vacancy in the Board, whether arising from death, resignation, an increase in the number of directors or any other cause, may be filled by the Board. SECTION 12. Retirement of Directors. The Board may prescribe a retirement policy for directors on or after reaching a certain age, provided, however, that such 7 retirement shall not cut short the annual term for which any director shall have been elected by the stockholders. ARTICLE IV EXECUTIVE AND OTHER COMMITTEES SECTION 1. Executive Committee. The Board, by resolution adopted by a majority of the Board, may designate not less than four of the directors then in office to constitute an Executive Committee, each member of which unless otherwise determined by resolution adopted by a majority of the whole Board, shall continue to be a member of such Committee until the annual meeting of the stockholders which shall be held next after designation as a member of such Committee or until the earlier termination as a director. The Chief Executive Officer shall always be designated as a member of the Executive Committee. The Board may by resolution appoint one member as the Chairman of the Executive Committee who shall preside at all meetings of such Committee. In the absence of said Chairman, the Chief Executive Officer shall preside at all such meetings. In the absence of both the Chairman of the Executive Committee and the Chief Executive Officer, the Chairman of the Board shall preside at all such meetings. In the absence of the Chairman of the Executive Committee and the Chief Executive Officer and the Chairman of the Board, the President shall preside at all such meetings. In the absence of all such persons, a majority of the members of the Executive Committee present shall choose a chairman to preside at such meetings. The Secretary, or if the Secretary shall be absent from such meeting, any person appointed by the chairman, shall act as secretary of the meeting and keep the minutes thereof. SECTION 2. Powers of the Executive Committee. To the extent permitted by law, the Executive Committee may exercise all the powers of the Board in the management of specified matters where such authority is delegated to it by the Board, and also, to the extent permitted by law, the Executive Committee shall have, and may exercise, all the powers of the Board in the management of the business and affairs of the Corporation (including the power to authorize the seal of the Corporation to be affixed to all papers which may require it; but excluding the power to appoint a member of the Executive Committee) in such manner as the Executive Committee shall deem to be in the best interests of the Corporation and not inconsistent with any prior specific action of the Board. An act of the Executive Committee taken within the scope of its authority shall be an act of the Board. The Executive Committee shall render in the form of minutes a report of its several acts at each regular meeting of the Board and at any other time when so directed by the Board. SECTION 3. Meetings of the Executive Committee. Regular meetings of the Executive Committee shall be held at such times, on such dates and at such places as shall be fixed by resolution adopted by a majority of the Executive Committee, 8 of which regular meetings notice need not be given, or as shall be fixed by the Chairman of the Executive Committee or in the absence of the Chairman of the Executive Committee the Chief Executive Officer and specified in the notice of such meeting. Special meetings of the Executive Committee may be called by the Chairman of the Executive Committee or by the Chief Executive Officer. Notice of each such special meeting of the Executive Committee (and of each regular meeting for which notice shall be required), stating the time and place thereof shall be mailed, postage prepaid, to each member of the Executive Committee, by first-class mail, at least four days before the day on which such meeting is to be held, or shall be sent by facsimile transmission or comparable medium, or be delivered personally or by telephone, at least twenty-four hours before the time at which such meeting is to be held; but notice need not be given to a member of the Executive Committee who shall waive notice thereof as provided in Article IX of these By-laws, and any meeting of the Executive Committee shall be a legal meeting without any notice thereof having been given, if all the members of such Committee shall be present thereat. SECTION 4. Quorum and Manner of Acting of the Executive Committee. Four members of the Executive Committee shall constitute a quorum for the transaction of business, and the act of a majority of the members of the Executive Committee present at a meeting at which a quorum shall be present shall be the act of the Executive Committee. Participating in a meeting by means of a conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other shall constitute presence at a meeting of the Executive Committee. The members of the Executive Committee shall act only as a committee and individual members shall have no power as such. SECTION 5. Other Committees. The Board may, by resolution adopted by a majority of the Board, designate members of the Board to constitute other committees, which shall have, and may exercise, such powers as the Board may by resolution delegate to them, and shall in each case consist of such number of directors as the Board may