IBM and Lenovo New Leadership in Global PCs New advantages for all PC customers

IBM and Lenovo Enter into Long-term Strategic Alliance Create Powerful New Global Leader Leading Products and Brands World Class Service & Support Global Reach New Growth Opportunities Scale Lenovo is acquiring IBM’s PC business. The new Lenovo, with IBM's PC business and strategic alliances in sales, service and financing -- is changing the game in PCs for enterprises as well as consumers. IBM’s PC division will be the strategic centerpiece of the new Lenovo, a powerful global leader in PCs, in which IBM will have an ownership stake and business-relationship commitments. The new Lenovo will be positioned with the global presence and financial resources to continue winning and succeeding in the “PCs for business productivity” segment of the industry. The new Lenovo will have unique access to the world’s largest emerging market -- China -- and new opportunity for growth in the consumer business as well. The management team of the new Lenovo is committed to leadership in personal computing technology, bringing the quality and reliability of IBM ThinkPad, ThinkCentre, and ThinkVantage Technologies to consumers as well as enterprises. The new Lenovo has a clear vision of the future of PCs, where a larger operation, working the synergies between enterprise and consumer personal computing, will strengthen the entire product category. Enterprise customers will benefit: Through IBM’s long-term, strategic relationship with the new Lenovo, IBM will continue to offer complete, end-to-end IT solutions, with Lenovo as its partner for PCs used in on demand computing. Business partners, dealers and IBM client teams will continue to support customers and offer the same high-quality, secure and reliable ThinkPads, ThinkCentres, and ThinkVantage Technologies. The new Lenovo will deliver for customers: top-notch products, lowest total-cost-of-ownership, higher productivity. Consumers will benefit: Consumers want the same advantages in their PCs as enterprises: laptops that protect themselves with an "airbag"; PCs that heal themselves and recover data with one touch; the most secure laptops available, yet quickly accessible with a fingerprint reader for fast identification. Both enterprises and consumers will be able to look to the new Lenovo for the highest level of service and support. IBM's PC Division is performing well, gaining share against competitors globally and growing faster than the industry in most segments and regions.

The New Lenovo: Overview $13B sales (last 12 months) 19,000 employees WW Headquarters: New York, USA Principal operations: Raleigh, Beijing Public company with ownership positions by Lenovo and IBM Closing date: 2Q05 Est. combined share data: 34% in China Talk directly to slide.

Customer Value Innovative Products / Broader Portfolio Continued IBM Sales Coverage World Class Service and Support IBM Financing Ease of Doing Business The key to success in IT is customer focus. That means listening to what customers want and delivering it. Customers want best design, technical leadership, understanding and a good ownership experience. The new Lenovo will do that, through the elements of the new company itself and through its ongoing partnering with IBM. The new company delivers exactly what customers want and is able to do so on a global basis. Global Business Partner Network

(Lenovo + IBM PC Business) Transaction Summary “Today’s announcement further strengthens IBM’s focus on the enterprise, while creating a new global business that is better positioned to capture the opportunities in the PC industry going forward.” – Sam Palmisano Lenovo acquires IBM PC operations IBM: ownership stake, long-term alliances with the new Lenovo in sales, services and financing The new Lenovo Lenovo IBM Ownership Public Lenovo Holdings IBM 36% 45% 19% IBM Sales This transaction is really twofold. One piece is the movement of IBM’s PC operations to Lenovo. IBM retains an 18% ownership in the new Lenovo. Lenovo will be preferred supplier of PCs to IBM, which will continue to offer a full range of IBM-branded personal computing solutions to its enterprise and small and medium business clients IBM global financing and Global Services will be preferred providers to Lenovo The second aspect of this transaction is the creation of a very close alliance between the new Lenovo and IBM. That alliances is in the area of services, financing and IT. IBM opens global doors for Lenovo Lenovo drives IBM business deeper into China, the world fastest-growing economy IBM Services The new Lenovo (Lenovo + IBM PC Business) IBM Financing IBM IT

