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

2. 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.

3. 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.

4. 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

5. (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

6. 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

7. 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.

8. 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 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

9. 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

10. Global PCs: Where are the opportunities?
Top six emerging countries will represent 39% of the – 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

11. 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

12. 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

13. 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

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

15. 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.

16. 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

17. 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

18. 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)

19. 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

20. 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

21. 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!

22. 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.