determine; provided, however, that each such committee shall have at least three directors as members thereof. Such a committee may either be constituted for a specified term or may be constituted as a standing committee which does not require annual or periodic reconstitution. A majority of all the members of any such committee may determine its action and its quorum requirements and may fix the time and place of its meetings, unless the Board shall otherwise provide. Participating in a meeting by means of a conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other shall constitute presence at a meeting of such other committees. In addition to the foregoing, the Board may, by resolution adopted by a majority of the Board, create a committee of indeterminate membership and duration and not subject to the limitations as to the membership, quorum and manner of meeting and acting prescribed in these By-laws, which committee, in the event of a major disaster or catastrophe or national emergency which renders the Board 9 incapable of action by reason of the death, physical incapacity or inability to meet of some or all of its members, shall have, and may exercise all the powers of the Board in the management of the business and affairs of the Corporation (including, without limitation, the power to authorize the seal of the Corporation to be affixed to all papers which may require it and the power to fill vacancies in the Board). An act of such committee taken within the scope of its authority shall be an act of the Board. SECTION 6. Changes in Committees; Resignations; Removals; Vacancies. The Board shall have power, by resolution adopted by a majority of the Board, at any time to change or remove the members of, to fill vacancies in, and to discharge any committee created pursuant to these By-laws, either with or without cause. Any member of any such committee may resign at any time by giving written notice to the Board or the Chairman of the Board or the Secretary. Such resignation shall take effect upon receipt of such notice or at any later time specified therein; and, unless otherwise specified therein, acceptance of such resignation shall not be necessary to make it effective. Any vacancy in any committee, whether arising from death, resignation, an increase in the number of committee members or any other cause, shall be filled by the Board in the manner prescribed in these By-laws for the original appointment of the members of such committee. ARTICLE V OFFICERS SECTION 1. Number and Qualifications. The officers of the Corporation shall include the Chairman of the Board, and may include one or more Vice Chairmen of the Board, the President, one or more Vice Presidents (one or more of whom may be designated as Executive Vice Presidents or as Senior Vice Presidents or by other designations), the Treasurer, the Secretary and the Controller. Officers shall be elected from time to time by the Board, each to hold office until a successor shall have been duly elected and shall have qualified, or until death, or until resignation as hereinafter provided in Section 2 of this Article V, or until removed as hereinafter provided in Section 3 of this Article V. SECTION 2. Resignations. Any officer of the Corporation may resign at any time by giving written notice of resignation to the Board, the Chairman of the Board, the Chief Executive Officer or the Secretary. Any such resignation shall take effect at the time specified therein, or, if the time when it shall become effective shall not be specified therein, then it shall become effective upon its receipt; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. 10 SECTION 3. Removal. Any officer of the Corporation may be removed, either with or without cause, at any time, by a resolution adopted by a majority of the Board at any meeting of the Board. SECTION 4. Vacancies. A vacancy in any office, whether arising from death, resignation, removal or any other cause, may be filled for the unexpired portion of the term of office which shall be vacant, in the manner prescribed in these By-laws for the regular election or appointment to such office. SECTION 5. Chairman of the Board. The Chairman of the Board shall, if present, preside at each meeting of the stockholders and of the Board and shall perform such other duties as may from time to time be assigned by the Board. The Chairman may sign certificates representing shares of the stock of the Corporation pursuant to the provisions of Section 1 of Article VII of these By-laws; sign, execute and deliver in the name of the Corporation all deeds, mortgages, bonds, contracts or other instruments authorized by the Board, except in cases where the signing, execution or delivery thereof shall be expressly delegated by the Board or these By- laws to some other officer or agent of the Corporation or where they shall be required by law otherwise to be signed, executed and delivered; and affix the seal of the Corporation to any instrument which shall require it. The Chairman of the Board, when there is no President or in the absence or incapacity of the President, shall perform all the duties and functions and exercise all the powers of the President. SECTION 6. Vice Chairman of the Board. Each Vice Chairman of the Board shall assist the Chairman of the Board and have such other duties as may be assigned by the Board or the Chairman of the Board. The Vice Chairman may sign certificates representing shares