IBM and Lenovo New Leadership in Global PCs

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

2. IBM and Lenovo Enter into Long-term Strategic AllianceCreate Powerful New Global Leader Leading Productsand Brands World Class Service & Support Global Reach New GrowthOpportunities Scale

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

4. Customer Value Innovative Products / Broader Portfolio World Class Service and Support Continued IBM Sales Coverage IBM Financing Ease of Doing Business Global Business Partner Network

5. Lenovo acquires IBM PC operations IBM: ownership stake, long-term alliances with the new Lenovo in sales, services and financing Lenovo IBM 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 The new Lenovo Ownership Public Lenovo Holdings IBM 36% 45% 19% IBM Sales 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 • CommercialProducts • Desktops • Soleil notebooks • Scanners • Laser printers • Home Products • Desktop PCs • Tianyi notebooks • Xuri notebooks • Inkjet printers • Cell Phones • Mobilehandsets • 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

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% SB / Consumer 80% 43% SB / Consumer 71% 60% LE / MM SB / Consumer 40% LE / MM 57% 20% LE / MM 29% 0% Source: International Planning & Research Industry IBM *Source: IDC PC Tracker Source: IDC PC Tracker

9. LE / MM 17% SB / Consumer 83% The New Lenovo:Leveraging strengths to pursue opportunities Product Mix Segment IBM % of Revenue Lenovo % of Revenue IBM % of Revenue Lenovo % of Revenue Notebook 18% SB / Consumer Desktop Notebook 40% 43% LE / MM, 60% 57% Desktop 82% Geography IBM % of Revenue Lenovo % of Revenue AP Americas 32% 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 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 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 • 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 Serving customers Innovative and “can do” spirit Accuracy and truth-seeking Trustworthiness and integrity Dedication to every client’s success Innovation that matters – for our company and for the world Trust and personal responsibility in all relationships Customers Innovation Integrity

14. The New Lenovo AnnouncementHR 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 completedno 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 Employee Announcement Meeting - PCD Website published with new Lenovo specifics; to be updated regularly December 8, 2004 Management Briefings December 8 – 9, 2004 Employee Department Meetings December 8 – 16, 2004 In-scope certification process December 8, 2004 – January 7, 2005 New Lenovo provides details of benefits offerings First Quarter 2005 Proposed IBM/Lenovo transaction closing Second Quarter 2005 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!