INTERNATIONAL BUSINESS MACHINES CORP, SC 13E3, 1995-01-11

INTERNATIONAL BUSINESS MACHINES CORP
SC 13E3, 1995-01-11
COMPUTER & OFFICE EQUIPMENT

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

SCHEDULE 13E-3

RULE 13E-3 TRANSACTION STATEMENT
(PURSUANT TO SECTION 13(E) OF THE SECURITIES EXCHANGE ACT OF 1934)

INTERNATIONAL BUSINESS MACHINES CORPORATION
(NAME OF ISSUER)

INTERNATIONAL BUSINESS MACHINES CORPORATION
(NAME OF PERSON(S) FILING STATEMENT)

DEPOSITARY SHARES, EACH REPRESENTING A ONE-FOURTH INTEREST IN A SHARE OF
SERIES A 7- 1/2% PREFERRED STOCK
(TITLE OF CLASS OF SECURITIES)

459200309
(CUSIP NUMBER OF CLASS OF SECURITIES)

JOHN E. HICKEY
VICE PRESIDENT AND SECRETARY
INTERNATIONAL BUSINESS MACHINES CORPORATION
ONE OLD ORCHARD ROAD
ARMONK, NEW YORK 10504
(914) 765-1900
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON
AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS
ON BEHALF OF THE PERSON FILING STATEMENT)

Copy to:

ROBERT ROSENMAN, ESQ.
CRAVATH, SWAINE & MOORE
WORLDWIDE PLAZA
825 EIGHTH AVENUE
NEW YORK, NEW YORK 10019
(212) 474-1300

This statement is filed in connection with (check the appropriate box):
a.[_] The filing of solicitation materials or an information
statement subject to Regulation 14A, Regulation 14C or Rule
13e-3(c) under the Securities Exchange Act of 1934.
b.[_] The filing of a registration statement under the Securities Act
of 1933.
c.[X] A tender offer.
d.[_] None of the above.

Check the following box if soliciting materials or an information statement
referred to in checking box
(a) are preliminary copies: [_]

CALCULATION OF FILING FEE

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* Assumes purchase of 44,580,000 shares at $25 per share.
** Calculated based on the transaction valuation multiplied by one-fiftieth of
one percent.

[X] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form or
Schedule and the date of its filing.

Amount Previously Paid: $222,900 Filing Party: International Business
Machines Corporation

Form or Registration No.: 13E-4 Date Filed: January 11, 1995

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This Rule 13e-3 Transaction Statement (the "Statement") relates to the offer
by International Business Machines Corporation, a New York corporation (the
"Company"), to purchase any and all of its outstanding Depositary Shares (the
"Depositary Shares"), each representing ownership of one-fourth of a share of
Series A 7- 1/2% Preferred Stock, par value $0.01 per share (the "Series A
Preferred Stock"), liquidation preference $100 per share, of the Company, at a
price of $25.00 per Depositary Share, net to the seller in cash, upon the terms
and subject to the conditions set forth in the Offer to Purchase for Cash dated
January 11, 1995 (the "Offer to Purchase"), and in the related Letter of
Transmittal (which together constitute the "Offer"), copies of which are
attached hereto as Exhibits (d)(1) and (d)(2), respectively.

The cross reference sheet below is being supplied pursuant to General
Instruction F to Schedule 13E-3 and shows the location in the Issuer Tender
Offer Statement on Schedule 13E-4 (the "Schedule 13E-4") filed by the Company
with the Securities and Exchange Commission on the date hereof of the
information required to be included in response to the items of this Statement.
The information set forth in the Schedule 13E-4, which is attached hereto as
Exhibit (g), including all exhibits thereto, is expressly incorporated by
reference and responses to each item herein are qualified in their entirety by
the provisions of the Schedule 13E-4.
<PAGE>

CROSS REFERENCE SHEET

<TABLE>
<CAPTION>
ITEM IN
SCHEDULE 13E- WHERE LOCATED IN
3 SCHEDULE 13E-4
------------- ----------------
<S> <C>
Item 1(a)..................................................... Item 1(a)
Item 1(b)..................................................... Item 1(b)
Item 1(c)..................................................... Item 1(c)
Item 1(d)..................................................... *
Item 1(e)..................................................... *
Item 1(f)..................................................... *
Item 2(a)..................................................... *
Item 2(b)..................................................... *
Item 2(c)..................................................... *
Item 2(d)..................................................... *
Item 2(e)..................................................... *
Item 2(f)..................................................... *
Item 2(g)..................................................... *
Item 3(a)(1).................................................. *
Item 3(a)(2).................................................. *
Item 3(b)..................................................... *
Item 4(a)..................................................... *
Item 4(b)..................................................... *
Item 5(a)..................................................... Item 3(b)
Item 5(b)..................................................... Item 3(c)
Item 5(c)..................................................... Item 3(d)
Item 5(d)..................................................... Item 3(e)
Item 5(e)..................................................... Item 3(f)
Item 5(f)..................................................... Item 3(i)
Item 5(g)..................................................... Item 3(j)
Item 6(a)..................................................... Item 2(a)
Item 6(b)..................................................... *
Item 6(c)..................................................... Item 2(b)
Item 6(d)..................................................... *
Item 7(a)..................................................... Item 3
Item 7(b)..................................................... *
Item 7(c)..................................................... *
Item 7(d)..................................................... *
Item 8(a)..................................................... *
Item 8(b)..................................................... *
Item 8(c)..................................................... *
Item 8(d)..................................................... *
Item 8(e)..................................................... *
Item 8(f)..................................................... *
Item 9(a)..................................................... *
Item 9(b)..................................................... *
Item 9(c)..................................................... *
Item 10(a).................................................... *
Item 10(b).................................................... *
Item 11....................................................... Item 5
Item 12(a).................................................... *
Item 12(b).................................................... *
Item 13(a).................................................... *
</TABLE>

i
<PAGE>

<TABLE>
<CAPTION>
ITEM IN
SCHEDULE 13E- WHERE LOCATED IN
3 SCHEDULE 13E-4
------------- ----------------
<S> <C>
Item 13(b).................................................... *
Item 13(c).................................................... *
Item 14(a).................................................... Item 7(a)
Item 14(b).................................................... Item 7(b)
Item 15(a).................................................... *
Item 15(b).................................................... Item 6
Item 16....................................................... Item 8(e)
Item 17(a).................................................... Item 9(b)
Item 17(b).................................................... *
Item 17(c).................................................... Item 9(c)
Item 17(d).................................................... Item 9(a)
Item 17(e).................................................... *
Item 17(f).................................................... Item 9(f)
</TABLE>
--------
* The Item is located in the Schedule 13E-3 only.

ii
<PAGE>

ITEM 1. ISSUER AND CLASS OF SECURITY SUBJECT TO THE TRANSACTION.

(a) The name of the issuer is International Business Machines Corporation, a
New York corporation (the "Company"), which has its principal executive offices
at One Old Orchard Road, Armonk, New York 10504 (telephone number (914) 765-
1900).

(b) The information set forth in the front cover page, "Section 1. Purpose of
the Offer; Certain Effects of the Offer; Plans of the Company After the Offer"
and "Section 9. Price Range of the Depositary Shares; Dividends" of the Offer
to Purchase is incorporated herein by reference.

(c)-(d) The information set forth in the "Introduction" and "Section 9. Price
Range of the Depositary Shares; Dividends" of the Offer to Purchase is
incorporated herein by reference.

(e)-(f) The information set forth in "Section 12. Transactions and
Arrangements Concerning the Depositary Shares" of the Offer to Purchase is
incorporated herein by reference.

ITEM 2. IDENTITY AND BACKGROUND.

The issuer is the party filing this Statement.

(a)-(d) The information set forth in "Section 10. Certain Information
Concerning the Company" and Schedule I of the Offer to Purchase is incorporated
herein by reference.

(e)-(f) None.

(g) The information set forth in Schedule I of the Offer to Purchase is
incorporated herein by reference.

ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS.

Not applicable.

ITEM 4. TERMS OF THE TRANSACTION.

(a) The information set forth in "Introduction", "Section 1. Purpose of the
Offer; Certain Effects of the Offer; Plans of the Company After the Offer" and
"The Offer" of the Offer to Purchase is incorporated herein by reference.

(b) Not applicable.

ITEM 5. PLANS OR PROPOSALS OF THE ISSUER OR AFFILIATE.

(a)-(e) The information set forth in "Section 1. Purpose of the Offer;
Certain Effects of the Offer; Plans of the Company After the Offer" of the
Offer to Purchase is incorporated herein by reference.

(f)-(g) The information set forth in "Section 1. Purpose of the Offer;
Certain Effects of the Offer; Plans of the Company After the Offer" of the
Offer to Purchase is incorporated herein by reference.

ITEM 6. SOURCE AND AMOUNTS OF FUNDS OR OTHER CONSIDERATION.

(a) The information set forth in "Section 11. Source and Amount of Funds" of
the Offer to Purchase is incorporated herein by reference.

(b) The information set forth in "Section 14. Fees and Expenses" of the Offer
to Purchase is incorporated herein by reference.

(c)-(d) Not applicable.

1
<PAGE>

ITEM 7. PURPOSE(S), ALTERNATIVES, REASONS AND EFFECTS.

(a) The information set forth in "Section 1. Purpose of the Offer; Certain
Effects of the Offer; Plans of the Company After the Offer" of the Offer to
Purchase is incorporated herein by reference.

(b) Not applicable.

(c) The information set forth in "Section 1. Purpose of the Offer; Certain
Effects of the Offer; Plans of the Company After the Offer" of the Offer to
Purchase is incorporated herein by reference.

(d) The information set forth in "Section 1. Purpose of the Offer; Certain
Effects of the Offer; Plans of the Company After the Offer" and "Section 2.
Certain Federal Income Tax Consequences" of the Offer to Purchase is
incorporated herein by reference.

ITEM 8. FAIRNESS OF THE TRANSACTION.

(a)-(b) The information set forth in "Section 1. Purpose of the Offer;
Certain Effects of the Offer; Plans of the Company After the Offer" of the
Offer to Purchase is incorporated herein by reference.

(c) The information set forth in "Section 3. Certain Legal Matters;
Regulatory and Foreign Approvals; No Appraisal Rights" of the Offer to Purchase
is incorporated herein by reference.

(d)-(e) The information set forth in "Section 1. Purpose of the Offer;
Certain Effects of the Offer; Plans of the Company After the Offer" of the
Offer to Purchase is incorporated herein by reference.

(f) None.

ITEM 9. REPORTS, OPINIONS, APPRAISALS AND CERTAIN NEGOTIATIONS.

(a) The information set forth in "Section 1. Purpose of the Offer; Certain
Effects of the Offer; Plans of the Company After the Offer" of the Offer to
Purchase is incorporated herein by reference.

(b) Not applicable.

ITEM 10. INTEREST IN SECURITIES OF THE ISSUER.

(a)-(b) The information set forth in "Section 12. Transactions and
Arrangements Concerning the Depositary Shares" of the Offer to Purchase is
incorporated herein by reference.

ITEM 11. CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS WITH RESPECT TO THE ISSUER'S
SECURITIES.

The information set forth in "Section 12. Transactions and Arrangements
Concerning the Depositary Shares" of the Offer to Purchase is incorporated
herein by reference.

ITEM 12. PRESENT INTENTION AND RECOMMENDATION OF CERTAIN PERSONS WITH REGARD TO
THE TRANSACTION.

(a) The information set forth in "Section 12. Transactions and Arrangements
Concerning the Depositary Shares" of the Offer to Purchase is incorporated
herein by reference.

(b) The information set forth in the front cover page, "Introduction" and
"Section 1. Purpose of the Offer; Certain Effects of the Offer; Plans of the
Company After the Offer" of the Offer to Purchase is incorporated herein by
reference.

2
<PAGE>

ITEM 13. OTHER PROVISIONS OF THE TRANSACTION.

(a) The information set forth in "Section 3. Certain Legal Matters;
Regulatory and Foreign Approvals; No Appraisal Rights" of the Offer to Purchase
is incorporated herein by reference.

(b) None.

ITEM 14. FINANCIAL INFORMATION.

(a) The information set forth in "Section 10. Certain Information Concerning
the Company" is incorporated herein by reference.

(b) Not applicable.

ITEM 15. PERSONS AND ASSETS EMPLOYED, RETAINED OR UTILIZED.

(a) None.

(b) The information set forth in the front cover page and "Section 14. Fees
and Expenses" of the Offer to Purchase is incorporated herein by reference.

ITEM 16. ADDITIONAL INFORMATION.

Reference is hereby made to the Offer to Purchase and the related Letter of
Transmittal, copies of which are attached hereto as Exhibits (d)(1) and (d)(2),
respectively, and incorporated in their entirety herein by reference.

ITEM 17. MATERIAL TO BE FILED AS EXHIBITS.

(a) Not applicable.

(b) Not applicable.

(d)(1) Form of Offer to Purchase dated January 11, 1995.

(d)(2) Form of Letter of Transmittal.

(d)(3) Form of Notice of Guaranteed Delivery.

(d)(4) Form of letter to brokers, dealers, commercial banks, trust companies
and other nominees dated January 11, 1995.

(d)(5) Form of letter to clients for use by brokers, dealers, commercial
banks, trust companies and other nominees dated January 11, 1994.

(d)(6) Letter to shareholders dated January 10, 1995.

(d)(7) Form of press release dated January 10, 1995.

(d)(8) Form of summary advertisement dated January 11, 1995.

(d)(9) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.

(d)(10) Summary of conditions for payment of fees to Soliciting Dealers.

(e) Not applicable.

(f) Not applicable.

(g) Issuer Tender Offer Statement on Schedule 13E-4.

3
<PAGE>

After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.

International Business Machines
Corporation

/s/ Richard F. Wallman
By: _________________________________
Richard F. Wallman
Vice President and Controller

Dated: January 11, 1995

4
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT NO. DESCRIPTION PAGE
----------- ----------- ------------
<C> <S> <C>
(d)(1) --Form of Offer to Purchase dated January 11, 1995.
(d)(2) --Form of Letter of Transmittal....................
(d)(3) --Form of Notice of Guaranteed Delivery............
(d)(4) --Form of letter to brokers, dealers, commercial
banks, trust companies and other nominees dated
January 11, 1995..................................
(d)(5) --Form of letter to clients for use by brokers,
dealers, commercial banks, trust companies and
other nominees dated January 11, 1995.............
(d)(6) --Letter to shareholders dated January 10, 1995....
(d)(7) --Form of press release dated January 10, 1995.....
--Form of summary advertisement dated January 11,
(d)(8) 1995..............................................
(d)(9) --Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9......
(d)(10) --Summary of conditions for payment of fees to
Soliciting Dealers................................
(g) --Issuer Tender Offer Statement on Schedule 13E-4..
</TABLE>

<PAGE>

EXHIBIT 99.(D)(1)
<PAGE>

OFFER TO PURCHASE FOR CASH

IBM

INTERNATIONAL BUSINESS MACHINES CORPORATION

ANY AND ALL OF ITS OUTSTANDING DEPOSITARY SHARES,

EACH REPRESENTING

A ONE-FOURTH INTEREST IN A SHARE OF ITS SERIES A 7- 1/2%

PREFERRED STOCK

$25 NET PER DEPOSITARY SHARE

THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, EASTERN
STANDARD TIME, ON WEDNESDAY, FEBRUARY 8, 1995, UNLESS THE OFFER IS
EXTENDED.

International Business Machines Corporation, a New York corporation (the
"Company"), is offering to purchase any and all of its outstanding Depositary
Shares (the "Depositary Shares"), each representing a one-fourth interest in a
share of Series A 7- 1/2% Preferred Stock, par value $0.01 per share (the
"Series A Preferred Stock"), liquidation preference $100 per share, of the
Company, at $25 per Depositary Share, net to the seller in cash, upon the terms
and subject to the conditions set forth in this Offer to Purchase and in the
related Letter of Transmittal (which together constitute the "Offer").

----------------

THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF DEPOSITARY SHARES
BEING TENDERED. The Offer is, however, subject to certain other conditions. See
Section 8.

----------------

The Depositary Shares are listed and traded on the New York Stock Exchange
(the "NYSE"). On January 9, 1995, the last trading day before the Company
announced the Offer, the closing sales price of the Depositary Shares as
reported on the NYSE Composite Tape was $23.375 per Depositary Share.
SHAREHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE DEPOSITARY
SHARES.

----------------

Depositary Shares tendered and purchased by the Company will not receive or
otherwise be entitled to the expected regular quarterly cash dividend of
$.46875 per Depositary Share, with a record date of March 19, 1995, to be paid
on April 3, 1995 by the Company for the first quarter of 1995, and will also
not receive any accrued dividends in respect thereof. See Section 9.

----------------

THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS
OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION
CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

----------------

THE COMPANY, ITS BOARD OF DIRECTORS AND ITS EXECUTIVE OFFICERS MAKE NO
RECOMMENDATION AS TO WHETHER ANY SHAREHOLDER SHOULD TENDER ANY OR ALL OF SUCH
SHAREHOLDER'S DEPOSITARY SHARES PURSUANT TO THE OFFER. EACH SHAREHOLDER MUST
MAKE ITS OWN DECISION WHETHER TO TENDER DEPOSITARY SHARES AND, IF SO, HOW MANY
DEPOSITARY SHARES TO TENDER.

----------------

The Dealer Manager for the Offer Is:

MERRILL LYNCH & CO.

January 11, 1995
<PAGE>

IMPORTANT

Any shareholder desiring to tender all or any portion of such shareholder's
Depositary Shares should either (1) complete the Letter of Transmittal or a
facsimile copy thereof in accordance with the instructions in the Letter of
Transmittal, mail or deliver it and any other required documents to First
Chicago Trust Company of New York (the "Depositary"), and either mail or
deliver the depositary receipts for such Depositary Shares to the Depositary
along with the Letter of Transmittal or follow the procedure for book-entry
transfer set forth in Section 5, or (2) request such shareholder's broker,
dealer, commercial bank, trust company or nominee to effect the transaction for
such shareholder. Shareholders having Depositary Shares registered in the name
of a broker, dealer, commercial bank, trust company or other nominee must
contact such person if they desire to tender their Depositary Shares.
Shareholders who wish to tender Depositary Shares and whose depositary receipts
for such Depositary Shares are not immediately available should tender such
Depositary Shares by following the procedures for guaranteed delivery set forth
in Section 5.

Questions and requests for assistance or for additional copies of this Offer
to Purchase, the Letter of Transmittal or the Notice of Guaranteed Delivery may
be directed to Georgeson & Company Inc. (the "Information Agent") and Merrill
Lynch & Co. (the "Dealer Manager") at the addresses and telephone numbers set
forth on the back cover of this Offer to Purchase.

NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY RECOMMENDATION ON BEHALF OF THE
COMPANY AS TO WHETHER SHAREHOLDERS SHOULD TENDER OR REFRAIN FROM TENDERING
DEPOSITARY SHARES PURSUANT TO THE OFFER. NO PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER
OTHER THAN THOSE CONTAINED IN THIS OFFER TO PURCHASE OR IN THE LETTER OF
TRANSMITTAL. IF GIVEN OR MADE, SUCH RECOMMENDATION AND SUCH INFORMATION AND
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY.
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
INTRODUCTION............................................................ 1
SPECIAL FACTORS......................................................... 1
Section 1. Purpose of the Offer; Certain Effects of the Offer; Plans
of the Company After the
Offer.................................................... 1
Section 2. Certain Federal Income Tax Consequences................... 3
Certain Legal Matters; Regulatory and Foreign Approvals;
Section 3. No Appraisal Rights...................................... 5
THE OFFER............................................................... 6
Section 4. Expiration Date; Extension of the Offer................... 6
Section 5. Procedure For Tendering Depositary Shares................. 6
Proper Tender of Depositary Shares........................ 6
Signature Guarantees and Method of Delivery............... 6
Federal Backup Withholding................................ 7
Book-Entry Delivery....................................... 7
Guaranteed Delivery....................................... 7
Determinations of Validity; Rejection of Depositary
Shares; Waiver of Defects; No Obligation to Give Notice
of Defects............................................... 8
Section 6. Withdrawal Rights......................................... 8
Acceptance for Payment of Depositary Shares and Payment of
Section 7. Purchase Price........................................... 9
Section 8. Certain Conditions of the Offer........................... 9
Section 9. Price Range of the Depositary Shares; Dividends........... 11
Section 10. Certain Information Concerning the Company................ 12
Summary Historical Financial Information.................. 12
Additional Information.................................... 14
Section 11. Source and Amount of Funds................................ 14
Transactions and Arrangements Concerning the Depositary
Section 12. Shares................................................... 14
Section 13. Extension of the Tender Period; Termination; Amendments... 15
Section 14. Fees and Expenses......................................... 15
Section 15. Miscellaneous............................................. 17
SCHEDULE I--Directors and Executive Officers of the Company
</TABLE>
<PAGE>

SUMMARY

This general summary is provided solely for the convenience of holders of
Depositary Shares and is qualified in its entirety by reference to the full
text and more specific details contained in this Offer to Purchase and the
related Letter of Transmittal and any amendments hereto and thereto.