of the stock of the Corporation pursuant to the provisions of Section 1 of Article VII of these By-laws; sign, execute and deliver in the name of the Corporation all deeds, mortgages, bonds, contracts or other instruments authorized by the Board, except in cases where the signing, execution or delivery thereof shall be expressly delegated by the Board or these By-laws to some officer or agent of the Corporation or where they shall be required by law otherwise to be signed, executed and delivered; and affix the seal of the Corporation to any instrument which shall require it. SECTION 7. President. The President shall perform all such duties as from time to time may be assigned by the Board or the Chairman of the Board. The President may sign certificates representing shares of the stock of the Corporation pursuant to the provisions of Section 1 of Article VII of these By-laws; sign, execute and deliver in the name of the Corporation all deeds mortgages, bonds, contracts or other instruments authorized by the Board, except in cases where the signing, execution or delivery thereof shall be expressly delegated by the Board or these By-laws to some other officer or agent of the Corporation or where they shall be required by law otherwise to be signed, executed and delivered, and affix the seal of the Corporation to any instrument which shall require it; and, in general, perform all duties incident to the office of President. The President shall in the absence or incapacity of the Chairman of the Board, perform all the duties and functions and exercise all the powers of the Chairman of the Board. 11 SECTION 8. Designated Officers. (a) Chief Executive Officer. Either the Chairman of the Board, or the President, as the Board of Directors may designate, shall be the Chief Executive Officer of the Corporation. The officer so designated shall have, in addition to the powers and duties applicable to the office set forth in Section 5 or 7 of this Article V, general and active supervision over the business and affairs of the Corporation and over its several officers, agents, and employees, subject, however, to the control of the Board. The Chief Executive Officer shall see that all orders and resolutions of the Board are carried into effect, be an ex officio member of all committees of the Board (except the Audit Committee, the Directors and Corporate Governance Committee, and committees specifically empowered to fix or approve the Chief Executive Officer's compensation or to grant or administer bonus, option or other similar plans in which the Chief Executive Officer is eligible to participate), and, in general, shall perform all duties incident to the position of Chief Executive Officer and such other duties as may from time to time be assigned by the Board. (b) Other Designated Officers. The Board of Directors may designate officers to serve as Chief Financial Officer, Chief Accounting Officer and other such designated positions and to fulfill the responsibilities of such designated positions in addition to their duties as officers as set forth in this Article V. SECTION 9. Executive Vice Presidents, Senior Vice Presidents and Vice Presidents. Each Executive and Senior Vice President shall perform all such duties as from time to time may be assigned by the Board or the Chairman of the Board or a Vice Chairman of the Board or the President. Each Vice President shall perform all such duties as from time to time may be assigned by the Board or the Chairman of the Board or a Vice Chairman of the Board or the President or an Executive or a Senior Vice President. Any Vice President may sign certificates representing shares of stock of the Corporation pursuant to the provisions of Section 1 of Article VII of these By-laws. SECTION 10. Treasurer. The Treasurer shall: (a) have charge and custody of, and be responsible for, all the funds and securities of the Corporation, and may invest the same in any securities, may open, maintain and close accounts for effecting any and all purchase, sale, investment and lending transactions in securities of any and all kinds for and on behalf of the Corporation or any employee pension or benefit plan fund or other fund established by the Corporation, as may be permitted by law; (b) keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation; 12 (c) deposit all moneys and other valuables to the credit of the Corporation in such depositaries as may be designated by the Board or the Executive Committee; (d) receive, and give receipts for, moneys due and payable to the Corporation from any source whatsoever; (e) disburse the funds of the Corporation and supervise the investment of its funds, taking proper vouchers therefor; (f) render to the Board, whenever the Board may require, an account of all transactions as Treasurer; and (g) in general, perform all the duties incident to the office of Treasurer and such other duties as from time to time may be assigned by the Board or the Chairman of the Board or a Vice Chairman of the Board or the President or an Executive or Senior Vice President. SECTION 11. Secretary. The Secretary shall: (a) keep or cause to be kept in one or more books provided for the purpose, the minutes of all meetings of the Board, the Executive Committee and other committees of the Board and the stockholders; (b) see that all notices are duly given in accordance with the provisions of these By-laws and as required by law; (c) be custodian of the records and the seal of the Corporation and affix and attest the seal to all stock certificates of the Corporation and affix and attest the seal to all other documents to be executed on behalf of the Corporation under its seal; (d) see that the books, reports, statements, certificates and other documents and records required by law to be kept and filed are properly kept and filed; and (e) in general, perform all the duties incident to the office of Secretary and such other duties as from time to time may be assigned by the Board or the Chairman of the Board or a Vice Chairman of the Board or the President or an Executive or Senior Vice President. 