Lenovo Group LTD Founded 1984 FY04: Revenue, $3B; Net Profit, $135M Approx. 9,000 employees #1 market share in China for seven years (27% market share, source: IDC) #1 PC company in Asia Pacific (excl. Japan) #1 IT company in China Small Business and Consumer market strength Market capitalization: approx. $2.6B Commercial Products Desktops Soleil notebooks Scanners Laser printers Home Products Desktop PCs Tianyi notebooks Xuri notebooks Inkjet printers Cell Phones Mobile handsets Lenovo’s success has helped make the deal possible. Tremendous strength in China market and throughout Asia Pacific. Ready to go global with an impressive array of brands Servers 886 Servers Creator of Deepcomp 6800 supercomputer

IBM Personal Computing Division Established in 1981, creator of personal computer $9B 2003 revenue; 10,000 employees in PCD and supporting operations #2 in WW commercial notebooks revenue Undisputed leader in enterprise PC design, business productivity, and lowest total cost of ownership Enterprise and Mid-market strength (15% share total client) Client, notebook and SMB double-digit growth, outpacing industry ThinkPad notebooks have won over 1,000 industry awards 100-million PCs shipped PCD’s performance in the past months helped make this opportunity a reality. The unit is gaining share against competitors and growing faster than the industry in most segments and regions.

Global PCs: Where are the opportunities? IBM focuses on the Enterprise market. As a result, PCD revenue is weighted towards Large Enterprise/Mid-market customers. There is however, significant growth opportunity in the Small Business / Consumer market. PC market growth opportunity of $16B* from 2004 – 2006 led by SB / Consumer Segment Revenue Mix 100% 80% SB / Consumer 43% SB / Consumer 60% 71% LE / MM SB / Consumer IBM as a corporation focuses on LE/MM. This results in PC revenue being skewed towards LE/MM. This presents a large opportunity for Lenovo International to leverage SB/Consumer segments globally. More than half of IBM’s revenue comes from LE/MM vs. the industry, where 71% of their revenue comes from SB/Consumer (note: Education/Government is included in this breakout). This presents a large opportunity for Lenovo International to leverage globally. Source of Segment Revenue Mix Industry and IBM data: IDC PC Tracker Data for Industry MM/LE = $12,112B MM/LE/$42,180B Total All Segments = 29% of the Total Market SB/Cons* = $30,068B SB/Cons/$42,180B Total All Segments = 71% of the Total Market *Note: SB/Cons includes Education and Government Data for IBM MM/LE = $1,801B MM/LE/$3,130B Total All Segments = 57% of the Total Market SB/Cons* = $1,329B SB/Cons/$3,130B Total All Segments = 43% of the Total Market Market Growth Opportunity of $16B is per IDC PC Tracker 3Q04 Data, International Planning and Research (IPR) 1Q04 data indicates a market growth of $17.7B International Planning & Research 1Q04data indicates that the absolute growth of LE/MM = 14% of the total market growth. $2.5B/$17.7B SB/Cons/Gov’t/Education Growth from 2004 to 2006 = $15.1B/$17.7B total IPR 04-06 growth = 86% of the total market growth attributable to SB/Consumer 40% LE / MM 57% 20% LE / MM 29% 0% Industry IBM Source: International Planning & Research Source: IDC PC Tracker *Source: IDC PC Tracker

The New Lenovo: Leveraging strengths to pursue opportunities Product Mix Segment IBM % of Revenue Lenovo % of Revenue IBM % of Revenue Lenovo % of Revenue Notebook LE / MM 17% 83% SB / Consumer 18% SB / Consumer Desktop 40% Notebook 43% LE / MM, 60% 57% Desktop 82% Geography This slide clearly demonstrates that each organization brings its own complementary strengths. The new Lenovo will have strong positions in all PC market segments. IBM Data for Desktop/Notebook % of Revenue per Financial information/verification Lenovo information per 3Q04 IDC PC Tracker. For PRC, Lenovo Revenue for Desktop = $582M/$707M = 82% of the Revenue attributable to Desktop, For Notebooks, IDC 3Q Revenue = $125M/$707M = 18% of the Revenue is attributable to Notebook For Segment, IBM information is per IDC PC Tracker Data for IBM MM/LE = $1,801B MM/LE/$3,130B Total All Segments = 57% of the Total Market SB/Cons* = $1,329B SB/Cons/$3,130B Total All Segments = 43% of the Total Market *Note: SB/Cons includes Education and Government Lenovo Segment information is per IDC PC 3Q04 Tracker LE/MM = 120M/707M = 17%, SB/Cons/Gov’t/Ed = 587/707 = 83% Geography Revenue Charts IBM information per Financial records and verification Lenovo is per their verification with 98.7% of the revenue in China, 1.3% in Other AP IBM % of Revenue Lenovo % of Revenue AP 32% Americas AP 42% 100% EMEA 26% Data Source: IDC PC Tracker / Internal sources