The Company................... International Business Machines Corporation.

The Depositary Shares......... Depositary Shares, each representing a one-
fourth interest in a share of Series A 7- 1/2%
Preferred Stock, $0.01 par value, $100
liquidation preference, of the Company.

Number of Depositary Shares 44,580,000 (all of the Depositary Shares
Sought........................ outstanding).

Purchase Price................ $25.00 per Depositary Share, net to the seller
in cash. See Section 9.

Expiration Date of Offer...... February 8, 1995, at 12:00 midnight, Eastern
Standard Time, unless extended.

How to Tender Depositary See Section 5. For further information, call
Shares........................ the Information Agent or the Dealer Manager or
consult your broker for assistance.

Withdrawal Rights............. Tendered Depositary Shares may be withdrawn at
any time until the Expiration Date of the Offer
and may be withdrawn after 12:00 midnight,
Eastern Standard Time, on March 9, 1995. See
Section 6.

Purpose of Offer.............. The Company is making the Offer because it
believes that, given its current financial
condition (including its substantial current
cash and cash equivalents position) and the
current market price of the Depositary Shares,
the purchase of the Depositary Shares pursuant
to the Offer is economically attractive to the
Company. The Offer gives shareholders the
opportunity to sell their Depositary Shares at
a premium over the market price prevailing
prior to the announcement of the Offer and
without the usual transaction costs associated
with a market sale. See Section 1.

Market Price of Depositary On January 9, 1995, the closing price per
Shares........................ Depositary Share on the NYSE Composite Tape was
$23.375. Shareholders are urged to obtain a
current market quotation for the Depositary
Shares. See Section 9.

ii
<PAGE>

Dividends..................... Depositary Shares tendered and purchased by the
Company will not receive or otherwise be
entitled to the expected regular quarterly cash
dividend of $.46875 per Depositary Share, with
a record date of March 19, 1995, to be paid
April 3, 1995, by the Company for the first
quarter of 1995, and will also not receive any
accrued dividends in respect thereof. See
Section 9.

Brokerage Commissions.........
Not payable by shareholders.

Stock Transfer Tax............ None, except as provided in Instruction 6 of
the Letter of Transmittal.

Payment Date.................. As soon as practicable after the Expiration
Date of the Offer.

Further Information...........
Additional copies of this Offer to Purchase and
the Letter of Transmittal may be obtained by
contacting Georgeson & Company Inc., Wall
Street Plaza, New York, New York 10005 Tel:
(800) 223-2064 (toll free); Banks and Brokers
call collect (212) 440-9800. Questions about
the Offer should be directed to Merrill Lynch &
Co. at (212) 236-4565 or (212) 236-4097 (call
collect).

iii
<PAGE>

To the Holders of Depositary Shares of International Business Machines
Corporation:

INTRODUCTION

International Business Machines Corporation, a New York corporation (the
"Company"), is offering to purchase any and all of its outstanding Depositary
Shares (the "Depositary Shares"), representing a one-fourth interest in a share
of Series A 7- 1/2% Preferred Stock, par value $0.01 per share (the "Series A
Preferred Stock"), liquidation preference $100 per share, of the Company, at
$25 per Depositary Share (the "Purchase Price"), net to the seller in cash,
upon the terms and subject to the conditions set forth in this Offer to
Purchase and in the related Letter of Transmittal (which together constitute
the "Offer").

THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF DEPOSITARY SHARES
BEING TENDERED. The Offer is, however, subject to certain other conditions. See
Section 8.

The Depositary Shares are listed and traded on the New York Stock Exchange
(the "NYSE"). On January 9, 1995, the last trading day before the Company
announced the Offer, the closing sales price of the Depositary Shares as
reported on the NYSE Composite Tape was $23.375 per Depositary Share. See
Section 9. SHAREHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE
DEPOSITARY SHARES.

The Offer does not constitute a notice of redemption of the Series A
Preferred Stock underlying the Depositary Shares pursuant to the Company's
Restated Certificate of Incorporation, nor does the Company intend to effect
such a redemption by making the Offer. Shareholders are not under any
obligation to accept the Offer or to remit the Depositary Shares to the Company
pursuant to the Offer. In accordance with the Restated Certificate of
Incorporation and the Deposit Agreement which established the rights of the
holders of Depositary Shares, the shares of Series A Preferred Stock (and the
corresponding Depositary Shares) are not redeemable prior to July 1, 2001. On
and after July 1, 2001, the Company, at its option, may redeem shares of the
Series A Preferred Stock, as a whole or in part, for cash at a redemption price
per share of Series A Preferred Stock of $100 (equivalent to $25 per Depositary
Share), plus accrued and unpaid dividends to the redemption date. The Series A
Preferred Stock does not have preemptive or conversion rights and is not
entitled to any sinking fund or similar fund.

Tendering shareholders will not be obligated to pay brokerage commissions,
solicitation fees or, subject to the Instructions to the Letter of Transmittal,
stock transfer taxes on the purchase of Depositary Shares by the Company. The
Company will pay all charges and expenses of the Depositary, Information Agent
and Dealer Manager incurred in connection with the Offer.

SPECIAL FACTORS

SECTION 1. PURPOSE OF THE OFFER; CERTAIN EFFECTS OF THE OFFER; PLANS OF THE
COMPANY AFTER THE OFFER

The Company is making the Offer because it believes that, given its current
financial condition (including its substantial current cash and cash
equivalents position) and the current market price of the Depositary Shares,
the purchase of the Depositary Shares pursuant to the Offer is economically
attractive to the Company. The Offer will enable the Company to reduce its
dividend requirements and annual administrative expenses in connection with
servicing the accounts of holders of the Depositary Shares. The Company's cash,
cash equivalents and marketable securities position was $10.8 billion at
September 30, 1994. Cash will be reduced by approximately $1.14 billion as a
result of the consummation of the Offer if all 44,580,000 Depositary Shares are
tendered. The Board of Directors of the Company has authorized the Offer by a
unanimous vote.
<PAGE>

The Company believes the Offer is fair to holders of Depositary Shares. In
particular, the Offer gives holders of Depositary Shares the opportunity to
sell their Depositary Shares at a 6.95% premium over the closing sales price of
the Depositary Shares on January 9, 1995. The Offer will also provide
shareholders who are considering a sale of all or a portion of the Depositary
Shares the opportunity to sell those Depositary Shares for cash without the
usual transaction costs associated with open-market sales.

Neither the Company nor the Board of Directors of the Company received any
report, opinion (other than any opinion of counsel it may have received) or
appraisal which is materially related to the Offer, including, but not limited
to, any such report, opinion or appraisal relating to the consideration or the
fairness of the consideration to be offered to the holders of the Depositary
Shares or the fairness of such transaction to the Company. A majority of the
directors who are not employees of the Company have not retained an
unaffiliated representative to act solely on behalf of unaffiliated
shareholders for the purposes of negotiating the terms of the transaction.

Following the consummation of the Offer, the business and operations of the
Company will be continued by the Company substantially as they are currently
being conducted. Except as disclosed in this Offer to Purchase, the Company has
no present plans or proposals that would result in (i) the acquisition by any
person of additional securities of the Company, or the disposition of
securities of the Company, (ii) an extraordinary corporate transaction, such as
a merger, reorganization, liquidation or sale or transfer of a material amount
of assets, involving the Company or any of its subsidiaries, (iii) any change
in the present Board of Directors of the Company or management of the Company,
including, but not limited to, a plan or proposal to change the number or term
of the directors, to fill any existing vacancy on the Board of Directors or to
change any material term of the employment contract of any executive officer,
except in each case in connection with the Company's 1995 Annual Meeting of
shareholders to be held in April 1995, (iv) any material change in the present
dividend rate or policy or indebtedness or capitalization of the Company, (v)
any other material change in the Company's corporate structure or business or
(vi) any changes in the Company's charter, bylaws or instruments corresponding
thereto or any other actions which may impede the acquisition or control of the
Company by any person.

Following the expiration of the Offer, the Company may, in its sole
discretion, determine to purchase any remaining Depositary Shares through
privately negotiated transactions, open market purchases or another tender
offer or otherwise, on such terms and at such prices as the Company may
determine from time to time, the terms of which purchases or offers could
differ from those of the Offer, except that the Company will not make any such
purchases of Depositary Shares until the expiration of ten business days after
the termination of the Offer. Any possible future purchases of Depositary
Shares by the Company will depend on many factors, including the market price
of the Depositary Shares, the Company's business and financial position,
alternative investment opportunities available to the Company, the results of
the Offer and general economic and market conditions.

The purchase of Depositary Shares pursuant to the Offer will reduce the
number of holders of Depositary Shares and the number of Depositary Shares that
might otherwise trade publicly, and, depending upon the number of Depositary
Shares so purchased, could adversely affect the liquidity and market value of
the remaining Depositary Shares held by the public.

Depending upon the number of Depositary Shares purchased pursuant to the
Offer, the Depositary Shares may no longer meet the requirements of the NYSE
for continued listing. As of January 9, 1995, there were 44,580,000 issued and
outstanding Depositary Shares. According to the NYSE's published guidelines,
the NYSE would consider delisting the Depositary Shares if, among other things,
the number of publicly held Depositary Shares should fall below 100,000 or the
aggregate market value of publicly held Depositary Shares should fall below
$2,000,000. If, as a result of the purchase of Depositary Shares pursuant to
the Offer or otherwise, the Depositary Shares no longer meet the requirements
of the NYSE for continued listing and the listing of the Depositary Shares is
discontinued, the market for the Depositary Shares could be adversely affected.

2
<PAGE>

In the event of the delisting of the Depositary Shares by the NYSE, it is
possible that the Depositary Shares would continue to trade on another
securities exchange or in the over-the-counter market and that price quotations
would be reported by such exchange, by the NASD through the National
Association of Securities Dealers Automated Quotation System ("NASDAQ") or by
other sources. The extent of the public market for the Depositary Shares and
the availability of such quotations would, however, depend upon such factors as
the number of Shareholders remaining at such time, the interest in maintaining
a market in the Depositary Shares on the part of securities firms, the possible
termination of registration under the Securities Exchange Act of 1934 (the
"Exchange Act") as described below, and other factors.

The Depositary Shares are presently "margin securities" under the regulations
of the Board of Governors of the Federal Reserve System, which has the effect,
among other things, of allowing brokers to extend credit on the collateral of
such securities. If the Depositary Shares remain listed on the NYSE, they will
continue to be "margin securities." If the Depositary Shares were delisted,
depending upon factors similar to those described above, they might no longer
constitute "margin securities" for purposes of the margin regulations of the
Board of Governors of the Federal Reserve System, and, therefore, could no
longer be used as collateral for loans made by brokers.

The Depositary Shares are currently registered under the Exchange Act.
Registration of the Depositary Shares under the Exchange Act may be terminated
upon application of the Company to the Securities and Exchange Commission (the
"Commission") if the Depositary Shares are neither held by 300 or more holders
of record nor listed on a national securities exchange. Termination of
registration of the Depositary Shares under the Exchange Act would
substantially reduce the information required to be furnished by the Company to
holders of the Depositary Shares (although the Company would, among other
things, remain subject to the reporting obligations under the Exchange Act as a
result of other of its outstanding securities) and would make certain
provisions of the Exchange Act, such as the requirements of Rule 13e-3
thereunder with respect to "going private" transactions, no longer applicable
in respect of the Depositary Shares. If registration of the Depositary Shares
under the Exchange Act were terminated, the Depositary Shares would no longer
be "margin securities" or be eligible for NASDAQ reporting.

All Depositary Shares purchased by the Company pursuant to the Offer will be
exchanged by the Company for the related Series A Preferred Stock which will in
turn be retired, cancelled and thereafter returned to the status of authorized
but unissued shares of the Company's preferred stock. Any share of Series A
Preferred Stock (and the corresponding Depositary Shares) remaining outstanding
after the Offer will continue to be redeemable at the option of the Company on
and after July 1, 2001, as described above under "Introduction". Upon
liquidation or dissolution of the Company, holders of the Series A Preferred
Stock are entitled to receive a liquidation preference of $100 per share of
Series A Preferred Stock ($25 per Depositary Share), plus all accrued and
unpaid dividends thereon to the date of payment, prior to the payment of any
amounts to the holders of the Company's common stock.

THE COMPANY, ITS BOARD OF DIRECTORS AND ITS EXECUTIVE OFFICERS MAKE NO
RECOMMENDATION AS TO WHETHER ANY SHAREHOLDER SHOULD TENDER ANY OR ALL OF SUCH
SHAREHOLDER'S DEPOSITARY SHARES PURSUANT TO THE OFFER. EACH SHAREHOLDER MUST
MAKE SUCH SHAREHOLDER'S OWN DECISION WHETHER TO TENDER DEPOSITARY SHARES AND,
IF SO, HOW MANY DEPOSITARY SHARES TO TENDER.

SECTION 2. CERTAIN FEDERAL INCOME TAX CONSEQUENCES

Sales of Depositary Shares by shareholders pursuant to the Offer will be
taxable transactions for Federal income tax purposes and may also be taxable
transactions under applicable state, local, foreign and other tax laws. The
Federal income tax consequences to a shareholder may vary depending upon the
shareholder's particular facts and circumstances.

3
<PAGE>

Under Section 302 of the Internal Revenue Code of 1986, as amended (the
"Code"), a sale of Depositary Shares pursuant to the Offer will, as a general
rule, be treated as a sale or exchange if the receipt of cash upon such sale
(a) results in a "complete termination" of the shareholder's interest in the
Company or (b) is "not essentially equivalent to a dividend" with respect to
the shareholder. If either of these tests is satisfied, a tendering shareholder
will recognize gain or loss equal to the difference between the amount of cash
received by the shareholder pursuant to the Offer and the shareholder's tax
basis in the Depositary Shares sold pursuant to the Offer. Recognized gain or
loss will be capital gain or loss, assuming the Depositary Shares are held as
capital assets, which will be long-term capital gain or loss if the Depositary
Shares had been held for more than one year.

In determining whether either of the tests under Section 302 of the Code is
satisfied, shareholders must take into account not only the Depositary Shares
they actually own, but also any common shares or Depositary Shares they are
deemed to own pursuant to the constructive ownership rules of Section 318 of
the Code. Pursuant to those constructive ownership rules, a shareholder is
deemed to own the common shares or Depositary Shares actually owned, and in
some cases constructively owned, by certain related individuals or entities,
and any common shares or Depositary Shares that the shareholder has the right
to acquire by exercise of an option or by conversion or exchange of a security.

The sale of Depositary Shares pursuant to the Offer will result in a
"complete termination" of a shareholder's interest in the Company if at the
conclusion of the Offer either (a) the shareholder actually and constructively
owns no common shares or Depositary Shares or (b) the shareholder actually owns
no common shares or Depositary Shares and the shareholder is eligible to waive
and does effectively waive attribution of all common shares or Depositary
Shares constructively owned by the shareholder in accordance with Section
302(c) of the Code.

Even if the sale of Depositary Shares pursuant to the Offer fails to satisfy
the "complete termination" test, such shareholder may nevertheless satisfy the
"not essentially equivalent to a dividend" test, if the shareholder's sale of
Depositary Shares pursuant to the Offer results in a "meaningful reduction" in
the shareholder's proportionate interest in the Company. Whether the receipt of
cash by a shareholder results in a "meaningful reduction" will depend upon the
individual shareholder's facts and circumstances. However, if a shareholder
actually or constructively owns no common shares, it appears that the sale of
any Depositary Shares pursuant to the Offer will result in a "meaningful
reduction". It also appears that the sale of any Depositary Shares in the Offer
by a shareholder who also owns a small percentage of common shares
(substantially less than 1%, based on an Internal Revenue Service published
ruling) and who exercises no control over corporate affairs will result in a
"meaningful reduction". Shareholders expecting to rely upon the "not
essentially equivalent to a dividend" test should consult with their tax
advisors as to its application in their particular situations.

It may be possible for a tendering shareholder to satisfy one of the above
tests by contemporaneously selling or otherwise disposing of all or some of the
common shares or Depositary Shares that are actually or constructively owned by
such shareholder but which are not purchased pursuant to the Offer.
Correspondingly, a tendering shareholder may not be able to satisfy one of the
above tests because of contemporaneous acquisitions of common shares or
Depositary Shares by such shareholder or a related party whose common shares or
Depositary Shares would be attributed to such shareholder. Shareholders should
consult their tax advisors regarding the tax consequences of such sales or
acquisitions in their particular circumstances.

If neither of the tests under Section 302 is satisfied and if, as is
anticipated, the Company has sufficient earnings and profits, the tendering
shareholder will be treated as having received a dividend includible in gross
income in an amount equal to the entire amount of cash received by the
shareholder pursuant to the Offer (without regard to gain or loss, if any). In
such case, the tendering shareholder's tax basis in the Depositary Shares to be
purchased pursuant to the Offer will be added to such shareholder's tax basis
in the Depositary Shares and the common shares retained by such shareholder
(or, in the case such shareholder does not retain any common shares or
Depositary Shares, the tax basis in the Depositary Shares will be added to the
related person's tax basis in the Depositary Shares and the common shares that
are constructively owned by such shareholder).

4
<PAGE>

In the case of a corporate shareholder, if the cash paid is treated as a
dividend, the dividend income may be eligible for the 70% dividends-received
deduction. The dividends-received deduction is subject to certain limitations,
and may not be available if the corporate shareholder does not satisfy certain
holding period requirements with respect to the Depositary Shares and common
shares or if the Depositary Shares and common shares are treated as "debt
financed portfolio stock". Generally, if a dividends-received deduction is
available, it is expected that the dividend will be treated as an
"extraordinary dividend" under Section 1059(a) of the Code, in which case such
corporate shareholder's tax basis in Depositary Shares and common shares
retained by such shareholder would be reduced, but not below zero, by the
amount of the nontaxed portion of the dividend. Any amount of the nontaxed
portion of the dividend in excess of the shareholder's basis will generally be
subject to tax upon sale or disposition of those Depositary Shares or common
shares, as the case may be. Corporate shareholders are urged to consult their
tax advisors as to the effect of Section 1059 of the Code on their tax basis in
Depositary Shares.

In the case of any foreign shareholder, the Depositary will withhold United
States federal income tax at a rate of 30% from gross proceeds paid pursuant to
the Offer to the foreign shareholder or his agent, unless the Depositary
determines that a reduced rate of withholding is applicable pursuant to a tax
treaty or that an exemption from withholding is applicable because such gross
proceeds are effectively connected to the conduct of a trade or business by the
foreign shareholder within the United States. For this purpose, a foreign
shareholder is any shareholder that is not (i) a citizen or resident of the
United States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States, or (iii) any estate or
trust the income of which is subject to the United States federal income
taxation regardless of its source. Without definite knowledge to the contrary,
the Depositary will determine whether a shareholder is a foreign shareholder by
reference to the shareholder's address. A foreign shareholder may be eligible
to file for a refund of such tax or a portion of such tax if such shareholder
(i) meets the "complete termination" or "not essentially equivalent to a
dividend" tests described above, (ii) is entitled to a reduced rate of
withholding pursuant to a treaty and the Depositary withheld at a higher rate,
or (iii) is otherwise able to establish that no tax or a reduced portion of tax
was due.

THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY. EACH SHAREHOLDER IS URGED TO CONSULT SUCH SHAREHOLDER'S OWN
TAX ADVISOR TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO SUCH SHAREHOLDER
(INCLUDING THE APPLICABILITY AND EFFECT OF THE CONSTRUCTIVE OWNERSHIP RULES AND
STATE, LOCAL AND FOREIGN TAX LAWS) OF THE SALE OF DEPOSITARY SHARES PURSUANT TO
THE OFFER.