13 SECTION 12. Controller. The Controller shall: (a) have control of all the books of account of the Corporation; (b) keep a true and accurate record of all property owned by it, of its debts and of its revenues and expenses; (c) keep all accounting records of the Corporation (other than the accounts of receipts and disbursements and those relating to the deposits of money and other valuables of the Corporation, which shall be kept by the Treasurer); (d) render to the Board, whenever the Board may require, an account of the financial condition of the Corporation; and (e) in general, perform all the duties incident to the office of Controller and such other duties as from time to time may be assigned by the Board or the Chairman of the Board or a Vice Chairman of the Board or the President or an Executive or Senior Vice President. SECTION 13. Compensation. The compensation of the officers of the Corporation shall be fixed from time to time by the Board; provided, however, that the Board may delegate to a committee the power to fix or approve the compensation of any officers. An officer of the Corporation shall not be prevented from receiving compensation by reason of being also a director of the Corporation; but any such officer who shall also be a director shall not have any vote in the determination of the amount of compensation paid to such officer. ARTICLE VI CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC. SECTION 1. Execution of Contracts. Except as otherwise required by law or these By-laws, any contract or other instrument may be executed and delivered in the name and on behalf of the Corporation by any officer (including any assistant officer) of the Corporation. The Board or the Executive Committee may authorize any agent or employee to execute and deliver any contract or other instrument in the name and on behalf of the Corporation, and such authority may be general or confined to specific instances as the Board or such Committee, as the case may be, may by resolution determine. SECTION 2. Loans. Unless the Board shall otherwise determine, the Chairman of the Board or a Vice Chairman of the Board or the President or any Vice President, acting together with the Treasurer or the Secretary, may effect loans and advances at any time for the Corporation from any bank, trust company or other 14 institution, or from any firm, corporation or individual, and for such loans and advances may make, execute and deliver promissory notes, bonds or other certificates or evidences of indebtedness of the Corporation, but in making such loans or advances no officer or officers shall mortgage, pledge, hypothecate or transfer any securities or other property of the Corporation, except when authorized by resolution adopted by the Board. SECTION 3. Checks, Drafts, etc. All checks, drafts, bills of exchange or other orders for the payment of money out of the funds of the Corporation, and all notes or other evidences of indebtedness of the Corporation, shall be signed in the name and on behalf of the Corporation by such persons and in such manner as shall from time to time be authorized by the Board or the Executive Committee or authorized by the Treasurer acting together with either the General Manager of an operating unit or a nonfinancial Vice President of the Corporation, which authorization may be general or confined to specific instances. SECTION 4. Deposits. All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation in such banks, trust companies or other depositaries as the Board or the Executive Committee may from time to time designate or as may be designated by any officer or officers of the Corporation to whom such power of designation may from time to time be delegated by the Board or the Executive Committee. For the purpose of deposit and for the purpose of collection for the account of the Corporation, checks, drafts and other orders for the payment of money which are payable to the order of the Corporation may be endorsed, assigned and delivered by any officer, employee or agent of the Corporation. SECTION 5. General and Special Bank Accounts. The Board or the Executive Committee may from time to time authorize the opening and keeping of general and special bank accounts with such banks, trust companies or other depositaries as the Board or the Executive Committee may designate or as may be designated by any officer or officers of the Corporation to whom such power of designation may from time to time be delegated by the Board or the Executive Committee. The Board or the Executive Committee may make such special rules and regulations with respect to such bank accounts, not inconsistent with the provisions of these By-laws, as it may deem expedient. SECTION 6. Indemnification. The Corporation shall, to the