Global PCs: Where are the opportunities? Top six emerging countries will represent 39% of the 2004 – 2006 growth opportunity* IBM is performing well on the premium product segments in these countries with the proper sales and distribution channels to reach these markets The new Lenovo will have a broader product portfolio to capture this opportunity Data used to calculate the 39% is IPR. Emerging Markets are China, India, Russia, Mexico, So. Africa, and Brazil $6.8B of the $17.3B growth over 2 years is attributable to the 6 emerging markets or 39% of the total absolute growth. Emerging markets are the next area of opportunity for PC sales, especially China and Asia Pacific IBM has significant operations in these countries and is performing well. Those markets are now more accessible through the new Lenovo. Lenovo will have an expanded product portfolio through its acquisition of IBM’s iconic PC brands to strengthen its hold on the China market and Asia Pacific. Source: International Planning & Research

A Perfect Fit between Complementary Organizations Premium Global PC Brand Most recognized technology brand globally Enterprise / Mid-Market Expertise Leader in business productivity and lowest total cost of ownership Notebook Leader Leading technology enhanced notebook product offering #1 IT Brand in China Most recognized technology brand in China Consumer / Small Business Expertise Differentiated consumer/small business and extensive retail network Efficient Operational Platform Low cost infrastructure and manufacturing scale If you removed product names and company logos from this slide, there would be a one-pager describing what a highly competitive PC company would like. This is what is required for success. This is the dream team. Restore the brands and the logos and you have exactly what we’re talking about – the new Lenovo Global Sales, Financing, Fulfillment and Service Network Global sales network with financing, fulfillment and service support

Lenovo’s Chairman Yang .. We at Lenovo understand that people are at the core of a successful company. .. Our two companies also share a common vision to create an undisputed global leader in the PC industry. .. we’re both fully committed to success – success on the international stage, and success through producing the best PCs in the world for both enterprises and consumers. .. welcome to our family. I’m honored that you will be joining us and I hope that we’ll get to know each other a lot better in the years to come. Yuanqing Yang

Synergy in Values Customers Innovation Integrity Dedication to every client’s success Innovation that matters – for our company and for the world Trust and personal responsibility in all relationships Serving customers Innovative and “can do” spirit Accuracy and truth-seeking Trustworthiness and integrity Customers Innovation Integrity The new company will not require a lengthy period of settling in. Cultures are similar and this is reflected in their values. The new Lenovo Global presence Continue winning in “PCs for business productivity” segment New options for growth, including consumer business Important alliances with IBM, the largest IT company in the world

The New Lenovo Announcement HR Transition Peter Haddad VP Human Resources, PSG

The New Lenovo Value Proposition The new Lenovo will offer an exciting opportunity to participate in a new and expanding business venture The new Lenovo will offer an attractive employment package Lenovo and IBM are committed to make this a smooth transition that minimizes personal disruptions and loss of work productivity The transaction is expected to be completed no later than the second quarter 2005, and requires the approval of Lenovo’s shareholders and review by relevant regulatory organizations. It is the intention of IBM and Lenovo to reach and sign local agreements after completion of additional legal requirements and industrial relations processes where applicable in some countries outside the United States.