SECTION 3. CERTAIN LEGAL MATTERS; REGULATORY AND FOREIGN APPROVALS; NO
APPRAISAL RIGHTS

The Company is not aware of any license or regulatory permit that appears to
be material to its business that might be adversely affected by its acquisition
of Depositary Shares as contemplated in the Offer or of any approval or other
action by any government or governmental, administrative or regulatory
authority or agency, domestic or foreign, that would be required for the
Company's acquisition or ownership of Depositary Shares pursuant to the Offer.
Should any such approval or other action be required, the Company currently
contemplates that it will seek such approval or other action. The Company
cannot predict whether it may determine that it is required to delay the
acceptance for payment of, or payment for, Depositary Shares tendered pursuant
to the Offer pending the outcome of any such matter. There can be no assurance
that any such approval or other action, if needed, would be obtained or would
be obtained without substantial conditions or that the failure to obtain any
such approval or other action might not result in adverse consequences to the
Company's business. The Company intends to make all required filings under the
Exchange Act. The Company's obligation under the Offer to accept for payment,
or make payment for, Depositary Shares is subject to certain conditions. See
Section 8.

There is no shareholder vote required in connection with the Offer.

No appraisal rights are available to holders of Depositary Shares in
connection with the Offer.

5
<PAGE>

THE OFFER

SECTION 4. EXPIRATION DATE; EXTENSION OF THE OFFER

Upon the terms and subject to the conditions of the Offer, the Company will
accept for payment (and thereby purchase) any and all Depositary Shares as are
properly tendered on or before the Expiration Date (and not withdrawn in
accordance with Section 6) at the Purchase Price. The term "Expiration Date"
means 12:00 midnight, Eastern Standard Time, on Wednesday, February 8, 1995,
unless and until the Company shall have extended the period of time during
which the Offer is open, in which event the term "Expiration Date" shall refer
to the latest time and date at which the Offer, as so extended by the Company,
shall expire. See Section 13 for a description of the Company's right to extend
the time during which the Offer is open and to delay, terminate or amend the
Offer. See also Section 8.

The Company expressly reserves the right, in its sole discretion, at any time
or from time to time, to extend the period of time during which the Offer is
open by giving oral or written notice of such extension to the Depositary and
making a public announcement thereof. See Section 13. There can be no
assurance, however, that the Company will exercise its right to extend the
Offer.

If (a) the Company (i) increases or decreases the price to be paid for
Depositary Shares or (ii) decreases the number of Depositary Shares being
sought and (b) the Offer is scheduled to expire at any time earlier than the
tenth business day from and including the date that notice of such increase or
decrease is first published, sent or given in the manner specified in Section
13, the Offer will be extended until the expiration of such ten business day
period. For purposes of the Offer, "business day" means any day other than a
Saturday, Sunday or Federal holiday and consists of the time period from 12:01
a.m. through 12:00 midnight, Eastern Standard Time.

All Depositary Shares purchased pursuant to the Offer will be purchased at
the Purchase Price, net to the seller in cash. All Depositary Shares not
purchased pursuant to the Offer, including Depositary Shares tendered and
withdrawn, will be returned to the tendering shareholders at the Company's
expense as promptly as practicable.

SECTION 5. PROCEDURE FOR TENDERING DEPOSITARY SHARES

PROPER TENDER OF DEPOSITARY SHARES. For Depositary Shares to be properly
tendered pursuant to the Offer:

(a) the depositary receipts for such Depositary Shares (or confirmation
of receipt of such Depositary Shares pursuant to the procedures for book-
entry transfer set forth below), together with a properly completed and
duly executed Letter of Transmittal (or a facsimile thereof) with any
required signature guarantees (or in the case of book-entry transfer, an
Agent's Message (as defined below)), and any other documents required by
the Letter of Transmittal, must be received before the Expiration Date by
the Depositary at one of its addresses set forth on the back cover of this
Offer to Purchase; or

(b) the tendering shareholder must comply with the guaranteed delivery
procedure set forth below.

A tender of Depositary Shares made pursuant to any method of delivery set
forth herein will constitute a binding agreement between the tendering
shareholder and the Company upon the terms and subject to the conditions of the
Offer.

SIGNATURE GUARANTEES AND METHOD OF DELIVERY. No signature guarantee is
required on the Letter of Transmittal if the Letter of Transmittal is signed by
the registered owner of the Depositary Shares (which term, for purposes of this
Section, includes any participant in The Depository Trust Company, the Midwest
Securities Trust Company or the Philadelphia Depository Trust Company
(collectively, the "Book-Entry Transfer Facilities") whose name appears on a
security position listing as the owner of the Depositary Shares) tendered
therewith, and payment and delivery are to be made directly to such registered
owner at such

6
<PAGE>

owner's address shown on the records of the Company, or if Depositary Shares
are tendered for the account of a bank, broker, dealer, credit union, savings
association or other entity that is a member in good standing of a recognized
Medallion Program approved by The Securities Transfer Association Inc. (each
such entity being hereinafter referred to as an "Eligible Institution"). In all
other cases, all signatures on the Letter of Transmittal must be guaranteed by
an Eligible Institution. See Instruction 1 of the Letter of Transmittal. If a
depositary receipt representing Depositary Shares is registered in the name of
a person other than the signer of a Letter of Transmittal, or if payment is to
be made, or Depositary Shares not purchased or tendered are to be issued, to a
person other than the registered owner, the depositary receipt must be endorsed
or accompanied by an appropriate stock power, in either case signed exactly as
the name of the registered owner appears on the depositary receipt, with the
signature on the depositary receipt or stock power guaranteed by an Eligible
Institution. In all cases, payment for Depositary Shares tendered and accepted
for payment pursuant to the Offer will be made only after timely receipt by the
Depositary of depositary receipts for such Depositary Shares (or a timely
confirmation of a book-entry transfer of such Depositary Shares into the
Depositary's account at one of the Book-Entry Transfer Facilities), a properly
completed and duly executed Letter of Transmittal (or facsimile thereof), with
any required signature guarantees (or in the case of book-entry transfer, an
Agent's Message) and any other documents required by the Letter of Transmittal.
The method of delivery of all documents, including depositary receipts, the
Letter of Transmittal and any other required documents, is at the election and
risk of the tendering shareholder. If delivery is by mail, registered mail with
return receipt requested, properly insured, is recommended.

FEDERAL BACKUP WITHHOLDING. Unless an exemption applies under the applicable
law and regulations concerning "backup withholding" of Federal income tax, the
Depositary will be required to withhold, and will withhold, 31% of the gross
proceeds otherwise payable to a shareholder or other payee pursuant to the
Offer unless the shareholder or other payee provides such person's tax
identification number (social security number or employer identification
number) and certifies that such number is correct. Each tendering shareholder,
other than a noncorporate foreign shareholder, should complete and sign the
main signature form and the Substitute Form W-9 included as part of the Letter
of Transmittal, so as to provide the information and certification necessary to
avoid backup withholding, unless an applicable exemption exists and is proved
in a manner satisfactory to the Company and the Depositary. Noncorporate
foreign shareholders should generally complete and sign a Form W-8, Certificate
of Foreign Status, a copy of which may be obtained from the Depositary, in
order to avoid backup withholding.

BOOK-ENTRY DELIVERY. The Depositary will establish an account with respect to
the Depositary Shares at each of the Book-Entry Transfer Facilities for
purposes of the Offer within two business days after the date of this Offer to
Purchase. Any financial institution that is a participant in a Book-Entry
Transfer Facility's system may make book-entry delivery of the Depositary
Shares by causing such facility to transfer such Depositary Shares into the
Depositary's account in accordance with such facility's procedure for such
transfer. Even though delivery of Depositary Shares may be effected through
book-entry transfer into the Depositary's account at one of the Book-Entry
Transfer Facilities, a properly completed and duly executed Letter of
Transmittal (or a facsimile thereof), with any required signature guarantees
(or in the case of book-entry transfer, an Agent's Message) and other required
documents, must, in any case, be transmitted to and received by the Depositary
at one of its addresses set forth on the back cover of this Offer to Purchase
prior to the Expiration Date, or the guaranteed delivery procedure set forth
below must be followed. Delivery of the Letter of Transmittal and any other
required documents to one of the Book-Entry Transfer Facilities does not
constitute delivery to the Depositary.

GUARANTEED DELIVERY. If a shareholder desires to tender Depositary Shares
pursuant to the Offer and such shareholder's depositary receipts are not
immediately available (or the procedures for book-entry transfer cannot be
completed on a timely basis) or time will not permit all required documents to
reach the Depositary before the Expiration Date, such Depositary Shares may
nevertheless be tendered provided that all of the following conditions are
satisfied:

(a) such tender is made by or through an Eligible Institution;

7
<PAGE>

(b) the Depositary receives (by hand, mail or facsimile transmission), on
or prior to the Expiration Date, a properly completed and duly executed
Notice of Guaranteed Delivery substantially in the form the Company has
provided with this Offer to Purchase; and

(c) the depositary receipts for all tendered Depositary Shares in proper
form for transfer (or confirmation of book-entry transfer of such
Depositary Shares into the Depositary's account at one of the Book-Entry
Transfer Facilities), together with a properly completed and duly executed
Letter of Transmittal (or a facsimile thereof), with any required signature
guarantees (or in the case of book-entry transfer, an Agent's Message) and
any other documents required by the Letter of Transmittal, are received by
the Depositary within five NYSE trading days after the date of execution of
such Notice of Guaranteed Delivery.

The term "Agent's Message" means a message, transmitted by a Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of
the confirmation of book-entry transfer, which states that such Book-Entry
Transfer Facility has received an express acknowledgement from the
participant in such Book-Entry Transfer Facility tendering the Depositary
Shares, that such participant has received and agrees to be bound by the
terms of the Letter of Transmittal and that the Purchaser may enforce such
agreement against the participant.

DETERMINATIONS OF VALIDITY; REJECTION OF DEPOSITARY SHARES; WAIVER OF
DEFECTS; NO OBLIGATION TO GIVE NOTICE OF DEFECTS. All questions as to the
validity, form, eligibility (including time of receipt) and acceptance for
payment of any tender of Depositary Shares will be determined by the Company,
in its sole discretion, which determination shall be final and binding on all
parties. The Company reserves the absolute right to reject any or all tenders
it determines not to be in proper form or the acceptance for payment of which
may, in the opinion of the Company's counsel, be unlawful. The Company also
reserves the absolute right to waive any of the conditions of the Offer and
any defect or irregularity in the tender of any particular Depositary Shares.
No tender of Depositary Shares will be deemed to be properly made until all
defects or irregularities have been cured or waived. None of the Company, the
Depositary, the Information Agent, the Dealer Manager or any other person is
or will be obligated to give notice of any defects or irregularities in
tenders, and none of them will incur any liability for failure to give any
such notice.

SECTION 6. WITHDRAWAL RIGHTS

Except as otherwise provided in this Section 6, a tender of Depositary
Shares pursuant to the Offer is irrevocable. Depositary Shares tendered
pursuant to the Offer may be withdrawn at any time before the Expiration Date
and, unless theretofore accepted for payment by the Company, may also be
withdrawn after 12:00 midnight, Eastern Standard Time, on March 9, 1995.

For a withdrawal to be effective, the Depositary must timely receive (at one
of its addresses set forth on the back cover of this Offer to Purchase) a
written, telegraphic or facsimile transmission notice of withdrawal. Such
notice of withdrawal must specify the name of the person having tendered the
Depositary Shares to be withdrawn, the number of Depositary Shares to be
withdrawn and the name of the registered owner, if different from that of the
person who tendered such Depositary Shares. If the depositary receipts have
been delivered or otherwise identified to the Depositary, then, prior to the
release of such depositary receipts, the tendering shareholder must also
submit the serial numbers shown on the particular depositary receipts
evidencing the Depositary Shares, and the signature on the notice of
withdrawal must be guaranteed by an Eligible Institution (except in the case
of Depositary Shares tendered by an Eligible Institution). If Depositary
Shares have been delivered pursuant to the procedure for book-entry transfer
set forth in Section 5, the notice of withdrawal must specify the name and the
number of the account at the applicable Book-Entry Transfer Facility to be
credited with the withdrawn Depositary Shares and otherwise comply with the
procedures of such facility.

All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Company, in its sole
discretion, which determination shall be final and binding on all parties.
None of the Company, the Depositary, the Information Agent, the Dealer Manager
or any other person is or will be obligated to give any notice of any defects
or irregularities in any notice of withdrawal, and none of them will incur any
liability for failure to give any such notice. A withdrawal of a tender of
Depositary Shares may not be rescinded, and Depositary Shares properly
withdrawn will thereafter be deemed not validly tendered for purposes of the
Offer. Withdrawn Depositary Shares may, however, be retendered before the
Expiration Date by again following any of the procedures described in Section
5.

8
<PAGE>

SECTION 7. ACCEPTANCE FOR PAYMENT OF DEPOSITARY SHARES AND PAYMENT OF PURCHASE
PRICE

Upon the terms and subject to the conditions of the Offer, promptly after the
Expiration Date, the Company will purchase and pay the Purchase Price for any
and all Depositary Shares (subject to certain matters discussed in Section 4
and Section 13) as are properly tendered and not withdrawn as permitted in
Section 6. For purposes of the Offer, the Company will be deemed to have
accepted for payment (and thereby purchased) Depositary Shares which are
tendered and not withdrawn when, as and if it gives oral or written notice to
the Depositary of its acceptance of such Depositary Shares for payment pursuant
to the Offer.

Payment for Depositary Shares purchased pursuant to the Offer will be made by
depositing the aggregate Purchase Price therefor with the Depositary, which
will act as agent for tendering shareholders for the purpose of receiving
payment from the Company and transmitting payment to the tendering
shareholders. Notwithstanding any other provision hereof, payment for
Depositary Shares accepted for payment pursuant to the Offer will in all cases
be made only after timely receipt by the Depositary of depositary receipts for
such Depositary Shares (or a timely confirmation by a Book-Entry Transfer
Facility of book-entry transfer of such Depositary Shares to the Depositary), a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof) with any required signature guarantees (or, in the case of book-entry
transfer, an Agent's Message) and any other required documents. Under no
circumstances will interest be paid on the Purchase Price of the Depositary
Shares to be paid by the Company, regardless of any delay in making such
payment.

The Company will pay any stock transfer taxes with respect to the transfer
and sale of Depositary Shares to it pursuant to the Offer. If, however, payment
of the Purchase Price is to be made to, or if depositary receipts for
Depositary Shares not tendered or accepted for purchase are to be registered in
the name of, any person other than the registered holder, or if tendered
depositary receipts are registered in the name of any person other than the
person signing the Letter of Transmittal, the amount of any stock transfer
taxes (whether imposed on the registered holder or such person) payable on
account of the transfer to such person will be deducted from the Purchase Price
unless satisfactory evidence of the payment of such taxes or exemption
therefrom is submitted. See Instruction 6 of the Letter of Transmittal.

ANY TENDERING SHAREHOLDER OR OTHER PAYEE WHO FAILS TO COMPLETE FULLY AND SIGN
THE SUBSTITUTE FORM W-9 INCLUDED IN THE LETTER OF TRANSMITTAL (OR, IN THE CASE
OF A FOREIGN INDIVIDUAL, FORM W-8 OBTAINABLE FROM THE DEPOSITARY) MAY BE
SUBJECT TO REQUIRED FEDERAL INCOME TAX WITHHOLDING OF 31% OF THE GROSS PROCEEDS
PAID TO SUCH SHAREHOLDER OR OTHER PAYEE PURSUANT TO THE OFFER. SEE SECTION 5.

SECTION 8. CERTAIN CONDITIONS OF THE OFFER

Notwithstanding any other provision of the Offer, and in addition to (and not
in limitation of) the Company's right to extend or amend the Offer at any time
in its sole discretion, the Company shall not be required to accept for payment
or make payment for any Depositary Shares tendered, and may terminate or amend
the Offer, if before acceptance for payment or payment for any such Depositary
Shares any of the following shall have occurred (or shall have been determined
by the Company to have occurred):

(a) there shall have been threatened, instituted or pending any action or
proceeding by any government or governmental, regulatory or administrative
agency or authority or tribunal or any other person, domestic or foreign,
before any court or governmental, regulatory or administrative authority,
agency or tribunal, domestic or foreign, which (i) challenges the making of
the Offer, the acquisition of Depositary Shares pursuant to the Offer or
otherwise relates in any manner to the Offer; or (ii) in the sole judgment
of the Company, could materially adversely affect the business, condition
(financial or other), income, operations or prospects of the Company and
its subsidiaries, taken as a whole, or otherwise materially impair in any
way the contemplated future conduct of the business of the Company or any
of its subsidiaries or materially impair the Offer's contemplated benefits
to the Company;

9
<PAGE>

(b) there shall have been any action threatened, pending or taken, or
approval withheld, or any statute, rule, regulation, judgment, order or
injunction threatened, proposed, sought, promulgated, enacted, entered,
amended, enforced or deemed to be applicable to the Offer or the Company or
any of its subsidiaries, by any court or any government or governmental,
regulatory or administrative authority, agency or tribunal, domestic or
foreign, which, in the Company's sole judgment, would or might directly or
indirectly (i) make the acceptance for payment of, or payment for,
Depositary Shares illegal or otherwise restrict or prohibit consummation of
the Offer; (ii) delay or restrict the ability of the Company, or render the
Company unable, to accept for payment, or pay for, Depositary Shares; (iii)
materially impair the contemplated benefits of the Offer to the Company; or
(iv) materially adversely affect the business, condition (financial or
other), income, operations or prospects of the Company and its
subsidiaries, taken as a whole, or otherwise materially impair in any way
the contemplated future conduct of the business of the Company or any of
its subsidiaries;

(c) there shall have occurred after January 11, 1995, (i) any general
suspension of trading in, or limitation on prices for, securities on any
United States national securities exchange or in the over-the-counter
market (excluding any coordinated trading halt triggered solely as a result
of a specified decrease in a market index), (ii) the declaration of a
banking moratorium or any suspension of payments in respect of banks in the
United States, (iii) the commencement of a war, armed hostilities or other
international or national crisis directly or indirectly involving the
United States, (iv) any limitation (whether or not mandatory) by any
governmental, regulatory or administrative agency or authority on, or any
event which, in the sole judgment of the Company, might affect, the
extension of credit by banks or other lending institutions in the United
States, (v) any significant decrease in the market price of the Depositary
Shares, (vi) any change in the general political, market, economic or
financial conditions in the United States or abroad that could, in the sole
judgment of the Company, have a material adverse effect on the Company's
business, operations, prospects or the trading in the Depositary Shares,
(vii) in the case of any of the foregoing existing at the time of the
commencement of the Offer, a material acceleration or worsening thereof or
(viii) any decline in either the Dow Jones Industrial Average (3861.35 at
the close of business on January 9, 1995) or the Standard and Poor's Index
of 500 Industrial Companies (460.83 at the close of business on January 9,
1995) by an amount in excess of 15% measured from the close of business on
January 9, 1995;

(d) after January 11, 1995, any tender or exchange offer with respect to
the Depositary Shares (other than the Offer) or any other class of the
Company's equity securities, or any merger, acquisition, business
combination or other similar transaction with or involving the Company or
any subsidiary, shall have been proposed, announced or made by any person
or entity;

(e) after January 11, 1995, any change shall occur or be threatened in
the business, condition (financial or other), income, operations or
prospects of the Company and its subsidiaries taken as a whole, which, in
the sole judgment of the Company, is or may be materially adverse to the
Company; or

(f) (i) any person, entity or "group" (as that term is used in Section
13(d)(3) of the Exchange Act) shall have acquired, or proposed to acquire,
beneficial ownership of more than 5% of the Company's outstanding common
stock (other than a person, entity or group which had publicly disclosed
such ownership in a Schedule 13D or 13G (or an amendment thereto) on file
with the Securities and Exchange Commission prior to January 11, 1995),
(ii) any new group shall have been formed which beneficially owns more than
5% of the Company's outstanding common stock or (iii) any person, entity or
group shall have filed a Notification and Report Form under the Hart-Scott-
Rodino Antitrust Improvement Act of 1976, or made a public announcement
reflecting an intent to acquire the Company or any of its subsidiaries or
any of their respective assets or securities;

and, in the sole judgment of the Company, in any such case and regardless of
the circumstances (including any action or inaction by the Company) giving rise
to such condition, such event makes it inadvisable to proceed with the Offer or
with such acceptance for payment or payment.

10
<PAGE>

The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances (including any action
or inaction by the Company) giving rise to any such condition, and any such
condition may be waived by the Company, in whole or in part, at any time and
from time to time in its sole discretion; provided, however, that the Exchange
Act and the rules and regulations promulgated thereunder require that all
conditions to the Offer, other than those relating to the receipt of certain
necessary governmental approvals, must be satisfied or waived prior to the
Expiration Date. The Company's failure at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any such right; the waiver of
any such right with respect to particular facts and circumstances shall not be
deemed a waiver with respect to any other facts or circumstances; and each such
right shall be deemed an ongoing right which may be asserted at any time and
from time to time. Any determination by the Company concerning the events
described above and any related judgment by the Company regarding the
inadvisability of proceeding with the acceptance for payment or payment for any
tendered Depositary Shares will be final and binding on all parties.