fullest extent permitted by applicable law as in effect at any time, indemnify any person made, or threatened to be made, a party to an action or proceeding whether civil or criminal (including an action or proceeding by or in the right of the Corporation or any other corporation of any type or kind, domestic or foreign, or any partnership, joint venture, trust, employee benefit plan or other enterprise, for which any director or officer of the Corporation served in any capacity at the request of the Corporation), by reason of the fact that such person or such person's testator or intestate was a director or officer of the Corporation, or served such other corporation, partnership, joint 15 venture, trust, employee benefit plan or other enterprise in any capacity, against judgments, fines, amounts paid in settlement and reasonable expenses, including attorneys' fees actually and necessarily incurred as a result of such action or proceeding, or any appeal therein. Such indemnification shall be a contract right and shall include the right to be paid advances of any expenses incurred by such person in connection with such action, suit or proceeding, consistent with the provisions of applicable law in effect at any time. Indemnification shall be deemed to be 'permitted' within the meaning of the first sentence hereof if it is not expressly prohibited by applicable law as in effect at the time. ARTICLE VII SHARES SECTION 1. Stock Certificates. The shares of the Corporation shall be represented by certificates, or shall be uncertificated shares. Each owner of stock of the Corporation shall be entitled to have a certificate, in such form as shall be approved by the Board, certifying the number of shares of stock of the Corporation owned. To the extent that shares are represented by certificates, such certificates of stock shall be signed in the name of the Corporation by the Chairman of the Board or a Vice Chairman of the Board or the President or a Vice President and by the Secretary and sealed with the seal of the Corporation (which seal may be a facsimile, engraved or printed); provided, however, that where any such certificate is signed by a registrar, other than the Corporation or its employee, the signatures of the Chairman of the Board, a Vice Chairman of the Board, the President, the Secretary, and transfer agent or a transfer clerk acting on behalf of the Corporation upon such certificates may be facsimiles, engraved or printed. In case any officer, transfer agent or transfer clerk acting on behalf of the Corporation ceases to be such officer, transfer agent, or transfer clerk before such certificates shall be issued, they may nevertheless be issued by the Corporation with the same effect as if they were still such officer, transfer agent or transfer clerk at the date of their issue. SECTION 2. Books of Account and Record of Stockholders. There shall be kept at the office of the Corporation correct books of account of all its business and transactions, minutes of the proceedings of stockholders, Board, and Executive Committee, and a book to be known as the record of stockholders, containing the names and addresses of all persons who are stockholders, the number of shares of stock held, and the date when the stockholder became the owner of record thereof. SECTION 3. Transfers of Stock. Transfers of shares of stock of the Corporation shall be made on the record of stockholders of the Corporation only upon authorization by the registered holder thereof, or by an attorney thereunto authorized by power of attorney duly executed and filed with the Secretary or with a transfer agent or transfer clerk, and on surrender of the certificate or certificates for such shares properly endorsed, provided such shares are represented by a certificate, or accompanied by a duly executed stock transfer power and the payment of all taxes thereon. The person in whose names shares of stock shall stand on the 16 record of stockholders of the Corporation shall be deemed the owner thereof for all purposes as regards the Corporation. Whenever any transfers of shares shall be made for collateral security and not absolutely and written notice thereof shall be given to the Secretary or to such transfer agent or transfer clerk, such fact shall be stated in the entry of the transfer. SECTION 4. Regulations. The Board may make such additional rules and regulations as it may deem expedient, not inconsistent with these By-laws, concerning the issue, transfer and registration of certificated or uncertificated shares of stock of the Corporation. It may appoint, or authorize any officer or officers to appoint, one or more transfer agents or one or more transfer clerks and one or more registrars and may require all certificates of stock to bear the signature or signatures of any of them. SECTION 5. Fixing of Record Date. The Board shall fix a time not exceeding sixty nor less than ten days prior to the date then fixed for the holding of any meeting of the stockholders or prior to the last day on which the consent or dissent of the stockholders may be effectively expressed for any purpose without a meeting, as the time as of which the stockholders entitled to notice of and to vote at such meeting or whose consent or dissent is required or may be expressed for any purpose, as the case may be, shall be determined, and all persons who were holders of record of voting stock at such time, and no others, shall