IBM Employees Joining the new Lenovo Employees who are part of PCD and their primary work responsibility is in support of the PCD mission/business Employees in other business units whose primary work responsibility is in support of the PCD mission/business Additional employees deemed necessary to meet the new Lenovo’s requirements may be selected based upon business need and an assessment of their current job responsibilities

Attractive Employee Compensation & Benefit Package* The new Lenovo will provide total compensation and benefits that are comparable to IBM’s: Cash Compensation Same or Similar Job Responsibilities Comprehensive Benefit Plans Pension / Retirement Plan** Vacation *Certain countries, generally in EMEA, require that these compensation packages undergo further legal and industrial relations review before signing local agreements. Management plans to seek packages that are comparable in value to the package currently offered to employees in those countries in accordance with applicable laws. **In Countries where these plans are offered today

Attractive Employee Compensation & Benefit Package* (continued) Employee Health Benefit Package Immediate access for employee & dependents – no exclusions Pre-existing conditions are covered Credit for current year plan deductibles Years of service credit for: The new Lenovo Vacation Plan will be based on combined IBM and Lenovo years of service and will provide the same benefits as the IBM plan guidelines IBM accrued and unused vacation transfers with you according to country legal standards Other selected benefit programs (varies by geography)

US Benefits: the new Lenovo Pension Plans with comparable benefits and service credit for purposes of determining eligibility and vesting: IBM Personal Pension Plan (Prior DB Plan) – new Lenovo Pension Plan (DB) IBM Personal Pension Account (Cash Balance) – new Lenovo Defined Contribution Plan IBM Savings Plan – the new Lenovo 401(k) Plan Health benefits Continuous coverage Medical Dental Compensation Same base salary Performance bonus targets maintained for one year Similar incentive and sales commission plans Vacation – Same as IBM plan More details about the new Lenovo benefits will be forthcoming

IBM / Lenovo Transition Schedule December 8, 2004 Employee Announcement Meeting - PCD Website published with new Lenovo specifics; to be updated regularly December 8 – 9, 2004 Management Briefings December 8 – 16, 2004 Employee Department Meetings December 8, 2004 – January 7, 2005 In-scope certification process First Quarter 2005 New Lenovo provides details of benefits offerings Second Quarter 2005 Proposed IBM/Lenovo transaction closing Employees join the new Lenovo and transition based on final country closing dates Note: Dates represent anticipated transition plan and may vary based on transition progress

HR Summary The new Lenovo will provide: Attractive Employment Package Competitive compensation Continuity of benefits Smooth Employee Transition Career Growth opportunities as we expand our markets Recognition of innovation, performance and leadership A chance to run our own show!

Lenovo is acquiring IBM’s PC business. The new Lenovo, with IBM's PC business and strategic alliances in sales, service and financing -- is changing the game in PCs for enterprises as well as consumers. IBM’s PC division will be the strategic centerpiece of the new Lenovo, a powerful global leader in PCs, in which IBM will have an ownership stake and business-relationship commitments. The new Lenovo will be positioned with the global presence and financial resources to continue winning and succeeding in the “PCs for business productivity” segment of the industry. The new Lenovo will have unique access to the world’s largest emerging market -- China -- and new opportunity for growth in the consumer business as well. The management team of the new Lenovo is committed to leadership in personal computing technology, bringing the quality and reliability of IBM ThinkPad, ThinkCentre, and ThinkVantage Technologies to consumers as well as enterprises. The new Lenovo has a clear vision of the future of PCs, where a larger operation, working the synergies between enterprise and consumer personal computing, will strengthen the entire product category. Enterprise customers will benefit: Through IBM’s long-term, strategic relationship with the new Lenovo, IBM will continue to offer complete, end-to-end IT solutions, with Lenovo as its partner for PCs used in on demand computing. Business partners, dealers and IBM client teams will continue to support customers and offer the same high-quality, secure and reliable ThinkPads, ThinkCentres, and ThinkVantage Technologies. The new Lenovo will deliver for customers: top-notch products, lowest total-cost-of-ownership, higher productivity. Consumers will benefit: Consumers want the same advantages in their PCs as enterprises: laptops that protect themselves with an "airbag"; PCs that heal themselves and recover data with one touch; the most secure laptops available, yet quickly accessible with a fingerprint reader for fast identification. Both enterprises and consumers will be able to look to the new Lenovo for the highest level of service and support. IBM's PC Division is performing well, gaining share against competitors globally and growing faster than the industry in most segments and regions.