SECTION 9. PRICE RANGE OF THE DEPOSITARY SHARES; DIVIDENDS

The Depositary Shares are listed and traded on the NYSE. The following table
sets forth, for each period shown, the high and low sales prices of the
Depositary Shares as reported on the NYSE Composite Tape and the dividends paid
per Depositary Share. The Depositary Shares were first traded on May 28, 1993.

<TABLE>
<CAPTION>
DEPOSITARY SHARE
PRICE RANGE DIVIDENDS PAID
---------------------- PER DEPOSITARY
HIGH LOW SHARE*
-------- -------- --------------
<S> <C> <C> <C>
1993
2nd Quarter (commencing May 28). 25 3/8 24 1/2 .12500
3rd Quarter..................... 26 1/2 24 1/4 .46875
4th Quarter..................... 26 1/8 23 3/8 .46875
1994
1st Quarter..................... 26 3/8 23 7/8 .46875
2nd Quarter..................... 25 22 11/16 .46875
3rd Quarter..................... 25 5/16 23 .46875
4th Quarter..................... 24 3/8 21 1/8 .46875
1995
1st Quarter (through January 9,
1995).......................... 23 3/8 22 1/4 .46875**
</TABLE>
--------
* Quarterly accrued dividends are paid on the first business day of the
following quarter.
** The Company expects to pay the regular quarterly cash dividend of $.46875
for the first quarter of 1995 on the payment date of April 3, 1995.

On January 9, 1995, the last trading day before the Company announced the
Offer, the closing sales price of the Depositary Shares as reported on the NYSE
Composite Tape was $23.375 per Depositary Share. Shareholders are urged to
obtain a current market quotation for the Depositary Shares. As of January 9,
1995, the Company had issued and outstanding 44,580,000 million Depositary
Shares. As of January 5, 1994, there were approximately 11,624 record holders
of Depositary Shares.

Holders of shares of the Series A Preferred Stock are entitled to receive
dividends at a fixed annual rate of $7.50 per share of Series A Preferred Stock
(equivalent to $1.875 per Depositary Share). Such dividends are cumulative and
are payable, when and as declared by the Board of Directors of the Company out
of funds legally available therefor, quarterly for each of the quarters ending
March, June, September and December of each year, payable in arrears on the
first business day that is not a legal holiday of each succeeding April, July,
October and January, respectively. Each such dividend is payable to holders of
record as they appear in the stock records of the Company at the close of
business on each record date, which is the 15th day prior to the payment date.
There are no contractual or legal restrictions on the Company's present or
future ability to pay such dividends, including under its Restated Certificate
of Incorporation, except those

11
<PAGE>

restrictions imposed by New York law, which provides, as a general matter, that
dividends may not be paid if (i) the corporation is insolvent or after giving
effect to such payment, would thereby be made insolvent or (ii) the net assets
of the corporation remaining after such payment will not at least equal the
amount of its stated capital.

The record date for the expected regular quarterly cash dividend of $.46875
is March 19, 1995 for the first quarter of 1995, and the related payment date
is April 3, 1995. Depositary Shares tendered and purchased by the Company
accordingly will not receive or otherwise be entitled to such regular quarterly
dividend expected to be paid by the Company for the first quarter of 1995, and
will also not receive any accrued dividends in respect thereof.

SECTION 10. CERTAIN INFORMATION CONCERNING THE COMPANY

The Company develops, manufactures and sells advanced information processing
products, including computers and microelectronic technology, software,
networking systems and information technology-related services. The Company
offers value worldwide through its United States, Canada, Europe/Middle
East/Africa, Latin America, and Asia/Pacific business units, by providing
comprehensive and competitive product choices.

SUMMARY HISTORICAL FINANCIAL INFORMATION

Set forth below is certain summary consolidated historical financial
information for the Company and its subsidiaries. The historical financial
information at and for the years ended December 31, 1993, and December 31,
1992, has been summarized from the Company's audited consolidated financial
statements incorporated by reference in the Company's Annual Report on Form 10-
K for the year ended December 31, 1993 (the "1993 10-K"). The historical
financial information at and for the nine months ended September 30, 1994, and
September 30, 1993, has been summarized from the Company's unaudited
consolidated financial statements as set forth in the Company's Quarterly
Report on Form 10-Q for the nine months ended September 30, 1994 (the "1994
Third Quarter 10-Q"). The following summary historical financial information
should be read in conjunction with, and is qualified in its entirety by
reference to, such audited and unaudited consolidated financial statements and
their related notes. See "Additional Information" below.

INTERNATIONAL BUSINESS MACHINES CORPORATION AND SUBSIDIARY COMPANIES

SUMMARY HISTORICAL FINANCIAL INFORMATION
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(DOLLARS IN MILLIONS)

<TABLE>
<CAPTION>
AT SEPTEMBER 30, AT DECEMBER 31,
---------------- ---------------
1994 1993 1992
---------------- ------- -------
(UNAUDITED)
<S> <C> <C> <C>
Cash.......................................... $ 1,012 $ 873 $ 1,090
Cash equivalents.............................. 8,310 4,988 3,356
Marketable securities, at cost, which
approximates market.......................... 1,482 1,272 1,203
Other current assets.......................... 29,346 32,069 34,043
Total current assets.......................... 40,150 39,202 39,692
Plant, rental machines and other property--
net.......................................... 16,338 17,521 21,595
Total investments and other assets............ 22,580 24,390 25,418
Total assets.................................. 79,068 81,113 86,705
Total current liabilities..................... 28,280 33,150 36,737
Long-term debt................................ 14,077 15,245 12,853
Other liabilities............................. 12,291 11,177 7,461
Deferred income taxes......................... 1,957 1,803 2,030
Total liabilities............................. 56,605 61,375 59,081
Total Stockholders' equity.................... 22,463 19,738 27,624
Total liabilities and Stockholders' equity.... 79,068 81,113 86,705
</TABLE>

12
<PAGE>

INTERNATIONAL BUSINESS MACHINES CORPORATION AND SUBSIDIARY COMPANIES

SUMMARY HISTORICAL FINANCIAL INFORMATION CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS (DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS AND RATIOS)

<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEARS ENDED
SEPTEMBER 30, DECEMBER 31,
--------------- ----------------
1994 1993 1993 1992
------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C>
Total revenue............................... $44,156 $43,320 $62,716 $64,523
Costs and expenses.......................... 41,172 52,453 71,353 72,762
------- ------- ------- -------
Operating income (loss)..................... 2,984 (9,133) (8,637) (8,239)
Other income, principally interest.......... 1,108 646 1,113 573
Interest expense............................ 1,010 973 1,273 1,360
------- ------- ------- -------
Earnings (loss) before income taxes......... 3,082 (9,460) (8,797) (9,026)
Provision (benefit) for income taxes........ 1,292 (1,091) (810) (2,161)
------- ------- ------- -------
Net earnings (loss) before changes in ac-
counting principles........................ 1,790 (8,369) (7,987) (6,865)
Effect of changes in accounting principles
(1)........................................ -- (114) (114) 1,900
------- ------- ------- -------
Net earnings (loss)......................... 1,790 (8,483) (8,101) (4,965)
Preferred stock dividends................... 63 27 47 --
------- ------- ------- -------
Net earnings (loss) applicable to common
shareholders (2)........................... $ 1,727 $(8,510) $(8,148) $(4,965)
======= ======= ======= =======
Net earnings (loss) per common share before
changes in accounting principles........... $ 2.96 $(14.70) $(14.02) $(12.03)
Net earnings (loss) per common share (3).... $ 2.96 $(14.90) $(14.22) $ (8.70)
Average number of common shares outstanding
(in millions).............................. 584.1 571.1 573.2 570.9
Ratio of earnings to fixed charges (4)...... 2.5 (5) (5) (5)
Ratio of earnings to combined fixed charges
and preferred stock dividends (4).......... 2.4 (5) (5) (5)
</TABLE>
--------
(1) In the fourth quarter of 1993, the Company implemented Statement of
Financial Accounting Standards 112, "Employers' Accounting for Postemployment
Benefits," effective as of January 1, 1993. The cumulative effect of adopting
this standard resulted in a one-time charge of $114 million (net of
approximately $61 million of income tax benefits), which was recorded against
first quarter results. In 1992, the Company implemented Statement of
Financial Accounting Standards 109, "Accounting for Income Taxes." The
cumulative effect of this accounting change, which resulted in recognizing
previously unrecognized tax benefits for years prior to January 1, 1992,
increased net earnings for 1992 by $1,900 million.
(2) Net (loss) earnings for the year ended December 31, 1993, and for the nine
months ended September 30, 1993, reflect a restructuring charge of $8.9
billion before taxes ($8.0 billion after taxes or $14.02 per common share).
Net (loss) earnings for the year ended December 31, 1992 reflect a
restructuring charge of $11.6 billion before taxes ($8.3 billion after taxes
or $14.51 per common share).
(3) Net earnings (loss) per common share was computed by dividing earnings
(loss) after deduction of preferred stock dividends by the average number of
common shares outstanding.
(4) The ratio of earnings to fixed charges has been computed by dividing
earnings before income taxes (which excludes the cumulative and transition
effects of accounting changes) and fixed charges by fixed charges. "Fixed
charges" consist of interest on debt and that portion of rental expense
deemed to be representative of interest. For purposes of calculating the
ratio of earnings to combined fixed charges and preferred stock dividends,
the preferred stock dividend requirements were assumed to be equal to the
pre-tax earnings that would be required to cover such dividend requirements
based on the Company's effective income tax rates for the respective periods.
The Company did not have preferred stock dividend requirements prior to June
7, 1993.
(5) No ratios are shown for these periods as earnings were insufficient to
cover fixed charges and combined fixed charges and preferred stock dividends.
As a result of the net loss incurred for the nine months ended September 30,
1993, earnings were inadequate to cover fixed charges and combined fixed
charges and preferred stock dividends by $9,165 million and $9,195 million,
respectively. As a result of the net loss incurred for the year ended
December 31, 1993, earnings were inadequate to cover fixed charges and
combined fixed charges and preferred stock dividends by $8,478 million and
$8,530 million, respectively. As a result of the net loss incurred for the
year ended December 31, 1992, earnings were inadequate to cover fixed charges
by $8,962 million.

13
<PAGE>

ADDITIONAL INFORMATION. The Company is subject to the informational
requirements of the Exchange Act and in accordance therewith files periodic
reports, proxy statements and other information with the Commission. The
Company is required to disclose in such proxy statements certain information,
as of particular dates, concerning the Company's directors and officers, their
remuneration, stock options granted to them, the principal holders of the
Company's securities and any material interest of such persons in transactions
with the Company. The Company has also filed a Transaction Statement on
Schedule 13E-3 and an Issuer Tender Offer Statement on Schedule 13E-4 with the
Commission which includes certain additional information relating to the Offer.

Such material can be inspected and copied at the public reference facilities
of the Commission, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at its regional offices at Seven World Trade Center, 13th Floor, New York,
New York 10048, and Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. The Company's Schedule 13E-3 and Schedule 13E-4
will not be available at the Commission's regional offices. Reports, proxy
materials and other information about the Company are also available at the
offices of the New York Stock Exchange, 20 Broad Street, New York, New York
10005, and the Pacific Stock Exchange, 301 Pine Street, San Francisco,
California 94104. Copies may also be obtained by mail from the Commission's
Public Reference Branch, 450 Fifth Street, N.W., Washington, D.C. 20549.

SECTION 11. SOURCE AND AMOUNT OF FUNDS

Assuming that the Company purchases all outstanding Depositary Shares
pursuant to the Offer, the total amount required by the Company to purchase
such Depositary Shares and pay related fees and expenses will be approximately
$1.14 billion. See Section 14. The Company anticipates that it will fund the
purchase of Depositary Shares pursuant to the Offer and the payment of related
fees and expenses from available cash of the Company.

SECTION 12. TRANSACTIONS AND ARRANGEMENTS CONCERNING THE DEPOSITARY SHARES

The Depositary Shares were issued by the Company in an underwritten public
offering for cash which was registered under the Securities Act of 1933. The
offering, which commenced on May 28, 1993, was for 45,000,000 Depositary Shares
(including 1,000,000 Depositary Shares purchased upon exercise of the over-
allotment option) at a price to the public of $25 per Depositary Share, and the
Company received aggregate proceeds of $1,090,982,778.75 after deducting the
aggregate underwriting discount of $34,017,221.25, but before expenses.

Based upon the Company's records and upon information provided to the Company
by its directors, executive officers and affiliates, neither the Company nor
any of its subsidiaries nor, to the best of the Company's knowledge, any of the
directors or executive officers of the Company listed on Schedule I to this
Offer to Purchase or any of its subsidiaries, nor any associates of any of the
foregoing, has effected any transactions in the Depositary Shares since the
issuance of the Depositary Shares in May 28, 1993, except for the Company's
purchase of 420,000 Depositary Shares, between October 20, 1994 and October 26,
1994, at prices ranging from $22.82 to $23.25 per Depositary Share or an
average price of $22.99.

Except as set forth in this Offer to Purchase, neither the Company nor, to
the best of the Company's knowledge, any of its affiliates, directors or
executive officers listed on Schedule I to this Offer to Purchase, or any of
the executive officers or directors of its subsidiaries, is a party to any
contract, arrangement, understanding or relationship with any other person
relating, directly or indirectly, to the Offer with respect to any securities
of the Company (including, but not limited to, any contract, arrangement,
understanding or relationship concerning the transfer of the voting of any such
securities, joint ventures, loan or option arrangements, puts or calls,
guarantees of loans, guarantees against loss or the giving or withholding or
proxies, consents or authorizations). As of January 11, 1995, neither the
Company or any subsidiary or affiliate nor, to the Company's knowledge, any of
their respective directors or executive officers, owns any of the Depositary
Shares.

14
<PAGE>

SECTION 13. EXTENSION OF THE TENDER PERIOD; TERMINATION; AMENDMENTS

The Company expressly reserves the right, in its sole discretion, at any time
or from time to time and regardless of whether or not any of the events set
forth in Section 8 shall have occurred or shall be deemed by the Company to
have occurred, to extend the period of time during which the Offer is open and
thereby delay acceptance for payment of, or payment for, any Depositary Shares
by giving oral or written notice of such extension to the Depositary and making
a public announcement thereof. During any such extension, all Depositary Shares
previously tendered and not purchased or withdrawn will remain subject to the
Offer, except to the extent that such Depositary Shares may be withdrawn as set
forth in Section 6. The Company also expressly reserves the right, in its sole
discretion, to terminate the Offer, not accept for payment and not make payment
for any Depositary Shares not theretofore accepted for payment or paid for upon
the occurrence of any of the conditions specified in Section 8 by giving oral
or written notice of such termination to the Depositary and making a public
announcement thereof. Subject to compliance with applicable law, the Company
further reserves the right, in its sole discretion, and regardless of whether
or not any of the events set forth in Section 8 shall have occurred or shall be
deemed by the Company to have occurred, to amend the Offer in any respect
(including, without limitation, by decreasing or increasing the consideration
offered in the Offer to owners of Depositary Shares or by decreasing the number
of Depositary Shares being sought in the Offer). Amendments to the Offer may be
made at any time or from time to time effected by public announcement thereof,
such announcement, in the case of an extension, to be issued no later than 9:00
a.m., Eastern Standard Time, on the next business day after the previously
scheduled Expiration Date. Any public announcement made pursuant to the Offer
will be disseminated promptly to shareholders in a manner reasonably designed
to inform shareholders of such change. Without limiting the manner in which the
Company may choose to make a public announcement, except as required by
applicable law, the Company shall have no obligation to publish, advertise or
otherwise communicate any such public announcement other than by making a
release to the Dow Jones News Service.

If the Company materially changes the terms of the Offer or the information
concerning the Offer or if it waives a material condition of the Offer, the
Company will extend the Offer to the extent required by Rules 13e-4(d)(2) and
13e-4(e)(2) promulgated under the Exchange Act. These rules provide that the
minimum period during which an offer must remain open following material
changes in the terms of the offer or information concerning the offer (other
than a change in price or a change in percentage of securities sought) will
depend on the facts and circumstances, including the relative materiality of
such terms or information. The Commission has stated that, as a general rule,
it is of the view that an offer should remain open for a minimum of five
business days from the date that notice of such a material change is first
published, sent or given. If (a) the Company (i) increases or decreases the
price to be paid for Depositary Shares or (ii) decreases the number of
Depositary Shares being sought and (b) the Offer is scheduled to expire at any
time earlier than the expiration of a period ending on the tenth business day
from and including the date that notice of such increase or decrease is first
published, sent or given, the Offer will be extended until the expiration of
such period of ten business days.

SECTION 14. FEES AND EXPENSES

The Company has retained First Chicago Trust Company of New York as
Depositary, Georgeson & Company Inc. as Information Agent and Merrill Lynch &
Co. as Dealer Manager in connection with the Offer. The Information Agent and
Dealer Manager will assist shareholders who request assistance in connection
with the Offer and may request brokers, dealers and other nominee shareholders
to forward materials relating to the Offer to beneficial owners. The Company
has agreed to pay the Dealer Manager, upon acceptance for payment of Depositary
Shares pursuant to the Offer, a fee of $0.125 per Depositary Share purchased in
the Offer. The Dealer Manager will also be reimbursed by the Company for its
reasonable out-of-pocket expenses, including attorneys' fees. The Dealer
Manager has rendered, is currently rendering and is expected to continue to
render various investment banking and other advisory services to the Company.
It has received, and will continue to receive, customary compensation from the
Company for such services. The Depositary and Information Agent will receive
reasonable and customary compensation for their services in

15
<PAGE>

connection with the Offer and will also be reimbursed for reasonable out-of-
pocket expenses, including attorneys' fees. The Company has agreed to indemnify
the Depositary, Information Agent and Dealer Manager against certain
liabilities in connection with the Offer, including certain liabilities under
the Federal securities laws. Neither the Depositary nor the Information Agent
has been retained to make solicitations, and none of the Depositary,
Information Agent or Dealer Manager has been retained to make recommendations,
in their respective roles as Depositary, Information Agent and Dealer Manager.

The Company will pay to a Soliciting Dealer (as defined herein) a
solicitation fee of $0.375 per Depositary Share, or for transactions equal to
or exceeding 20,000 Depositary Shares or $500,000, $0.250 per Depositary Share,
for any Depositary Shares tendered, accepted for payment and paid for pursuant
to the Offer. For purposes of this Section 14, "Soliciting Dealer" includes (i)
any broker or dealer in securities, including the Dealer Manager in its
capacity as a broker or dealer, who is a member of any national securities
exchange or of the National Association of Securities Dealers, Inc. (the
"NASD"), (ii) any foreign broker or dealer not eligible for membership in the
NASD who agrees to conform to the NASD's Rules of Fair Practice in soliciting
tenders outside the United States to the same extent as though it were an NASD
member, or (iii) any bank or trust company, any one of whom has solicited and
obtained a tender pursuant to the Offer. No such fee shall be payable to a
Soliciting Dealer in respect of Depositary Shares registered in the name of
such Soliciting Dealer unless (i) such Depositary Shares are held by such
Soliciting Dealer as nominee and such Depositary Shares are being tendered for
the benefit of one or more beneficial owners identified on the Letter of
Transmittal or on the Notice of Solicited Tenders (included in the materials
provided to brokers and dealers) or (ii) such Depositary Shares are being
tendered for the benefit of the Soliciting Dealer and such Soliciting Dealer
certifies on the Letter of Transmittal or on the Notice of Solicited Tenders
that such Depositary Shares were acquired by the Soliciting Dealer (x) after
the announcement of the Offer, (y) at a price not in excess of the Purchase
Price and (z) from a holder solicited by the Soliciting Dealer. For purposes of
clause (z), "solicited" shall mean direct contact (other than the mailing of
the tender offer materials) with the holder relating to the tender of
Depositary Shares beneficially owned by the holder that resulted in the
purchase by the Soliciting Dealer of such Depositary Shares. No such fee shall
be payable to a Soliciting Dealer with respect to the tender of Depositary
Shares by a holder unless the Letter of Transmittal accompanying such tender
designates such Soliciting Dealer as such in the box captioned "Solicited
Tenders" or the Notice of Solicited Tenders accompanying such tender designates
such Soliciting Dealer. No such fee shall be payable to the Soliciting Dealer
with respect to the tender of Depositary Shares by the holder of record, for
the benefit of the beneficial owner, unless the beneficial owner has designated
such Soliciting Dealer. No such fee shall be payable to a Soliciting Dealer
unless the Soliciting Dealer returns a Notice of Solicited Tenders to the
Depositary within 5 business days after the Expiration Date. No such fee shall
be payable to a Soliciting Dealer if such Soliciting Dealer is required for any
reason to transfer the amount of such fee to a depositing holder (other than
itself). No broker, dealer, bank, trust company or fiduciary shall be deemed to
be the agent of the Company, the Depositary, the Information Agent or the
Dealer Manager for purposes of the Offer.