be entitled to notice of and to vote at such meeting or to express their consent or dissent, as the case may be. The Board may fix a time not exceeding sixty days preceding the date fixed for the payment of any dividend or the making of any distribution or the allotment of rights to subscribe for securities of the Corporation, or for the delivery of evidences of rights or evidences of interests arising out of any change, conversion or exchange of capital stock or other securities, as the record date for the determination of the stockholders entitled to receive any such dividend, distribution, allotment, rights or interests, and in such case only the stockholders of record at the time so fixed shall be entitled to receive such dividend, distribution, allotment, rights or interests. SECTION 6. Lost, Destroyed or Mutilated Certificates. The holder of any certificate representing shares of stock of the Corporation shall immediately notify the Corporation of any loss, destruction or mutilation of such certificate, and the Corporation may issue a new certificate of stock in the place of any certificate theretofore issued by it which the owner thereof shall allege to have been lost or destroyed or which shall have been mutilated, and the Corporation may, in its discretion, require such owner or the owner's legal representatives to give to the Corporation a bond in such sum, limited or unlimited, and in such form and with such surety or sureties as the Board in its absolute discretion shall determine, to indemnify the Corporation against any claim that may be made against it on account of the alleged loss or destruction of any such certificate, or the issuance of such new certificate. Anything to the contrary notwithstanding, the Corporation, in its absolute discretion, may refuse to issue any such new certificate, except pursuant to legal proceedings under the laws of the State of New York. 17 SECTION 7. Inspection of Records. The record of stockholders and minutes of the proceedings of stockholders shall be available for inspection, within the limits and subject to the conditions and restrictions prescribed by applicable law. SECTION 8. Auditors. The Board shall employ an independent public or certified public accountant or firm of such accountants who shall act as auditors in making examinations of the consolidated financial statements of the Corporation and its subsidiaries in accordance with generally accepted auditing standards. The auditors shall certify that the annual financial statements are prepared in accordance with generally accepted accounting principles, and shall report on such financial statements to the stockholders and directors of the Corporation. The Board's selection of auditors shall be presented for ratification by the stockholders at the annual meeting. Directors and officers, when acting in good faith, may rely upon financial statements of the Corporation represented to them to be correct by the officer of the Corporation having charge of its books of account, or stated in a written report by the auditors fairly to reflect the financial condition of the Corporation. ARTICLE VIII OFFICES SECTION 1. Principal Office. The principal office of the Corporation shall be at such place in the Town of North Castle, County of Westchester and State of New York as the Board shall from time to time determine. SECTION 2. Other Offices. The Corporation may also have an office or offices other than said principal office at such place or places as the Board shall from time to time determine or the business of the Corporation may require. ARTICLE IX WAIVER OF NOTICE Whenever under the provisions of any law of the State of New York, the Certificate of Incorporation or these By-laws or any resolution of the Board or any committee thereof, the Corporation or the Board or any committee thereof is authorized to take any action after notice to the stockholders, directors or members of any such committee, or after the lapse of a prescribed period of time, such action may be taken without notice and without the lapse of any period of time, if, at any time before or after such action shall be completed, such notice or lapse of time shall be waived by the person or persons entitled to said notice or entitled to participate in 18 the action to be taken, or, in the case of a stockholder, by an attorney thereunto authorized. Attendance at a meeting requiring notice by any person or, in the case of a stockholder, by the stockholder's attorney, agent or proxy, shall constitute a waiver of such notice on the part of the person so attending, or by such stockholder, as the case may be. ARTICLE X FISCAL YEAR The fiscal year of the Corporation shall end on the thirty-first day of December in each year. ARTICLE XI SEAL The Seal of the Corporation shall consist of two concentric circles with the IBM logotype appearing in bold face type within the inner circle and the words 'International Business Machines Corporation' appearing within the outer circle. ARTICLE XII AMENDMENTS These By-laws may be amended or repealed or new By-laws may be adopted by the stockholders at any annual or special meeting, if the notice thereof mentions that amendment or repeal or the adoption of new By-laws is one of the purposes of such meeting. These By-laws, subject to the laws of the State of New York, may also be amended or repealed or new By-laws may be adopted by the affirmative vote of a majority of the Board given at any meeting, if the notice thereof mentions that amendment or repeal or the adoption of new By-laws is one of the purposes of such meeting. 19 INTERNATIONAL BUSINESS MACHINES CORPORATION The undersigned does hereby certify that the foregoing is a true and complete copy of the By-laws of International Business Machines Corporation, including all amendments thereto, and the same is in force at the date hereof. IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the seal of said Corporation, this day of 2000. _____________________________ Title: ____________________________ 20 EX-11 3 0003.txt COMPUTATION OF BASIC AND DILUTED EXHIBIT 11 COMPUTATION OF BASIC AND DILUTED EARNINGS PER SHARE (UNAUDITED)