The Company will pay (or cause to be paid) any stock transfer taxes on its
purchase of Depositary Shares, except as otherwise provided in Instruction 6 of
the Letter of Transmittal.

Assuming all outstanding Depositary Shares are tendered pursuant to the
Offer, it is estimated that the expenses incurred by the Company in connection
with the Offer will be approximately as set forth below. The Company will be
responsible for paying all such expenses.

<TABLE>
<S> <C>
Dealer Manager fees.......................................... $ 5,572,000
Solicitation fees............................................ 14,300,000
Printing and mailing fees.................................... 300,000
Filing fees.................................................. 222,900
Legal, accounting and miscellaneous.......................... 400,000
-----------
Total...................................................... $20,794,900
===========
</TABLE>

16
<PAGE>

SECTION 15. MISCELLANEOUS

The Offer is not being made to, nor will the Company accept tenders from,
owners of Depositary Shares in any jurisdiction in which the Offer or its
acceptance would not be in compliance with the laws of such jurisdiction. The
Company is not aware of any jurisdiction where the making of the Offer or the
tender of Depositary Shares would not be in compliance with applicable law. If
the Company becomes aware of any jurisdiction where the making of the Offer or
the tender of Depositary Shares is not in compliance with any applicable law,
the Company will make a good faith effort to comply with such law. If, after
such good faith effort, the Company cannot comply with such law, the Offer will
not be made to (nor will tenders be accepted from or on behalf of) the holders
of Depositary Shares residing in such jurisdiction. In any jurisdiction in
which the securities, blue sky or other laws require the Offer to be made by a
licensed broker or dealer, the Offer will be deemed to be made on the Company's
behalf by one or more registered brokers or dealers licensed under the laws of
such jurisdiction.

INTERNATIONAL BUSINESS MACHINES CORPORATION

January 11, 1995

17
<PAGE>

SCHEDULE I

DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

The following table sets forth the name, business address and current
principal occupation or employment of the directors and executive officers of
the Company. Unless otherwise indicated, all occupations, offices or positions
of employment listed opposite any individual's name were held by such
individual during the course of the last five years. Unless otherwise
indicated, each individual listed below is a citizen of the United States.

<TABLE>
<CAPTION>
CURRENT PRINCIPAL OCCUPATION OR EMPLOYMENT
NAME AND BUSINESS ADDRESS AND FIVE-YEAR EMPLOYMENT HISTORY
------------------------- ------------------------------------------
<S> <C>
Harold Brown Counselor, Center for Strategic and International
Center for Strategic and Studies; General Partner, Warburg, Pincus & Company.
International Studies Prior to 1993, Chairman, Foreign Policy Institute, The
Suite 400 Johns Hopkins University.
1800 K Street, N.W.
Washington, D.C. 20006
James E. Burke Retired Chairman, Johnson & Johnson; Chairman,
Johnson & Johnson Partnership for a Drug-Free America.
Plaza 2, Suite 200
317 George Street
New Brunswick, NJ 08903-7006
Fritz Gerber Chairman and Chief Executive Officer of Roche Holding
Zurich Insurance Company Ltd.; Executive Chairman of Zurich Insurance Company.
P.O. Box CH-8022 Mr. Gerber is a citizen of the Swiss Confederation.
Zurich, Switzerland
Louis V. Gerstner, Jr. Chairman of the Board and Chief Executive Officer of
International Business the Company since 1993. Prior to 1990, Chairman of the
Machines Corporation Board and Chief Executive Officer of RJR Nabisco
One Old Orchard Road Holdings Corp.
Armonk, NY 10504
Nannerl O. Keohane President and professor of Political Science at Duke
Office of the President University. Prior to July 1, 1993, President of
207 Allen Building Wellesley College.
Box 90001
Duke University
Durham, NC 27708-0001
Charles F. Knight Chairman and Chief Executive Officer of Emerson
Emerson Electric Company Electric Co.
8000 West Florissant Avenue
P.O. Box 4100
St. Louis, MO 63136-8506
Thomas S. Murphy Chairman and Chief Executive Officer of Capital
Capital Cities/ABC, Inc. Cities/ABC, Inc.; from June 1990 to February, 1994, he
77 West 66th Street served as Chairman of the Board only.
New York, NY 10023-6298
</TABLE>

S-1
<PAGE>

<TABLE>
<CAPTION>
CURRENT PRINCIPAL OCCUPATION OR EMPLOYMENT
NAME AND BUSINESS ADDRESS AND FIVE-YEAR EMPLOYMENT HISTORY
------------------------- ------------------------------------------
<S> <C>
John B. Slaughter President, Occidental College.
Office of the President
Occidental College
1600 Campus Road
Los Angeles, CA 90041
Alexander J. Trotman Chairman of the Board of Directors, President and Chief
Ford Motor Company Executive Officer of Ford Motor Company since November
American Road 1, 1993; from May 1, 1993 to November 1, 1993,
Dearborn, MI 48121-1899 President and Chief Operating Officer, Ford Automotive
Group; prior to 1990 and to May 1, 1993, Executive Vice
President, Ford North American Automotive Operations.
Lodewijk C. van Wachem Prior to 1990 and to 1992, President of Royal Dutch
Royal Dutch Petroleum Company Petroleum. Member of supervisory boards, AKZO N.V. and
P.O. Box 162 Philips Electronics N.V. Mr. van Wachem is a citizen of
2501 AN The Hague the Kingdom of the Netherlands.
NETHERLANDS
Charles M. Vest President, Massachusetts Institute of Technology.
Massachusetts Institute of
Technology
President's Office
Room 3-208
77 Massachusetts Avenue
Cambridge, MA 02139
Edgar S. Woolard, Jr. Chairman and Chief Executive Officer of E.I. du Pont de
E.I. du Pont de Nemours Nemours and Company.
& Co., Inc.
1007 Market Street
Wilmington, DE 19898
Jerome B. York Director of Company since January 1, 1995. Senior Vice
International Business President and Chief Financial Officer of the Company
Machines Corporation since May 1993. 1990 to May 1993, Executive Vice
One Old Orchard Road President-Finance and Chief Financial Officer of
Armonk, NY 10504 Chrysler Corporation.
J. Thomas Bouchard Senior Vice President, Human Resources of the Company
International Business since October 1994. Prior to October 1994, Senior Vice
Machines Corporation President and Chief Human Resources Officer, US West,
One Old Orchard Road Inc.
Armonk, NY 10504
James A. Cannavino Senior Vice President, Strategy and Development of the
International Business Company.
Machines Corporation
One Old Orchard Road
Armonk, NY 10504
Nicholas M. Donofrio Senior Vice President and Group Executive of the
International Business Company.
Machines Corporation
One Old Orchard Road
Armonk, NY 10504
</TABLE>

S-2
<PAGE>

<TABLE>
<CAPTION>
CURRENT PRINCIPAL OCCUPATION OR EMPLOYMENT
NAME AND BUSINESS ADDRESS AND FIVE-YEAR EMPLOYMENT HISTORY
------------------------- ------------------------------------------
<S> <C>
Donato A. Evangelista Senior Vice President and General Counsel of the
International Business Company.
Machines Corporation
One Old Orchard Road
Armonk, NY 10504
Ned C. Lautenbach Senior Vice President and Group Executive of the
International Business Company.
Machines Corporation
One Old Orchard Road
Armonk, NY 10504
G. Richard Thoman Senior Vice President and Group Executive of the
One Old Orchard Road Company since January 1994. From 1992 to 1994,
Armonk, NY 10504 President, Nabisco International; prior to 1990 to
1992, Co-CEO of American Express Travel Related
Services Co. and CEO of American Express International.
John M. Thompson Senior Vice President and Group Executive of the
International Business Company.
Machines Corporation
One Old Orchard Road
Armonk, NY 10504
Patrick A. Toole Senior Vice President and Group Executive of the
One Old Orchard Road Company.
Armonk, NY 10504
John E. Hickey Vice President and Secretary of the Company.
International Business
Machines Corporation
One Old Orchard Road
Armonk, NY 10504
Richard F. Wallman Vice President and Controller of the Company since July
International Business 1994. General Assistant Controller, October 1993 to
Machines Corporation July 1994. Prior to 1990 to October 1993, Assistant
One Old Orchard Road Corporate Controller, Sales and Marketing, Chrysler
Armonk, NY 10504 Corporation.
Jeffrey D. Serkes Acting Treasurer of the Company since January 1995.
International Business Assistant Treasurer, August 1994 to January 1995; 1993
Machines Corporation to August 1994, Vice President and Deputy Treasurer,
One Old Orchard Road RJR Nabisco; 1991 to 1993, Vice President and Assistant
Armonk, NY 10504 Treasurer, Corporate Finance and prior to 1990 to 1991,
Director, Capital Markets, RJR Nabisco.
</TABLE>

S-3
<PAGE>

Facsimile copies of the Letter of Transmittal, properly completed and duly
executed, will be accepted. The Letter of Transmittal, depositary receipts for
Depositary Shares and any other required documents should be sent or delivered
by each shareholder of the Company or such shareholder's broker, dealer,
commercial bank or trust company to the Depositary at one of its addresses set
forth below.

The Depositary for the Offer is:

FIRST CHICAGO TRUST COMPANY
OF NEW YORK

<TABLE>
<CAPTION>
By Facsimile Transmission
By Hand or Overnight Delivery: (for Eligible Institutions only): By Mail:
<S> <C> <C>
First Chicago Trust Company (201) 222-4720 First Chicago Trust Company
of New York or of New York
Tenders & Exchanges (201) 222-4721 Tenders & Exchanges
Suite 4680-IBM Suite 4660-IBM
14 Wall Street, 8th Floor Confirm Receipt of P.O. Box 2560
New York, NY 10005 Notice of Jersey City, NJ 07303-2560
Guaranteed Delivery
by Telephone:
(201) 222-4707
</TABLE>

Any questions or requests for assistance or for additional copies of
this Offer to Purchase or the Letter of Transmittal may be directed to the
Information Agent or Dealer Manager. Shareholders may also contact their
broker, dealer, commercial bank, trust company or other nominee for
assistance concerning the Offer.

The Information Agent for the Offer is:

GEORGESON
& COMPANY INC.

Wall Street Plaza
New York, New York 10005
Banks and Brokers Call Collect:
(212) 440-9800
or
ALL OTHERS CALL TOLL FREE:
(800) 223-2064

The Dealer Manager for the Offer is:

MERRILL LYNCH & CO.
250 Vesey Street
New York, New York 10281
(212) 236-4565 (call collect)
(212) 236-4097 (call collect)

<PAGE>

EXHIBIT 99.(D)(2)
<PAGE>

LETTER OF TRANSMITTAL

TO TENDER DEPOSITARY SHARES, EACH REPRESENTING A ONE-FOURTH INTEREST IN A SHARE
OF SERIES A 7- 1/2% PREFERRED STOCK

IBM

INTERNATIONAL BUSINESS MACHINES CORPORATION

PURSUANT TO ITS OFFER TO PURCHASE

DATED JANUARY 11, 1995

THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, EASTERN
STANDARD TIME, ON WEDNESDAY, FEBRUARY 8, 1995, UNLESS THE OFFER IS EXTENDED.

TO: FIRST CHICAGO TRUST COMPANY OF NEW YORK, DEPOSITARY

By Hand or Overnight Delivery: By Mail:
First Chicago Trust Company
First Chicago Trust Company of New York
of New York Tenders & Exchanges
Tenders & Exchanges Suite 4660-IBM
Suite 4680-IBM P.O. Box 2560
14 Wall Street, 8th Floor Jersey City, NJ 07303-2560
New York, NY 10005

DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE WILL
NOT CONSTITUTE A VALID DELIVERY.

This Letter of Transmittal can be used only if (a) depositary receipts for
Depositary Shares (as defined below) are to be delivered with it or (b)
Depositary Shares are being delivered concurrently by book-entry transfer to
the account maintained by the Depositary at The Depository Trust Company, the
Midwest Securities Trust Company or the Philadelphia Depository Trust Company
(collectively, the "Book-Entry Transfer Facilities") as set forth in Section 5
of the Offer to Purchase (as defined below).
Shareholders who cannot deliver the depositary receipts for their Depositary
Shares to the Depositary prior to the Expiration Date (as defined in the Offer
to Purchase) or who cannot complete the procedure for book-entry transfer on a
timely basis or who cannot deliver a Letter of Transmittal and all other
required documents to the Depositary prior to the Expiration Date, in any such
case, must tender their Depositary Shares pursuant to the guaranteed delivery
procedure set forth in Section 5 of the Offer to Purchase. See Instruction 2.
The name(s) and address(es) of the registered holder(s) should be printed
below, if they are not already printed below, exactly as they appear on the
depositary receipt(s) representing the Depositary Shares tendered herewith. The
depositary receipt(s) and the number of Depositary Shares that the registered
holder(s) wish(es) to tender should be indicated in the appropriate boxes
below.
<PAGE>

DESCRIPTION OF DEPOSITARY SHARES TENDERED (SEE INSTRUCTIONS)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NAME(S) AND ADDRESS(ES) OF
REGISTERED HOLDER(S)
(PLEASE FILL IN EXACTLY AS
NAME(S) APPEAR(S) ON DEPOSITARY SHARES TENDERED
CERTIFICATE(S)) (ATTACH ADDITIONAL LIST IF NECESSARY)
--------------------------------------------------------------------------------------
NUMBER OF
DEPOSITARY SHARES
REPRESENTED NUMBER OF
DEPOSITARY RECEIPT BY DEPOSITARY DEPOSITARY SHARES
NUMBER(S)* RECEIPT(S)* TENDERED**
<S> <C> <C> <C>
------------------------------------------------------

------------------------------------------------------

------------------------------------------------------
TOTAL DEPOSITARY
SHARES
</TABLE>
--------------------------------------------------------------------------------
* Need not be completed by shareholders delivering Depositary Shares by
book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Depositary
Shares represented by any depositary receipts delivered to the
Depositary are being tendered. See Instruction 4.

[_]CHECK HERE IF TENDERED DEPOSITARY SHARES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER TO THE DEPOSITARY'S ACCOUNT AT ONE OF THE BOOK-ENTRY TRANSFER
FACILITIES AND COMPLETE THE FOLLOWING:

Name of Tendering Institution ______________________________________________

Check Box of Book-Entry Transfer Facility:
[_] The Depository Trust Company
[_] Midwest Securities Trust Company
[_] Philadelphia Depository Trust Company

Account No. ________________________________________________________________

Transaction Code No. _______________________________________________________

[_]CHECK HERE IF TENDERED DEPOSITARY SHARES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE
THE FOLLOWING:
Name(s) of Tendering Shareholder(s) ________________________________________

Date of Execution of Notice of Guaranteed Delivery _________________________

Name of Institution which Guaranteed Delivery ______________________________

If delivery is by book-entry transfer:
Name of Tendering Institution ________________________________________

Check Box of Book-Entry Transfer Facility:
[_] The Depository Trust Company
[_] Midwest Securities Trust Company
[_] Philadelphia Depository Trust Company

Account No. ________________________________________________________________

Transaction Code No. _______________________________________________________
<PAGE>

SOLICITED TENDERS
(SEE INSTRUCTION 9)
The Company will pay to any Soliciting Dealer, as defined in Instruction 9,
a solicitation fee of $0.375 per Depositary Share, or for transactions equal
to or exceeding 20,000 Depositary Shares or $500,000, $0.250 per Depositary
Share, for each Depositary Share tendered, accepted for payment and paid for
pursuant to the Offer.

The undersigned represents that the Soliciting Dealer which solicited and
obtained this tender is:

Name of Firm: ________________________________________________________________
(Please Print)

Name of Individual Broker or Financial Consultant: ___________________________

Identification Number (if known): ____________________________________________

Address: _____________________________________________________________________

______________________________________________________________________________
(Include Zip Code)

The following to be completed ONLY if customer's Depositary Shares held in
nominee name are tendered.
BENEFICIAL OWNERS NUMBER OF DEPOSITARY SHARES TENDERED

(ATTACH ADDITIONAL LIST IF NECESSARY)

Beneficial Owner No. 1................ --------------------------------------
Beneficial Owner No. 2................ --------------------------------------
Beneficial Owner No. 3................ --------------------------------------

The acceptance of compensation by such Soliciting Dealer will constitute a
representation by it that: (i) it has complied with the applicable
requirements of the Securities Exchange Act of 1934 and the applicable rules
and regulations thereunder, in connection with such solicitations; (ii) it is
entitled to such compensation for such solicitation under the terms and
conditions of the Offer to Purchase; (iii) in soliciting tenders of
Depositary Shares, it has used no soliciting materials other than those
furnished by the Company; and (iv) if it is a foreign broker or dealer not
eligible for membership in the National Association of Securities Dealers,
Inc. (the "NASD"), it has agreed to conform to the NASD's Rules of Fair
Practice in making solicitations.
The payment of compensation to any Soliciting Dealer is dependent on such
Soliciting Dealer returning a Notice of Solicited Tenders to the Depositary.
SOLICITING DEALERS SEEKING PAYMENT OF A FEE FOR DEPOSITARY SHARES
BENEFICIALLY OWNED BY SUCH SOLICITING DEALER MUST COMPLETE THE CERTIFICATION
BELOW.

CERTIFICATION BY TENDERING SOLICITING DEALERS
(SEE INSTRUCTION 9)
The undersigned Soliciting Dealer hereby certifies that the Depositary
Shares tendered hereby were acquired by the Soliciting Dealer (x) after the
announcement of the Offer, (y) at a price not in excess of the Purchase Price
(as defined herein) and (z) from a holder solicited by the Soliciting Dealer.
For purposes of clause (z), "solicited" shall mean direct contact (other than
the mailing of the tender offer materials) with the holder relating to the
tender of Depositary Shares beneficially owned by the holder that resulted in
the purchase by the Soliciting Dealer of such Depositary Shares.