For Three Months Ended ---------------------- June 30, 2000 June 30, 1999 ------------- ------------- Number of shares on which basic earnings per share is calculated: Average shares outstanding during period 1,767,618,661 1,812,074,414 Add - Incremental shares under stock compensation plans 47,477,949 58,575,124 Add- Incremental shares associated with contingently issuable shares 2,945,635 -- -------------- -------------- Number of shares on which diluted earnings per share is calculated 1,818,042,245 1,870,649,538 ============== ============== Net income applicable to common shareholders (millions) $ 1,936 $ 2,386 Less - net income applicable to contingently issuable shares (millions) 9 -- -------------- -------------- Net income on which diluted earnings per share is calculated (millions) $ 1,927 $ 2,386 ============== ============== Diluted earnings per share $ 1.06 $ 1.28 Basic earnings per share $ 1.10 $ 1.32
Stock options to purchase 25,390,405 shares and 287,300 shares were outstanding as of June 30, 2000 and 1999, respectively, but were not included in the computation of diluted earnings per share because the options' exercise price during the respective periods was greater than the average market price of the common shares and, therefore, the effect would have been antidilutive. In addition, 3,031,183 restricted stock units as of June 30, 1999 relating to the company's Long-Term Performance Plan were not included in the computation of diluted earnings per share as their effect would have been antidilutive. Net income applicable to common shareholders excludes preferred stock dividends of $5 million for the three months ended June 30, 2000 and 1999. -23- COMPUTATION OF BASIC AND DILUTED EARNINGS PER SHARE - (continued) (UNAUDITED)
For Six Months Ended --------------------- June 30, 2000 June 30, 1999 ------------- ------------- Number of shares on which basic earnings per share is calculated: Average shares outstanding during period 1,772,402,745 1,817,953,371 Add - Incremental shares under stock compensation plans 49,964,337 58,683,577 Add - Incremental shares associated with contingently issuable shares 1,659,239 -- -------------- -------------- Number of shares on which diluted earnings per share is calculated 1,824,026,321 1,876,636,948 ============== ============== Net income applicable to common shareholders (millions) $ 3,450 $ 3,851 Less - net income applicable to contingently issuable shares (millions) 9 -- -------------- -------------- Net income on which diluted earnings per share is calculated (millions) $ 3,441 $ 3,851 ============== ============== Diluted earnings per share $ 1.89 $ 2.05 Basic earnings per share $ 1.95 $ 2.12
Stock options to purchase 24,542,800 shares and 417,500 shares were outstanding as of June 30, 2000 and 1999, respectively, but were not included in the computation of diluted earnings per share because the options' exercise price during the respective periods was greater than the average market price of the common shares, and therefore, the effect would have been antidilutive. In addition, 2,953,924 restricted stock units as of June 30, 1999 relating to the company's Long-Term Performance Plan were not included in the computation of diluted earnings per share as their effect would have been antidilutive. Net income applicable to common shareholders excludes preferred stock dividends of $10 million for the six months ended June 30, 2000 and 1999. -24- EX-12 4 0004.txt COMPUTATION OF RATIO OF NET INCOME EXHIBIT 12 COMPUTATION OF RATIO OF NET INCOME TO FIXED CHARGES AND NET INCOME TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS (UNAUDITED) (Dollars in millions)
For Six Months Ended -------------------- June 30, 2000 June 30, 1999 ------------- ------------- Income before income taxes (1) $4,926 $6,137 Add: Fixed charges, excluding capitalized interest 905 973 ------ ------ Net income as adjusted $5,831 $7,110 ====== ====== Fixed charges: Interest expense $ 685 $ 739 Capitalized interest 15 15 Portion of rental expense representative of interest 220 234 ------ ------ Total fixed charges $ 920 $ 988 ====== ====== Preferred stock dividends (2) 14 15 ------ ------ Combined fixed charges and preferred stock dividends $ 934 $1,003 ====== ====== Ratio of net income to fixed charges 6.33 7.20 Ratio of net income to combined fixed charges and preferred stock dividends 6.24 7.09
(1) Income before income taxes excludes the company's share in the income and losses of less-than-fifty percent-owned affiliates. (2) Included in the ratio computation are preferred stock dividends of $10 million for the first six months of 2000 and 1999, or $14 million and $15 million, respectively, representing the pre-tax income that would be required to cover those dividend requirements based on the company's effective tax rate for the six months ended June 30, 2000 and 1999. -25- (THIS PAGE INTENTIONALLY LEFT BLANK) -26- SEGMENT INFORMATION (UNAUDITED)