---------------------
Name of Soliciting
Dealer
By _____________________
Name
Title:
<PAGE>

NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY

Ladies and Gentlemen:

The undersigned hereby tenders to International Business Machines
Corporation, a New York corporation (the "Company"), the above-described
Depositary Shares (the "Depositary Shares"), each representing a one-fourth
interest in a share of Series A 7- 1/2% Preferred Stock, par value $0.01 per
share, liquidation preference $100 per share, of the Company, pursuant to the
Company's offer to purchase any and all Depositary Shares at a price of $25
per Depositary Share (the "Purchase Price"), net to the seller in cash, upon
the terms and subject to the conditions set forth in the Offer to Purchase
dated January 11, 1995 (the "Offer to Purchase"), receipt of which is hereby
acknowledged, and in this Letter of Transmittal (which together constitute the
"Offer").
Subject to and effective upon acceptance for payment of the Depositary
Shares tendered herewith in accordance with the terms of the Offer (including,
if the Offer is extended or amended, the terms or conditions of any such
extension or amendment), the undersigned hereby sells, assigns and transfers
to or upon the order of the Company all right, title and interest in and to
all the Depositary Shares that are being tendered hereby, or orders the
registration of such Depositary Shares delivered by book-entry transfer, that
are purchased pursuant to the Offer and hereby irrevocably constitutes and
appoints the Depositary the true and lawful agent and attorney-in-fact of the
undersigned with respect to such Depositary Shares, with full power of
substitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest), to:
(a) deliver depositary receipts for such Depositary Shares, or transfer
ownership of such Depositary Shares on the account books maintained by any
of the Book-Entry Transfer Facilities, together, in any such case, with all
accompanying evidences of transfer and authenticity, to or upon the order
of the Company, upon receipt by the Depositary, as the undersigned's agent,
of the Purchase Price with respect to such Depositary Shares;
(b) present depositary receipts for such Depositary Shares for
cancellation and transfer on the books of the Company; and
(c) receive all benefits and otherwise exercise all rights of beneficial
ownership of such Depositary Shares, all in accordance with the terms of
the Offer.
The undersigned hereby represents and warrants that
(a) the undersigned has full power and authority to tender, sell, assign
and transfer the Depositary Shares tendered hereby;
(b) when and to the extent the Company accepts the Depositary Shares for
purchase, the Company will acquire good, marketable and unencumbered title
to the Depositary Shares, free and clear of all security interests, liens,
charges, encumbrances, conditional sales agreements or other obligations
relating to their sale or transfer, and not subject to any adverse claim;
(c) on request, the undersigned will execute and deliver any additional
documents the Depositary or the Company deems necessary or desirable to
complete the assignment, transfer and purchase of the Depositary Shares
tendered hereby; and
(d) the undersigned has read and agrees to all the terms of the Offer.
The undersigned recognizes that under certain circumstances set forth in the
Offer to Purchase, the Company may terminate or amend the Offer or may not be
required to accept for payment any of the Depositary Shares tendered herewith.
The undersigned understands that tenders of Depositary Shares pursuant to
any one of the procedures described in Section 5 of the Offer to Purchase and
in the instructions hereto will constitute an agreement between the
undersigned and the Company upon the terms and subject to the conditions of
the Offer.
All authority herein conferred, or agreed to be conferred, shall survive the
death or incapacity of the undersigned, and any obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives,
successors and assigns of the undersigned. Except as stated in the Offer, this
tender is irrevocable.
Unless otherwise indicated under "Special Payment Instructions", please
issue the check for the Purchase Price and/or return or issue the depositary
receipts(s) evidencing any Depositary Shares not tendered, not accepted for
payment or for which payment is not made in the name(s) of the registered
holder(s) appearing under "Description of Depositary Shares Tendered."
Similarly, unless otherwise indicated under "Special Delivery Instructions",
please mail the check for the Purchase Price and/or the depositary receipt(s)
evidencing any Depositary Shares not tendered, not accepted for payment or for
which payment is not made (and
<PAGE>

accompanying documents, as appropriate) to the address of the registered
holder(s) appearing under "Description of Depositary Shares Tendered". In the
event that both the "Special Delivery Instructions" and "Special Payment
Instructions" are completed, please issue the check for the Purchase Price
and/or issue or return the depositary receipt(s) evidencing any Depositary
Shares not tendered, not accepted for payment or for which payment is not made
in the names(s) of, and deliver said check and/or depositary receipt(s) to,
the person or persons so indicated. In the case of book-entry delivery of
Depositary Shares, please credit the account maintained at the Book-Entry
Transfer Facility indicated above with any Depositary Shares not accepted for
payment or for which payment is not made. The undersigned recognizes that the
Company has no obligation pursuant to the "Special Payment Instructions" to
transfer any Depositary Shares from the name(s) of the registered holder(s)
thereof if the Company does not accept for payment or make payment for any of
the Depositary Shares so tendered.

SPECIAL PAYMENT INSTRUCTIONS (SEE SPECIAL DELIVERY INSTRUCTIONS
INSTRUCTIONS 1, 4, 5, 6, 7, 10 (SEE INSTRUCTIONS 1, 4, 5, 6 AND
AND 11) 7)
To be completed ONLY if the
To be completed ONLY if the check for the aggregate Purchase
check for the aggregate Purchase Price of Depositary Shares pur-
Price of Depositary Shares pur- chased and/or depositary receipts
chased and/or depositary receipts for Depositary Shares not ten-
for Depositary Shares not ten- dered or not purchased are to be
dered or not purchased are to be mailed to someone other than the
issued in the name of someone undersigned or to the undersigned
other than the undersigned. at an address other than that
shown below the undersigned's
Issue [_] check, and/or signature(s).
[_] depositary receipts to: Mail [_] check, and/or

[_] depositary receipts to:
Name _____________________________

(PLEASE PRINT) Name______________________________
Address __________________________ (PLEASE PRINT)
__________________________________ Address __________________________
(ZIP CODE) __________________________________
__________________________________ (ZIP CODE)
(TAXPAYER IDENTIFICATION NO.)
<PAGE>

SIGN HERE
(SEE INSTRUCTIONS 1 AND 5) (PLEASE COMPLETE SUBSTITUTE FORM W-9 BELOW)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
SIGNATURE(S) OF OWNER(S)
Names(s) ___________________________________________________________________
Capacity (full title) ______________________________________________________
(PLEASE PRINT)
Address ____________________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone Number _____________________________________________
Taxpayer Identification Number _____________________________________________
Dated ______________________________________________________________________

(Must be signed by registered holder(s) exactly as name(s) appear(s) on
depositary receipt(s) or on a security position listing or by person(s)
authorized to become registered holder(s) by depositary receipts and
documents transmitted herewith. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, agent, officer of a corporation
or other person acting in a fiduciary or representative capacity, please
set forth full title and see Instruction 5.)
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
Authorized Signature _______________________________________________________
Name _______________________________________________________________________
(PLEASE PRINT)
Title ______________________________________________________________________
Name of Firm _______________________________________________________________
Address ____________________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone Number _____________________________________________
Dated ______________________________________________________________________
<PAGE>

INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER

1. GUARANTEE OF SIGNATURES
Except as otherwise provided below, all signatures on this Letter of
Transmittal must be guaranteed by a firm which is an "Eligible Institution" (as
defined in the Offer to Purchase). Signatures on this Letter of Transmittal
need not be guaranteed if (a) this Letter of Transmittal is signed by the
registered owner of the Depositary Shares (which term, for purposes of this
document, shall include any participant in one of the Book-Entry Transfer
Facilities whose name appears on a security position listing as the owner of
Depositary Shares) tendered herewith and such holder(s) have not completed
either of the boxes entitled "Special Payment Instructions" or "Special
Delivery Instructions" on this Letter of Transmittal or (b) such Depositary
Shares are tendered for the account of an Eligible Institution. See Instruction
5.

2. DELIVERY OF THE LETTER OF TRANSMITTAL AND DEPOSITARY SHARES
This Letter of Transmittal is to be used only if (a) depositary receipts for
Depositary Shares are to be forwarded herewith or (b) delivery of Depositary
Shares is to be made by book-entry transfer pursuant to the procedures set
forth in Section 5 of the Offer to Purchase. Depositary receipts for all
physically delivered Depositary Shares or a confirmation of a book-entry
transfer of all Depositary Shares delivered electronically into the
Depositary's account at one of the Book-Entry Transfer Facilities, together in
each case with a properly completed and duly executed Letter of Transmittal (or
a facsimile thereof) with any required signature guarantees (or in the case of
a book-entry transfer, an Agent's Message (as defined below)), and any other
documents required by this Letter of Transmittal, must be received by the
Depositary at one of its addresses set forth on the front page of this Letter
of Transmittal by the Expiration Date (as defined in the Offer to Purchase).
Delivery of documents to one of the Book-Entry Transfer Facilities does not
constitute delivery to the Depositary.
Shareholders who cannot deliver the depositary receipts for their Depositary
Shares to the Depositary prior to the Expiration Date or who cannot complete
the procedure for book-entry transfer on a timely basis or who cannot deliver a
Letter of Transmittal and all other required documents to the Depositary by the
Expiration Date must tender their Depositary Shares pursuant to the guaranteed
delivery procedure set forth in Section 5 of the Offer to Purchase. Pursuant to
such procedure: (a) such tender must be made by or through an Eligible
Institution, (b) a properly completed and duly executed Notice of Guaranteed
Delivery substantially in the form provided by the Company must be received (by
hand, mail or facsimile transmission) by the Depositary by the Expiration Date
and (c) the depositary receipts for all physically delivered Depositary Shares,
in proper form for transfer (or a confirmation of a book-entry transfer of such
Depositary Shares into the Depositary's account at one of the Book-Entry
Transfer Facilities), together with a properly completed and duly executed
Letter of Transmittal (or a facsimile thereof) and any required signature
guarantees (or in the case of book-entry transfer, an Agent's Message) and any
other documents required by this Letter of Transmittal, must be received by the
Depositary within five New York Stock Exchange trading days after the date of
execution of such Notice of Guaranteed Delivery, all as provided in Section 5
of the Offer to Purchase.
<PAGE>

The term "Agent's Message" means a message, transmitted by a Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of the
confirmation of book-entry transfer, which states that such Book-Entry Transfer
Facility has received an express acknowledgement from the participant in such
Book-Entry Transfer Facility tendering the Depositary Shares that such
participant has received and agrees to be bound by the terms of the Letter of
Transmittal and that the Purchaser may enforce such agreement against the
participant.

THE METHOD OF DELIVERY OF DEPOSITARY SHARES, THIS LETTER OF TRANSMITTAL AND
ANY OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND RISK OF THE TENDERING
SHAREHOLDER. IF DELIVERY IS MADE BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, IS RECOMMENDED.

No alternative, conditional, or contingent tenders will be accepted, and no
fractional Depositary Shares will be purchased. By executing this Letter of
Transmittal (or facsimile thereof), each tendering shareholder waives any right
to receive any notice of the acceptance of such shareholder's tender.

3. INADEQUATE SPACE
If the space provided in the box captioned "Description of Depositary Shares
Tendered" is inadequate, the depositary receipt numbers and/or the number of
Depositary Shares should be listed on a separate signed schedule and attached
to this Letter of Transmittal.

4. PARTIAL TENDERS AND UNPURCHASED DEPOSITARY SHARES
Partial tenders are not applicable to shareholders who deliver Depositary
Shares by book-entry transfer. If fewer than all the Depositary Shares
represented by any depositary receipt delivered to the Depositary are to be
tendered, fill in the number of Depositary Shares that are to be tendered in
the box entitled "Number of Depositary Shares Tendered". If such Depositary
Shares are purchased, a new depositary receipt for the remainder of the
Depositary Shares represented by the old depositary receipt will be sent to and
in the name of the registered holder(s) (unless otherwise provided by such
holder(s) having completed either of the boxes entitled "Special Payment
Instructions" or "Special Delivery Instructions" on this Letter of Transmittal)
as promptly as practicable following the expiration or termination of the
Offer. All Depositary Shares represented by the depositary receipt(s) listed
and delivered to the Depositary will be deemed to have been tendered unless
otherwise indicated.

5. SIGNATURES ON THE LETTER OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS
(a) If this Letter of Transmittal is signed by the registered holder(s) of
the Depositary Shares tendered herewith, the signature(s) must correspond with
the name(s) as written on the face of the depositary receipt without any change
whatsoever.
(b) If any of the Depositary Shares tendered herewith are registered in the
names of two or more joint owners, each such owner must sign this Letter of
Transmittal.
(c) If any of the Depositary Shares tendered herewith are registered in
different names on different depositary receipts, it will be necessary to
complete, sign and submit as many separate Letters of Transmittal as there are
different registrations of depositary receipts.
(d) If this Letter of Transmittal is signed by the registered holder(s) of
the Depositary Shares tendered herewith, no endorsements of depositary receipts
or separate stock powers are required unless payment is to be made, and/or the
depositary receipts for Depositary Shares not tendered or not purchased are to
be issued, in the name(s) of any person(s) other than the registered holder(s).
If this Letter of Transmittal is signed by a person other than the registered
holder(s) of the Depositary Shares tendered herewith, however, the depositary
receipts must be endorsed or accompanied by appropriate stock powers, in either
case, signed exactly as the name(s) of the registered holder(s) appear(s) on
the depositary receipts for such Depositary Shares. Signature(s) on any such
depositary receipts or stock powers must be guaranteed by an Eligible
Institution. See Instruction 1.
(e) If this Letter of Transmittal or any depositary receipt or stock power is
signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or
representative capacity, such proper evidence satisfactory to the Company of
the authority of such person so to act must be submitted.
<PAGE>

6. STOCK TRANSFER TAXES
The Company will pay any stock transfer taxes with respect to the transfer
and sale of Depositary Shares to it or its order pursuant to the Offer. If,
however, payment of the Purchase Price is to be made to, or if depositary
receipts for Depositary Shares not tendered or accepted for purchase are to be
registered in the name of any person other than the registered holder, or if
tendered depositary receipts are registered in the name of any person other
than the person(s) signing this Letter of Transmittal, the amount of any stock
transfer taxes (whether imposed on the registered holder or such person)
payable on account of the transfer to such person will be deducted from the
Purchase Price unless satisfactory evidence of the payment of such taxes or
exemption therefrom is submitted.

7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS
If the check for the Purchase Price of any Depositary Shares purchased is to
be issued to, or any Depositary Shares not tendered or not purchased are to be
returned in the name of, a person other than the person(s) signing this Letter
of Transmittal or if the check or any depositary receipts for Depositary Shares
not tendered or not purchased are to be mailed to someone other than the
person(s) signing this Letter of Transmittal or to the person(s) signing this
Letter of Transmittal at an address other than that shown in the box entitled
"Description of Depositary Shares Tendered", the boxes entitled "Special
Payment Instructions" and/or "Special Delivery Instructions" on this Letter of
Transmittal should be completed.

8. LOST, STOLEN OR DESTROYED DEPOSITARY RECEIPTS
Any shareholder whose depositary receipts have been lost, stolen or destroyed
should contact either the Depositary or the Information Agent at their
respective addresses shown on this Letter of Transmittal for special
instructions.

9. SOLICITED TENDERS.
The Company will pay to a Soliciting Dealer (as defined herein) a
solicitation fee of $0.375 per Depositary Share, or for transactions equal to
or exceeding 20,000 Depositary Shares or $500,000, $0.250 per Depositary Share,
for any Depositary Shares tendered, accepted for payment and paid for pursuant
to the Offer. For purposes of this Instruction 9, "Soliciting Dealer" includes
(i) any broker or dealer in securities, including the Dealer Manager in its
capacity as a dealer or broker, who is a member of any national securities
exchange or of the National Association of Securities Dealers, Inc. (the
"NASD"), (ii) any foreign broker or dealer not eligible for membership in the
NASD who agrees to conform to the NASD's Rules of Fair Practice in soliciting
tenders outside the United States to the same extent as though it were an NASD
member, or (iii) any bank or trust company, any one of whom has solicited and
obtained a tender pursuant to the Offer. No such fee shall be payable to a
Soliciting Dealer in respect of Depositary Shares registered in the name of
such Soliciting Dealer unless (i) such Depositary Shares are held by such
Soliciting Dealer as nominee and such Depositary Shares are being tendered for
the benefit of one or more beneficial owners identified on the Letter of
Transmittal or on the Notice of Solicited Tenders (included in the materials
provided to brokers and dealers) or (ii) such Depositary Shares are being
tendered for the benefit of the Soliciting Dealer and such Soliciting Dealer
certifies on the Letter of Transmittal or on the Notice of Solicited Tenders
that such Depositary Shares were acquired by the Soliciting Dealer (x) after
the announcement of the Offer, (y) at a price not in excess of the Purchase
Price and (z) from a holder solicited by the Soliciting Dealer. For purposes of
clause (z), "solicited" shall mean direct contact (other than the mailing of
the tender offer materials) with the holder relating to the tender of
Depositary Shares beneficially owned by the holder that resulted in the
purchase by the Soliciting Dealer of such Depositary Shares. No such fee shall
be payable to a Soliciting Dealer with respect to the tender of Depositary
Shares by a holder unless the Letter of Transmittal accompanying such tender
designates such Soliciting Dealer as such in the box captioned "Solicited
Tenders" or the Notice of Solicited Tenders accompanying such tender designates
such Soliciting Dealer. No such fee shall be payable to a Soliciting Dealer
with respect to the tender of Depositary Shares by the holder of record, for
the benefit of the beneficial owner, unless the beneficial owner has designated
such Soliciting Dealer. No such fee shall be payable to a Soliciting Dealer
unless the Soliciting Dealer returns a Notice of Solicited Tenders to the
Depositary within 5 business days after expiration of the Offer. No such fee
shall be payable to a Soliciting Dealer if such Soliciting Dealer is required
for any reason to transfer the amount of such fee to a depositing holder (other
than itself). No broker, dealer, bank, trust company or fiduciary shall be
deemed to be the agent of the Company, the Depositary or the Dealer Manager for
purposes of the Offer.

10. FEDERAL INCOME TAX WITHHOLDING
Except as provided below under "Important Tax Information", each tendering
shareholder is required to provide the Depositary with a correct TIN on
Substitute Form W-9 which is provided under "Important Tax Information" above.
Failure to provide the information on the form may subject the tendering
shareholder to a $50 penalty and 31% Federal backup withholding tax may be
imposed on the payments made to the shareholder or other payee with respect to
Depositary Shares purchased pursuant to the Offer. For further information
concerning backup withholding and instructions for completing the Substitute
Form W-9, consult the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9."
<PAGE>

11. WITHHOLDING ON FOREIGN SHAREHOLDERS
The Depositary will withhold federal income tax equal to 30% of the gross
payments payable to a foreign shareholder unless the Depositary determines that
a reduced rate of withholding or an exemption from withholding is applicable.
For this purpose, a foreign shareholder is any shareholder that is not (i) a
citizen or resident of the United States, (ii) a corporation, partnership or
other entity created or organized in or under the laws of the United States or
any political subdivision thereof or (iii) any estate or trust the income of
which is subject to United States federal income taxation regardless of the
source of such income. The Depositary will determine a shareholder's status as
a foreign shareholder and eligibility for a reduced rate of, or an exemption
from, withholding by reference to the shareholder's address and to any
outstanding certificates or statements concerning eligibility for a reduced
rate of, or exemption from, withholding unless facts and circumstances indicate
that reliance is not warranted. A foreign shareholder who has not previously
submitted the appropriate certificates or statements with respect to a reduced
rate of, or exemption from, withholding for which such shareholder may be
eligible should consider doing so in order to avoid over-withholding. A foreign
shareholder may be eligible to obtain a refund of tax withheld if such
shareholder meets one of the two tests for capital gain or loss treatment
described in Section 2 of the Offer to Purchase or is otherwise able to
establish that no tax or a reduced amount of tax was due.

12. IRREGULARITIES
All questions as to the number of Depositary Shares to be accepted and the
validity, form, eligibility (including time of receipt) and acceptance for
payment of any tender of Depositary Shares will be determined by the Company,
in its sole discretion, and its determination shall be final and binding on all
parties. The Company reserves the absolute right to reject any or all tenders
it determines not to be in proper form or the acceptance of or payment for
which may, in the opinion of the Company's counsel, be unlawful. The Company
also reserves the absolute right to waive any of the conditions of the Offer or
any defect or irregularity in the tender of any particular Depositary Shares.
No tender of Depositary Shares will be deemed to be properly made until all
defects and irregularities have been cured or waived. Unless waived, any
defects or irregularities in connection with tenders must be cured within such
time as the Company shall determine. None of the Company, the Dealer Manager,
the Depositary, the Information Agent nor any other person is or will be
obligated to give notice of any defects or irregularities in tenders, and none
of them will incur any liability for failure to give such notice.

13. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES
Requests for assistance or additional copies of the Offer to Purchase and
this Letter of Transmittal may be obtained from the Information Agent or Dealer
Manager at their respective addresses or telephone numbers set forth below.

IMPORTANT: THIS LETTER OF TRANSMITTAL OR A MANUALLY SIGNED FACSIMILE HEREOF
(TOGETHER WITH DEPOSITARY RECEIPTS FOR DEPOSITARY SHARES OR CONFIRMATION OF
BOOK-ENTRY TRANSFER OF DEPOSITARY SHARES AND ALL OTHER REQUIRED DOCUMENTS) OR A
NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY PRIOR TO THE
EXPIRATION DATE.

IMPORTANT TAX INFORMATION

Under U.S. federal income tax law, a shareholder whose tendered Depositary
Shares are accepted for payment is required to provide the Depositary with such
shareholder's correct taxpayer identification number ("TIN") on Substitute Form
W-9 below. If the Depositary is not provided with the correct TIN, the Internal
Revenue Service may subject the shareholder or other payee to a $50 penalty. In
addition, payments that are made to such shareholder or other payee with
respect to Depositary Shares purchased pursuant to the Offer may be subject to
31% backup withholding.
Certain shareholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements and should indicate their status by writing "exempt" across the
face of the Substitute Form W-9. In order for a foreign individual to qualify
as an exempt recipient, the shareholder must submit a Form W-8, signed under
penalties of perjury, attesting to that individual's exempt status. A Form W-8
can be obtained from the Depositary. See the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
more instructions.
If backup withholding applies, the Depositary is required to withhold 31% of
any such payments made to the shareholder or other payee. Backup withholding is
not an additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained from the Internal
Revenue Service.
<PAGE>

The box in Part 2 of the Substitute Form W-9 may be checked if the tendering
shareholder has not been issued a TIN and has applied for a TIN or intends to
apply for a TIN in the near future. If the box in Part 2 is checked, the
shareholder or other payee must also complete the Certificate of Awaiting
Taxpayer Identification Number below Part 2 in order to avoid backup
withholding. Notwithstanding that the box in Part 2 is checked and the
Certificate of Awaiting Taxpayer Identification Number is completed the
Depositary will withhold 31% on all payments made prior to the time a properly
certified TIN is provided to the Depositary.

WHAT NUMBER TO GIVE THE DEPOSITARY
The shareholder is required to give the Depositary the TIN (e.g., social
security number or employer identification number) of the record owner of the
Depositary Shares or of the last transferee appearing on the transfers attached
to, or endorsed on, the depositary receipts evidencing the Depositary Shares.
If the Depositary Shares are registered in more than one name or are not
registered in the name of the actual owner, consult the enclosed "Guidelines
for Certification of Taxpayer Identification Number on Substitute Form W-9" for
additional guidance on which number to report.

PAYER'S NAME: FIRST CHICAGO TRUST COMPANY OF NEW YORK

PART 1--PLEASE PROVIDE YOUR -----------------------
TIN IN THE BOX AT RIGHT AND Social security number
CERTIFY BY SIGNING AND
DATING BELOW OR ____________________
Employer identification
SUBSTITUTE number
FORM W-9 --------------------------------------------------------

PAYER'S REQUEST FOR PART 2--Awaiting TIN. [_]
TAXPAYER IDENTIFICATION
NUMBER (TIN) --------------------------------------------------------

CERTIFICATION--UNDER THE PENALTIES OF PERJURY, I
CERTIFY THAT THE INFORMATION PROVIDED ON THIS FORM IS
TRUE, CORRECT AND COMPLETE.

NAME _________________________________________________
(PLEASE PRINT)

ADDRESS ______________________________________________

______________________________________________________
(INCLUDE ZIP CODE)

SIGNATURE ___________________________ DATE ___________

YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX
IN PART 2 OF SUBSTITUTE FORM W-9

CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office, or
(b) I intend to mail or deliver an application in the near future. I
understand that, notwithstanding that I have checked the box on Part 2 (and
have completed this Certificate of Awaiting Taxpayer Identification Number),
all reportable payments made to me prior to the time I provide the Depositary
with a properly certified taxpayer identification number will be subject to a
31% backup withholding tax.

---------------------------------------- ---------------------------------
SIGNATURE DATE

NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM W-9 MAY RESULT IN A BACKUP
WITHHOLDING OF 31% OF ANY PAYMENT MADE TO YOU PURSUANT TO THE OFFER.
PLEASE REVIEW THE ENCLOSED "GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9" FOR ADDITIONAL DETAILS.
<PAGE>

The Information Agent for the Offer is:

GEORGESON
& COMPANY INC.
Wall Street Plaza
New York, New York 10005
Banks and Brokers Call Collect:
(212) 440-9800
ALL OTHERS CALL TOLL FREE:
(800) 223-2064

The Dealer Manager for the Offer is:

MERRILL LYNCH & CO.
250 Vesey Street
New York, New York 10281
(212) 236-4565 (call collect)
(212) 236-4097 (call collect)

<PAGE>

EXHIBIT 99.(D)(3)
<PAGE>

IBM

INTERNATIONAL BUSINESS MACHINES CORPORATION

NOTICE OF GUARANTEED DELIVERY OF DEPOSITARY SHARES, EACH REPRESENTING A ONE-
FOURTH INTEREST IN A SHARE OF SERIES A 7- 1/2% PREFERRED STOCK

This form or a facsimile hereof must be used to accept the Offer (as defined
below) if:

(a) depositary receipts for Depositary Shares (the "Depositary Shares"), each
representing a one-fourth interest in a share of Series A 7- 1/2% Preferred
Stock, par value $0.01 per share, liquidation preference $100 per share, of
INTERNATIONAL BUSINESS MACHINES CORPORATION, a New York corporation (the
"Company"), cannot be delivered to the Depositary prior to the Expiration Date
(as defined in Section 4 of the Company's Offer to Purchase dated January 11,
1995 (the "Offer to Purchase")); or

(b) the procedure for book-entry transfer (set forth in Section 5 of the
Offer to Purchase) cannot be completed on a timely basis; or

(c) the Letter of Transmittal (or a facsimile thereof) and all other required
documents cannot be delivered to the Depositary prior to the Expiration Date.

This form, properly completed and duly executed, may be delivered by hand,
mail or facsimile transmission to the Depositary. See Section 5 of the Offer to
Purchase.

TO: FIRST CHICAGO TRUST COMPANY OF NEW YORK, DEPOSITARY

By Hand or Overnight By Facsimile By Mail
Delivery: Transmission (for
Eligible Institutions
only):

First Chicago Trust (201) 222-4720 First Chicago Trust
Company of New York or Company of New York
Tenders & Exchanges (201) 222-4721 Tenders & Exchanges
Suite 4680-IBM 14 Wall Suite 4660-IBM P.O. Box
Street, 8th Floor New 2560 Jersey City, NJ
York, NY 10005 07303-2560

Confirm Receipt of
Notice of Guaranteed
Delivery by Telephone:
(201) 222-4707

DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR A
TRANSMISSION OF INSTRUCTIONS TO A FACSIMILE NUMBER OTHER THAN THE ONES LISTED
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.

This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
(as defined in the Offer to Purchase) under the instructions thereto, such
signature guarantee must appear in the applicable space provided in the
signature box on the Letter of Transmittal.

Ladies and Gentlemen:

The undersigned hereby tenders to the Company, upon the terms and subject to
the conditions set forth in the Offer to Purchase and the related Letter of
Transmittal (which together constitute the "Offer"), receipt of which is hereby
acknowledged, the number of Depositary Shares specified below pursuant to the
guaranteed delivery procedure set forth in Section 5 of the Offer to Purchase.
<PAGE>

No. of Depositary Shares tendered SIGN HERE

Depositary Shares
Certificate Nos. -------------------------------------
(if available): (Signature(s))

------------------------------------- -------------------------------------
(Signature(s))
-------------------------------------
If Depositary Shares will be delivered -------------------------------------
by book-entry transfer: (Name(s)) (Please Print)

Name of Tendering Institution: ______ -------------------------------------
(Address)
-------------------------------------
-------------------------------------
Account _____________________________ (Zip Code)
at:
-------------------------------------
[_]The Depository Trust Company (Area Code and Telephone No.)
[_]Midwest Securities Trust Company
[_]Philadelphia Depository Trust Company

GUARANTEE
(Not to be used for signature guarantee)

The undersigned, an "Eligible Institution", guarantees (a) that the above
named person(s) "own(s)" the Depositary Shares tendered hereby within the
meaning of Rule 14e-4 under the Securities Exchange Act of 1934, (b) that such
tender of Depositary Shares complies with Rule 14e-4 and (c) to deliver to the
Depositary either the depositary receipts representing the Depositary Shares
tendered hereby, in proper form for transfer, or confirmation of the book-entry
transfer of such Depositary Shares into the Depositary's account at The
Depository Trust Company, Midwest Securities Trust Company or Philadelphia
Depository Trust Company, in any such case together with a properly completed
and duly executed Letter(s) of Transmittal (or facsimile(s) thereof), with any
required signature guarantees (or an Agent's Message (as defined in the Offer
to Purchase)) and any other required documents within five New York Stock
Exchange trading days after the date of execution of this notice.

_____________________________________
(Name of Firm)

_____________________________________
(Authorized Signature)

_____________________________________
(Name)

_____________________________________
(Address)

_____________________________________
(Zip Code)

_____________________________________
(Area Code and Telephone No.)
Dated: ______________________

DO NOT SEND DEPOSITARY RECEIPTS WITH THIS FORM. YOUR DEPOSITARY RECEIPTS MUST
BE SENT WITH THE LETTER OF TRANSMITTAL.

<PAGE>

EXHIBIT 99.(D)(4)
<PAGE>

[MERRILL LYNCH & CO. LETTERHEAD]

INTERNATIONAL BUSINESS MACHINES CORPORATION
OFFER TO PURCHASE FOR CASH ANY AND ALL OUTSTANDING DEPOSITARY SHARES, EACH
REPRESENTING A ONE-FOURTH INTEREST IN A SHARE OF SERIES A 7- 1/2% PREFERRED
STOCK, AT $25 NET PER DEPOSITARY SHARE

January 11, 1995

To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees:

We have been appointed Dealer Manager by International Business Machines
Corporation, a New York corporation (the "Company"), in connection with its
offer to purchase any and all of its outstanding Depositary Shares (the
"Depositary Shares"), each representing a one-fourth interest in a share of
Series A 7- 1/2% Preferred Stock, par value $0.01 per share, liquidation
preference $100 per share, of the Company, at a price of $25 per Depositary
Share (the "Purchase Price"), upon the terms and subject to the conditions set
forth in the Company's Offer to Purchase dated January 11, 1995 (the "Offer to
Purchase"), and the related Letter of Transmittal (which together constitute
the "Offer").

For your information and for forwarding to your clients for whom you hold
Depositary Shares registered in your name or in the name of your nominee, we
are enclosing the following documents:

1. Offer to Purchase dated January 11, 1995;

2. Letter of Transmittal for your use and for the information of your
clients, together with Guidelines for Certification of Taxpayer Number on a
Substitute Form W-9 providing information relating to backup Federal income
tax withholding;

3. Notice of Guaranteed Delivery to be used to accept the Offer if the
Depositary Shares and all other required documents cannot be delivered to
First Chicago Trust Company of New York (the "Depositary") by the
Expiration Date (as defined in the Offer to Purchase);

4. A form of letter that may be sent to your clients for whose accounts
you hold Depositary Shares registered in your name or in the name of your
nominee, with space provided for obtaining such client's instructions and
designation of Soliciting Dealer with regard to the Offer; and

5. Return envelope addressed to First Chicago Trust Company of New York,
the Depositary.

WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE.

THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, EASTERN STANDARD
TIME, ON WEDNESDAY, FEBRUARY 8, 1995, UNLESS THE OFFER IS EXTENDED.

NEITHER THE COMPANY NOR ITS BOARD OF DIRECTORS MAKES ANY RECOMMENDATION AS TO
WHETHER ANY SHAREHOLDER SHOULD TENDER ANY OR ALL OF SUCH SHAREHOLDER'S
DEPOSITARY SHARES PURSUANT TO THE OFFER. EACH SHAREHOLDER MUST MAKE ITS OWN
DECISION WHETHER TO TENDER DEPOSITARY SHARES AND, IF SO, HOW MANY DEPOSITARY
SHARES TO TENDER.
<PAGE>

The Company will pay to a Soliciting Dealer (as defined herein) a
solicitation fee of $0.375 per Depositary Share, or for transactions equal to
or exceeding 20,000 Depositary Shares or $500,000, $0.250 per Depositary Share,
for any Depositary Shares tendered, accepted for payment and paid for pursuant
to the Offer. For purposes of this letter, "Soliciting Dealer" includes (i) any
broker or dealer in securities, including the Dealer Manager in its capacity as
a broker or dealer, who is a member of any national securities exchange or of
the National Association of Securities Dealers, Inc. (the "NASD"), (ii) any
foreign broker or dealer not eligible for membership in the NASD who agrees to
conform to the NASD's Rules of Fair Practice in soliciting tenders outside the
United States to the same extent as though it were an NASD member, or (iii) any
bank or trust company, any one of whom has solicited and obtained a tender
pursuant to the Offer. No such fee shall be payable to a Soliciting Dealer in
respect of Depositary Shares registered in the name of such Soliciting Dealer
unless (i) such Depositary Shares are held by such Soliciting Dealer as nominee
and such Depositary Shares are being tendered for the benefit of one or more
beneficial owners identified on the Letter of Transmittal or the Notice of
Solicited Tenders or (ii) such Depositary Shares are being tendered for the
benefit of the Soliciting Dealer and such Soliciting Dealer certifies on the
Letter of Transmittal or the Notice of Solicited Tenders that such Depositary
Shares were acquired by the Soliciting Dealer (x) after the announcement of the
Offer, (y) at a price not in excess of the Purchase Price and (z) from a holder
solicited by the Soliciting Dealer. For purposes of clause (z), "solicited"
shall mean direct contact (other than the mailing of the tender offer
materials) with the holder relating to the tender of Depositary Shares
beneficially owned by the holder that resulted in the purchase by the
Soliciting Dealer of such Depositary Shares. No such fee shall be payable to a
Soliciting Dealer with respect to the tender of Depositary Shares by a holder
unless the Letter of Transmittal accompanying such tender designates such
Soliciting Dealer as such in the box captioned "Solicited Tenders" or the
Notice of Solicited Tenders accompanying such tender designates such Soliciting
Dealer. No such fee shall be payable to a Soliciting Dealer with respect to the
tender of Depositary Shares by the holder of record, for the benefit of the
beneficial owner, unless the beneficial owner has designated such Soliciting
Dealer. No such fee shall be payable to a Soliciting Dealer if such Soliciting
Dealer is required for any reason to transfer the amount of such fee to a
depositing holder (other than itself). No broker, dealer, bank, trust company
or fiduciary shall be deemed to be the agent of the Company, the Depositary or
the Dealer Manager for purposes of the Offer.

The Company, upon request, will reimburse you for customary handling and
mailing expenses incurred by you in forwarding any of the enclosed materials to
your clients. The Company will pay all stock transfer taxes applicable to its
purchase of Depositary Shares pursuant to the Offer, subject to Instruction 6
of the Letter of Transmittal.

In order for a Soliciting Dealer to receive a solicitation fee, the
Depositary must have received from such Soliciting Dealer a properly completed
and duly executed Notice of Solicited Tenders in the form attached hereto (or
facsimile thereof) within 5 business days after expiration of the Offer.

Any inquiries you may have with respect to the Offer should be addressed to,
and additional copies of the enclosed materials may be obtained from, the
Information Agent or the Dealer Manager at the addresses and telephone numbers
set forth on the back cover of the Offer to Purchase.

Very truly yours,

Merrill Lynch & Co.

NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
THE AGENT OF THE COMPANY, THE INFORMATION AGENT, THE DEALER MANAGER OR THE
DEPOSITARY, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE
ANY STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN
THE DOCUMENTS ENCLOSED HEREWITH AND STATEMENTS CONTAINED THEREIN.
<PAGE>

NOTICE OF SOLICITED TENDERS

List below the number of Depositary Shares whose tender you have solicited.
All Depositary Shares beneficially owned by a beneficial owner, whether in one
account or several, and in however many capacities, must be aggregated for
purposes of completing the tables below. Any questions as to what constitutes
beneficial ownership should be directed to the Depositary. If the space below
is inadequate, list the Depositary Shares in a separate signed schedule and
affix the list to this Notice of Solicited Tenders. Please do not complete the
sections of the table headed "TO BE COMPLETED ONLY BY DEPOSITARY."

ALL NOTICES OF SOLICITED TENDERS SHOULD BE RETURNED TO THE DEPOSITARY AT THE
ADDRESS SET FORTH ON THE BACK COVER OF THE OFFER TO PURCHASE. ALL QUESTIONS
CONCERNING THE NOTICES OF SOLICITED TENDERS SHOULD BE DIRECTED TO THE
INFORMATION AGENT AT THE TELEPHONE NUMBER SET FORTH ON THE BACK COVER OF THE
OFFER TO PURCHASE.

SOLICITED TENDERS OF DEPOSITARY SHARES NOT BENEFICIALLY OWNED BY SOLICITING
DEALER

FOR TRANSACTIONS LESS THAN 20,000 DEPOSITARY SHARES OR $500,000

<TABLE>
<CAPTION>
TO BE COMPLETED TO BE COMPLETED TO BE COMPLETED TO BE COMPLETED
BY THE SOLICITING BY THE SOLICITING ONLY BY ONLY BY
DEALER DEALER DEPOSITARY DEPOSITARY
----------------- ----------------- ---------------- ----------------
FEE
NUMBER OF SHARES VOI TICKET NUMBER OF SHARES $.375 PER
BENEFICIAL OWNERS TENDERED NUMBER* ACCEPTED DEPOSITARY SHARE
----------------- ----------------- ----------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Beneficial Owner No. 1..
--------- --------- --------- ---------
Beneficial Owner No. 2..
--------- --------- --------- ---------
Beneficial Owner No. 3..
--------- --------- --------- ---------
Beneficial Owner No. 4..
--------- --------- --------- ---------
Beneficial Owner No. 5..
--------- --------- --------- ---------
Total.................
--------- --------- --------- ---------
</TABLE>
--------
* Complete if Depositary Shares delivered by book-entry transfer.

FOR TRANSACTIONS EQUAL TO OR EXCEEDING 20,000 DEPOSITARY SHARES OR $500,000

<TABLE>
<CAPTION>
TO BE COMPLETED TO BE COMPLETED TO BE COMPLETED TO BE COMPLETED
BY THE SOLICITING BY THE SOLICITING ONLY BY ONLY BY
DEALER DEALER DEPOSITARY DEPOSITARY
----------------- ----------------- ---------------- ----------------
FEE
NUMBER OF SHARES VOI TICKET NUMBER OF SHARES $.250 PER
BENEFICIAL OWNERS TENDERED NUMBER* ACCEPTED DEPOSITARY SHARE
----------------- ----------------- ----------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Beneficial Owner No. 1..
--------- --------- --------- ---------
Beneficial Owner No. 2..
--------- --------- --------- ---------
Beneficial Owner No. 3..
--------- --------- --------- ---------
Beneficial Owner No. 4..
--------- --------- --------- ---------
Beneficial Owner No. 5..
--------- --------- --------- ---------
Total.................
--------- --------- --------- ---------
</TABLE>
--------
* Complete if Depositary Shares delivered by book-entry transfer.
<PAGE>

SOLICITED TENDERS OF DEPOSITARY SHARES BENEFICIALLY OWNED BY SOLICITING DEALER

FOR TRANSACTIONS LESS THAN 20,000 DEPOSITARY SHARES OR $500,000

--------- --------- --------- ---------

--------- --------- --------- ---------
Total....
--------- --------- --------- ---------
</TABLE>
--------
* Complete if Depositary Shares delivered by book-entry transfer.

FOR TRANSACTIONS EQUAL TO OR EXCEEDING 20,000 DEPOSITARY SHARES OR $500,000

--------- --------- --------- ---------

--------- --------- --------- ---------
Total....
--------- --------- --------- ---------
</TABLE>
--------
*Complete if Depositary Shares delivered by book-entry transfer.

All questions as to the validity, form and eligibility (including time of
receipt) of Notices of Solicited Tenders will be determined by the Depositary,
in its sole discretion, which determination will be final and binding. Neither
the Depositary nor any other person will be under any duty to give notification
of any defects or irregularities in any Notice of Solicited Tenders or incur
any liability for failure to give such notification.

The undersigned hereby confirms that: (i) it has complied with the applicable
requirements of the Securities Exchange Act of 1934, and the applicable rules
and regulations thereunder, in connection with such solicitation; (ii) it is
entitled to such compensation for such solicitation under the terms and
conditions of the Offer to Purchase; (iii) in soliciting tenders of Depositary
Shares, it has used no soliciting materials other than those furnished by the
Company; and (iv) if it is a foreign broker or dealer not eligible for
membership in the NASD, it has agreed to conform to the NASD's Rules of Fair
Practice in making solicitations.

The undersigned hereby certifies that the Depositary Shares beneficially
owned by the Soliciting Dealer and tendered in connection herewith were
acquired by the Soliciting Dealer (x) after the announcement of the Offer, (y)
at a price not in excess of the Purchase Price and (z) from a holder solicited
by the Soliciting Dealer. For purposes of clause (z), "solicited" shall mean
direct contact (other than the mailing of the tender offer materials) with the
holder relating to the tender of Depositary Shares beneficially owned by the
holder that resulted in the purchase by the Soliciting Dealer of such
Depositary Shares.

------------------------------------- -------------------------------------
Printed Firm Name Address

------------------------------------- -------------------------------------
Authorized Signature Area Code and Telephone Number

<PAGE>

EXHIBIT 99.(D)(5)
<PAGE>

INTERNATIONAL BUSINESS MACHINES CORPORATION
OFFER TO PURCHASE FOR CASH ANY AND ALL OUTSTANDING DEPOSITARY SHARES,
EACH REPRESENTING A ONE-FOURTH INTEREST IN A SHARE OF SERIES A 7- 1/2%
PREFERRED STOCK,
AT $25 NET PER DEPOSITARY SHARE

January 11, 1995

To Our Clients:

Enclosed for your consideration are the Offer to Purchase dated January 11,
1995, and the related Letter of Transmittal (which together constitute the
"Offer"), in connection with the Offer by INTERNATIONAL BUSINESS MACHINES
CORPORATION, a New York corporation (the "Company"), to purchase any and all of
its outstanding Depositary Shares (the "Depositary Shares"), each representing
a one-fourth interest in a share of Series A 7- 1/2% Preferred Stock, par value
$0.01 per share, liquidation preference $100 per share, of the Company, at a
price of $25 per Depositary Share, upon the terms and subject to the conditions
of the Offer. We are the holder of record of Depositary Shares held for your
account. A tender of such Depositary Shares can be made only by us as the
holder of record and pursuant to your instructions. THE LETTER OF TRANSMITTAL
IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO
TENDER DEPOSITARY SHARES HELD BY US FOR YOUR ACCOUNT.