Hardware Segments ----------------------------------------- Personal Enterprise Global (Dollars in millions) Technology Systems Systems Services ---------- ------- ------- -------- Three Months Ended June 30, 2000: External revenue $ 2,456 $ 3,914 $ 2,774 $ 8,184 Internal revenue 710 21 162 600 ------- ------- ------- ------- Total revenue $ 3,166 $ 3,935 $ 2,936 $ 8,784 ======= ======= ======= ======= Pre-tax income (loss) $ 226 $ (69) $ 448 $ 1,069 ======= ======= ======= ======= Revenue year-to-year change (6.3)% (4.4)% (8.6)% 1.9% Pre-tax income year-to-year change 222.9% 31.0% (24.7)% (4.6)% Pre-tax income margin 7.1% (1.8)% 15.3% 12.2% Three Months Ended June 30, 1999*: External revenue $ 2,347 $ 4,111 $ 3,069 $ 7,988 Internal revenue 1,031 7 142 628 ------- ------- ------- ------- Total revenue $ 3,378 $ 4,118 $ 3,211 $ 8,616 ======= ======= ======= ======= Pre-tax income (loss) $ 70 $ (100) $ 595 $ 1,121 ======= ======= ======= ======= Pre-tax income margin 2.1% (2.4)% 18.5% 13.0%
* Reclassified to conform with 2000 presentation. Reconciliations to IBM as Reported:
Three Months Ended Three Months Ended (Dollars in millions) June 30, 2000 June 30, 1999 ------------- ------------- Revenue: Total reportable segments $ 23,627 $ 24,014 Eliminations/other (1,976) (2,109) -------- -------- Total IBM Consolidated $ 21,651 $ 21,905 ======== ======== Pretax income: Total reportable segments $ 2,604 $ 2,502 Sales of IBM's Global Network -- 3,430 Second quarter actions -- (1,820) Eliminations/other 169 (69) -------- -------- Total IBM Consolidated $ 2,773 $ 4,043 ======== ========
-27- Global Enterprise Total Software Financing Investments Segments -------- --------- ----------- -------- $ 3,182 $ 829 $ 321 $ 21,660 209 264 1 1,967 ------- ------- ------- -------- $ 3,391 $ 1,093 $ 322 $ 23,627 ======= ======= ======= ======== $ 736 $ 306 $ (112) $ 2,604 ======= ======= ======= ======== 2.5% 13.6% (23.5)% (1.6)% (2.6)% 16.3% 44.8% 4.1% 21.7% 28.0% (34.8)% 11.0% $ 3,126 $ 764 $ 418 $ 21,823 182 198 3 2,191 ------- ------- ------- -------- $ 3,308 $ 962 $ 421 $ 24,014 ======= ======= ======= ======== $ 756 $ 263 $ (203) $ 2,502 ======= ======= ======= ======== 22.9% 27.3% (48.2)% 10.4% -28- SEGMENT INFORMATION (UNAUDITED)
Hardware Segments ----------------------------------------- Personal Enterprise Global (Dollars in millions) Technology Systems Systems Services ---------- ------- ------- -------- Six Months Ended June 30, 2000: External revenue $ 4,396 $ 7,175 $ 5,190 $15,736 Internal revenue 1,503 31 325 1,195 ------- ------- ------- ------- Total revenue $ 5,899 $ 7,206 $ 5,515 $16,931 ======= ======= ======= ======= Pre-tax income (loss) $ 246 $ (247) $ 887 $ 2,067 ======= ======= ======= ======= Revenue year-to-year change (8.4)% (8.5)% (9.5)% 0.6% Pre-tax income year-to-year change 179.5% (59.4)% (22.3)% 0.3% Pre-tax income margin 4.2% (3.4)% 16.1% 12.2% Six Months Ended June 30, 1999*: External revenue $ 4,557 $ 7,862 $ 5,807 $15,538 Internal revenue 1,880 14 285 1,297 ------- ------- ------- ------- Total revenue $ 6,437 $ 7,876 $ 6,092 $16,835 ======= ======= ======= ======= Pre-tax income (loss) $ 88 $ (155) $ 1,142 $ 2,061 ======= ======= ======= ======= Pre-tax income margin 1.4% (2.0)% 18.7% 12.2%
* Reclassified to conform with 2000 presentation. Reconciliations to IBM as Reported:
Six Months Ended Six Months Ended (Dollars in millions) June 30, 2000 June 30, 1999 ------------- ------------- Revenue: Total reportable segments $ 44,835 $ 46,386 Eliminations/other (3,836) (4,164) -------- -------- Total IBM Consolidated $ 40,999 $ 42,222 ======== ======== Pretax income: Total reportable segments $ 4,709 $ 4,762 Sales of IBM's Global Network -- 3,430 Second quarter actions -- (1,820) Eliminations/other 234 (229) -------- -------- Total IBM Consolidated $ 4,943 $ 6,143 ======== ========
-29- Global Enterprise Total Software Financing Investments Segments -------- --------- ----------- -------- $ 6,109 $ 1,657 $ 662 $ 40,925 384 470 2 3,910 ------- ------- ---------- -------- $ 6,493 $ 2,127 $ 664 $ 44,835 ======= ======= ========== ======== $ 1,317 $ 594 $ (155) $ 4,709 ======= ======= ========== ======== 0.8% 12.4% (18.4)% (3.3)% (9.9)% 18.3% 54.1% (1.1)% 20.3% 27.9% (23.3)% 10.5% $ 6,046 $ 1,488 $ 800 $ 42,098 393 405 14 4,288 ------- ------- --------- -------- $ 6,439 $ 1,893 $ 814 $ 46,386 ======= ======= ========= ======== $ 1,462 $ 502 $ (338) $ 4,762 ======= ======= ========= ======== 22.7% 26.5% (41.5)% 10.3% -30- EXHIBITS OMITTED FROM THIS COPY The By-laws of IBM as amended through July 25, 2000 The Financial Data Schedule IBM's Definitive Proxy Statement dated March 23, 2000. Copies of these exhibits may be obtained without charge from EquiServe, First Chicago Trust Division, Suite 4688, P.O. Box 2530, Jersey City, New Jersey 07303-2530 -31- EX-27 5 0005.txt FDS
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM IBM CORPORATION'S FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000,000 6-MOS DEC-31-2000 JUN-30-2000 2,987 274 21,145 0 4,759 39,437 38,506 21,872 82,949 33,862 0 0 247 12,570 6,357 82,949 16,863 40,999 12,247 26,045 10,014 0 316 4,943 1,483 3,460 0 0 0 3,460 1.95 1.89
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