We request instructions as to whether you wish us to tender any or all of the
Depositary Shares held by us for your account, upon the terms and subject to
the conditions set forth in the Offer to Purchase and the Letter of
Transmittal. We also request that you designate, in the box captioned
"Solicited Tenders", any Soliciting Dealer who solicited your tender of
Depositary Shares.

Your attention is invited to the following:

1. The Offer and withdrawal rights expire at 12:00 midnight, Eastern
Standard Time, on Wednesday, February 8, 1995, unless the Offer is
extended.

2. The Offer is not conditioned upon any minimum number of Depositary
Shares being tendered. The Offer is, however, subject to certain other
conditions, as described in Section 8 of the Offer to Purchase.

3. Any stock transfer taxes applicable to the sale of Depositary Shares
to the Company pursuant to the Offer will be paid by the Company, except as
otherwise provided in Instruction 6 of the Letter of Transmittal.

If you wish to have us tender any or all of your Depositary Shares, please so
instruct us by completing, executing and returning to us the attached
instruction form. An envelope to return your instructions to us is enclosed. If
you authorize tender of your Depositary Shares, all such Depositary Shares will
be tendered unless otherwise specified on the attached instruction form. Your
instructions should be forwarded to us in ample time to permit us to submit a
tender on your behalf by the expiration of the Offer.

THE OFFER IS NOT BEING MADE TO, NOR WILL TENDERS BE ACCEPTED FROM OR ON
BEHALF OF, HOLDERS OF DEPOSITARY SHARES IN ANY JURISDICTION IN WHICH THE MAKING
OF THE OFFER OR ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE LAWS OF
SUCH JURISDICTION. IN THOSE JURISDICTIONS THE LAWS OF WHICH REQUIRE THAT THE
OFFER BE MADE BY A LICENSED BROKER OR DEALER, THE OFFER SHALL BE DEEMED TO BE
MADE ON BEHALF OF THE COMPANY BY ONE OR MORE REGISTERED BROKERS OR DEALERS
LICENSED UNDER THE LAWS OF SUCH JURISDICTION.
<PAGE>

INSTRUCTIONS WITH RESPECT TO OFFER TO PURCHASE FOR CASH ANY AND ALL OUTSTANDING
DEPOSITARY SHARES, EACH REPRESENTING A ONE-FOURTH INTEREST IN A SHARE OF SERIES
A 7- 1/2% PREFERRED STOCK

INTERNATIONAL BUSINESS MACHINES CORPORATION

The undersigned acknowledge(s) receipt of your letter and the enclosed Offer
to Purchase dated January 11, 1995, and the related Letter of Transmittal in
connection with the offer by International Business Machines Corporation, a New
York corporation (the "Company"), to purchase any and all of its outstanding
Depositary Shares (the "Depositary Shares"), each representing a one-fourth
interest in a share of Series A 7- 1/2% Preferred Stock, par value $0.01 per
share, liquidation preference $100 per share, of the Company, at a price of $25
per Depositary Share, net to the undersigned in cash.

This will instruct you to tender the number of Depositary Shares indicated
below held by you for the account of the undersigned, upon the terms and
subject to the conditions set forth in the Offer to Purchase and the related
Letter of Transmittal.

[_]By checking this box, all Depositary Shares held for the account of the
undersigned, including fractional Depositary Shares, will be tendered. If
fewer than all Depositary Shares are to be tendered, please check the box
and indicate below the aggregate number of Depositary Shares to be tendered.
(Unless otherwise indicated, it will be assumed that all Depositary Shares
held for the account of the undersigned are to be tendered.)

Depositary Shares

-------------------------

Please designate in the box below any Soliciting Dealer who solicited your
tender:

SOLICITED TENDERS

The undersigned represents that the Soliciting Dealer who solicited and
obtained this tender is:

Name of Firm: _______________________________________________________________
(Please Print)

Name of Individual Broker or Financial Consultant: __________________________

Identification Number (if known): ___________________________________________

Address: ____________________________________________________________________

_____________________________________________________________________________
(Include Zip Code)

SIGN HERE

------------------------------------- -------------------------------------
Signature(s)

------------------------------------- -------------------------------------

------------------------------------- -------------------------------------
Please print name(s) and address(es)
here

Dated
---------------------------------

<PAGE>

EXHIBIT 99.(D)(6)
<PAGE>

[LETTERHEAD OF INTERNATIONAL BUSINESS MACHINES CORPORATION]

January 10, 1995

Dear Shareholder:

IBM is offering to purchase all of the depositary shares of its Series A 7 1/2
percent Preferred Stock, issued in 1993.

We believe this offer makes good financial sense for IBM. And it gives you the
opportunity to sell your shares at a premium over the prevailing market price
prior to the announcement of the offer and without the usual transaction costs.

Neither IBM nor its Board of Directors makes any recommendation as to whether
you should sell your shares. That's entirely your decision. The offer is
explained in more detail in the enclosed offer to purchase. I encourage you to
read this material before making any decision. If you choose to sell, please
follow the instructions in the enclosed materials.

If you have any questions regarding this offer, please call Georgeson &
Company, Inc., for general information, or Merrill Lynch & Co., the offer's
dealer manager, at the phone numbers on the back cover of the enclosed offer to
purchase.

Sincerely,

/s/ Louis V. Gerstner, Jr.
-----------------------------
LOUIS V. GERSTNER, JR.

<PAGE>

EXHIBIT 99.(D)(7)
<PAGE>

PRESS RELEASE

IBM FILES PREFERRED STOCK TENDER OFFER

ARMONK, N.Y., January 10, 1995 . . . International Business Machines
Corporation announced today that effective tomorrow, January 11, 1995, it will
commence a tender offer to purchase for cash any and all of the 44,580,000
outstanding depositary shares representing its Series A 7 1/2 percent preferred
stock for a price of $25.00 net per depositary share.

"This is a prudent and effective use of a portion of our cash," said Jerome
B. York, senior vice president and chief financial officer of IBM. "Over the
past year, we've reduced our debt level by more than $4 billion. Although
preferred stock technically is equity, it is a long-term, fixed-rate obligation
similar to debt. As such, this tender offer will help to further reduce IBM's
ongoing financial obligations commensurate with our long-term capital structure
goals."

Under the offer, depositary shares tendered and purchased by IBM will not
receive or otherwise be entitled to the regular quarterly cash dividend
expected to be paid for the first quarter of 1995 and also will not receive any
accrued dividends for that period. The tender offer will be made only by means
of, and upon the terms and subject to the conditions set forth in, IBM's offer
to purchase dated January 11, 1995, and related letter of transmittal. The
offer is not conditioned upon any minimum number of depositary shares being
tendered. The offer and withdrawal rights will expire at 12:00 midnight (EST)
on February 8, 1995, unless the offer is extended.

Merrill Lynch & Co. will act as dealer manager in connection with the tender
offer. Information about the offer can be obtained from the dealer manager or
Georgeson & Co., the information agent for the tender offer. The toll-free
telephone number for Georgeson & Co. is (800) 223-2064.

The depositary shares were issued in a public offering on May 28, 1993. Each
depositary share represents a one-fourth interest in a share of the preferred
stock.

<PAGE>

EXHIBIT 99.(D)(8)
<PAGE>

This announcement is neither an offer to purchase nor a solicitation of an
offer to sell Depositary Shares. The Offer is made solely by the Offer to
Purchase dated January 11, 1995 and the related Letter of Transmittal and is
not being made to (nor will tenders be accepted from or on behalf of) holders
of Depositary Shares residing in any jurisdiction in which the making of the
Offer or the acceptance thereof would not be in compliance with the laws of
such jurisdiction. In any jurisdiction the securities laws of which require the
Offer to be made by a licensed broker or dealer, the Offer shall be deemed made
on behalf of the Company by one or more brokers or dealers licensed under the
laws of such jurisdiction.

IBM

NOTICE OF OFFER TO PURCHASE FOR CASH
BY
INTERNATIONAL BUSINESS MACHINES CORPORATION
OF
ANY AND ALL OF ITS OUTSTANDING DEPOSITARY SHARES, EACH
REPRESENTING A ONE-FOURTH INTEREST IN A SHARE OF ITS SERIES A 7- 1/2%
PREFERRED STOCK
AT
$25 PER SHARE

International Business Machines Corporation, a New York corporation (the
"Company"), is offering to purchase any and all of its outstanding Depositary
Shares (the "Depositary Shares"), each representing a one-fourth interest in a
share of Series A 7- 1/2% Preferred Stock, par value $0.01 per share,
liquidation preference $100 per share, of the Company, at $25 per Depositary
Share, net to the seller in cash, upon the terms and subject to the conditions
set forth in the Offer to Purchase dated January 11, 1995 (the "Offer to
Purchase"), and in the related Letter of Transmittal (which together constitute
the "Offer").

THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, EASTERN
STANDARD TIME, ON WEDNESDAY, FEBRUARY 8, 1995, UNLESS THE OFFER IS EXTENDED.

Depositary Shares tendered and purchased by the Company will not receive or
otherwise be entitled to the expected regular quarterly cash dividend of
$0.46875 per Depositary Share, with a record date of March 19, 1995, to be paid
on April 3, 1995 by the Company for the first quarter of 1995, and will also
not receive any accrued dividends in respect thereof. See Section 9 of the
Offer to Purchase.

The Company is making the Offer because it believes that, given its current
financial condition (including its substantial current cash and cash
equivalents position) and the current market price of the Depositary Shares,
the purchase of the Depositary Shares pursuant to the Offer is economically
attractive to the Company. The Offer will enable the Company to reduce its
dividend requirements and annual administrative expenses in connection with
servicing the accounts of holders of the Depositary Shares. The Company also
believes the Offer is fair to holders of Depositary Shares. The Offer will
provide shareholders who are considering a sale of all or a portion of the
Depositary Shares the opportunity to sell those Depositary Shares for cash
without the usual transaction costs associated with open-market sales. See
Section 1 of the Offer to Purchase.

THE OFFER IS NOT CONDITIONED UPON ANY MINIMUM NUMBER OF SHARES BEING
TENDERED. THE OFFER IS, HOWEVER, SUBJECT TO CERTAIN OTHER CONDITIONS. SEE
SECTION 8 OF THE OFFER TO PURCHASE.

Upon the terms and subject to the conditions of the Offer, the Company will
accept for payment (and thereby purchase) any and all Depositary Shares as are
properly tendered (and not withdrawn) on or before 12:00 midnight, Eastern
Standard Time, on Wednesday, February 8, 1995, or the latest time and date at
which the Offer, if extended by the Company, shall expire (the "Expiration
Date"). The Company expressly reserves the right, in its sole discretion, at
any time or from time to time, to extend the period of time during which the
Offer is open by giving oral or written notice of such extension to First
Chicago Trust Company of New York (the "Depositary") and making a public
announcement thereof. See Sections 4, 5, 7 and 13 of the Offer to Purchase.
<PAGE>

The Company will pay to a Soliciting Dealer (as defined in the Offer to
Purchase) a solicitation fee of $0.375 per Depositary Share, or for
transactions equal to or exceeding 20,000 Depositary Shares or $500,000, $0.25
per Depositary Share, for any Depositary Shares tendered and accepted for
payment and paid for pursuant to the Offer, subject to certain conditions. See
Section 14 of the Offer to Purchase.

Subject to the provisions in Section 6 of the Offer to Purchase, Depositary
Shares tendered pursuant to the Offer may be withdrawn at any time before the
Expiration Date and, unless theretofore accepted for payment by the Company,
may also be withdrawn after 12:00 Midnight, Eastern Standard Time, on Thursday,
March 9, 1995. See Section 6 of the Offer to Purchase.

For a withdrawal to be effective, the Depositary must timely receive (at one
of its addresses set forth on the back cover of the Offer to Purchase) a
written, telegraphic or facsimile transmission notice of withdrawal. Such
notice of withdrawal must specify the name of the person having tendered the
Depositary Shares to be withdrawn, the number of Depositary Shares to be
withdrawn and the name of the registered owner, if different from that of the
person who tendered such Depositary Shares. If the depositary receipts have
been delivered or otherwise identified to the Depositary, then, prior to the
release of such depositary receipts, the tendering shareholder must also submit
the serial numbers shown on the particular depositary receipts evidencing the
Depositary Shares and the signature on the notice of withdrawal must be
guaranteed by an Eligible Institution (as defined in Section 5 of the Offer to
Purchase) (except in the case of Depositary Shares tendered by an Eligible
Institution). If Depositary Shares have been delivered pursuant to the
procedure for book-entry transfer set forth in Section 5 of the Offer to
Purchase, the notice of withdrawal must specify the name and number of the
account at the applicable Book-Entry Transfer Facility (as defined in Section 5
of the Offer to Purchase) to be credited with the withdrawn Depositary Shares
and otherwise comply with the procedures of such facility. A withdrawal of a
tender of Depositary Shares may not be rescinded, and any Depositary Shares
properly withdrawn will thereafter be deemed not validly tendered for purposes
of the Offer. Withdrawn Depositary Shares may, however, be retendered before
the Expiration Date by again following any of the procedures described in
Section 5 of the Offer to Purchase.

THE OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION THAT SHOULD BE READ BEFORE ANY DECISION IS MADE WITH RESPECT TO THE
OFFER. These documents are being mailed to recordholders of Depositary Shares
and will be furnished to brokers, dealers, banks and similar persons whose
nominees, appear on the Company's shareholders list or, if applicable, who are
listed as participants in a clearing agency's security position listing for
subsequent transmittal to beneficial owners of Depositary Shares.

The information required to be disclosed by Rule 13e-4(d)(1) of the General
Rules and Regulations under the Securities Exchange Act of 1934 is contained in
the Offer to Purchase and is incorporated herein by reference.

Any questions or requests for assistance may be directed to the Information
Agent and the Dealer Manager at the addresses and telephone numbers set forth
below. Requests for additional copies of the Offer to Purchase, Letter of
Transmittal or other tender offer materials may be directed to the Information
Agent and the Dealer Manager and such copies will be furnished at the Company's
expense. Shareholders may also contact their broker, dealer, commercial bank or
trust company for assistance concerning the Offer.

The Information Agent for the Offer is:

GEORGESON
& COMPANY INC.

WALL STREET PLAZA
NEW YORK, NEW YORK 10005
BANKS AND BROKERS CALL COLLECT:
(212) 440-9800

ALL OTHERS CALL TOLL FREE:
(800) 223-2064

The Dealer Manager for the Offer is:

MERRILL LYNCH & CO.
WORLD FINANCIAL CENTER
NORTH TOWER
NEW YORK, NEW YORK 10281-1305
(212) 236-4565 (CALL COLLECT)
(212) 236-4097 (CALL COLLECT)

January 11, 1995

<PAGE>

EXHIBIT 99.(D)(9)
<PAGE>

GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9

GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.-- Social Security numbers have nine digits separated by two hyphens:
i.e. 000-00-0000. Employer identification numbers have nine digits separated by
only one hyphen: i.e. 00-0000000. The table below will help determine the
number to give the payer.

--------------------------------------------
<TABLE>
<CAPTION>
GIVE THE
FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY
NUMBER OF--
--------------------------------------------
<S> <C>
1. An individual's account The individual
2. Two or more individuals The actual owner
(joint account) of the account
or, if combined
funds, any one
of the
individuals/1/
3. Husband and wife (joint The actual owner
account) of the account
or, if joint
funds, either
person/1/
4. Custodian account of a The minor/2/
minor (Uniform Gift to
Minors Act)
5. Adult and minor (joint The adult or, if
account) the minor is the
only
contributor, the
minor/1/
6. Account in the name of The ward, minor,
guardian or committee or incompetent
for a designated ward, person/3/
minor, or incompetent
person
7.a. The usual revocable The grantor-
savings trust account trustee/1/
(grantor is also
trustee)
b. So-called trust account The actual
that is not a legal or owner/1/
valid trust under State
law
--------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
GIVE THE EMPLOYER
FOR THIS TYPE OF ACCOUNT: IDENTIFICATION
NUMBER OF--
--------------------------------------------
<S> <C>
8. Sole proprietorship The Owner/1/
account
9. A valid trust, estate, Legal entity (Do
or pension trust not furnish the
identifying
number of the
personal
representative
or trustee
unless the legal
entity itself is
not designated
in the account
title.)/5/
10. Corporate account The Corporation
11. Religious, charitable, The organization
or educational
organization account
12. Partnership account The partnership
held in the name of the
business
13. Association, club, or The organization
other tax-exempt
organization
14. A broker or registered The broker or
nominee nominee
15. Account with the The public
Department of entity
Agriculture in the name
of a public entity
(such as a State or
local government,
school district, or
prison) that receives
agricultural program
payments
--------------------------------------------
</TABLE>

(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate, or pension
trust.

NOTE: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE>

GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE
FORM W-9 PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or
Form SS-4, Application for Employer Identification Number, at the local office
of the Social Security Administration or the Internal Revenue Service and apply
for a number.

PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include
the following:
. A corporation.
. A financial institution.
. An organization exempt from tax under section 501(a), or an individual
retirement plan.
. The United States or any agency or instrumentality thereof.
. A State, the District of Columbia, a possession of the United States, or any
subdivision or instrumentality thereof.
. A foreign government, a political subdivision of a foreign government, or any
agency or instru-mentality thereof.
. An international organization or any agency, or instrumentality thereof.
. A registered dealer in securities or commodities registered in the U.S. or a
possession of the U.S.
. A real estate investment trust.
. A common trust fund operated by a bank under section 584(a).
. An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
. An entity registered at all times under the Investment Company Act of 1940.
. A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
. Payments to nonresident aliens subject to with-holding under section 1441.
. Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
. Payments of patronage dividends where the amount received is not paid in mon-
ey.
. Payments made by certain foreign organizations.
Payments of interest not generally subject to backup withholding include the
following:
. Payments of interest on obligations issued by individuals. Note: You may be
subject to backup withholding if this interest is $600 or more and is paid in
the course of the payer's trade or business and you have not provided your
correct taxpayer identification number to the payer.
. Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
. Payments described in section 6049(b)(5) to non-resident aliens.
. Payments on tax-free covenant bonds under section 1451.
. Payments made by certain foreign organizations.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDEN-
TIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO THE
PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO
SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends, that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividends,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Payers must generally withhold 31% of taxable
interest, dividend, and certain other payments to a payee who does not furnish
a taxpayer identification number to a payer. Certain penalties may also apply.

PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.

<PAGE>

EXHIBIT 99.(D)(10)
<PAGE>

IBM OFFER TO PURCHASE FOR CASH ANY AND ALL OUTSTANDING DEPOSITARY SHARES, EACH
REPRESENTING A ONE-FOURTH INTEREST IN ASHARE OF SERIES A 7- 1/2% PREFERRED
STOCK, AT $25 NET PER DEPOSITARY SHARE

Conditions for Payment of Fees to Soliciting Dealers
----------------------------------------------------

IBM will pay to a Soliciting Dealer a solicitation fee of $0.375 per
Depositary Share (or for transactions equal to or exceeding 20,000 shares or
$500,000, $0.25 per Depositary Share) for shares that have been tendered,
accepted for payment and paid for pursuant to the Offer, AS LONG AS THE
--------------
FOLLOWING CONDITIONS ARE MET:
-----------------------------

(A) The Soliciting Dealer is NOT the beneficial owner of the Depositary
Shares and is designated as Soliciting Dealer by the beneficial owner.

(B) If the Soliciting Dealer beneficially owns such shares, the Soliciting
Dealer certifies that the shares were acquired:

1. after the announcement of the Offer; and
2. at a price not in excess of $25.00 per Depositary Share; and
3. from a holder "solicited" by the Soliciting Dealer, who has direct
contact with the holder (other than the mailing of the tender offer
materials).

All of the above is subject to additional conditions, including that the
Soliciting Dealer completes and delivers a Notice of Solicited Tenders to the
Depositary within 5 business days of the expiration of the Offer, as set forth
in full in Section 14 of the OFFER TO PURCHASE.

These conditions are required as a matter of law and are set forth in full in
Section 14 (page 16) of the OFFER TO PURCHASE.

<PAGE>

EXHIBIT 99.(G)
<PAGE>

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

SCHEDULE 13E-4

ISSUER TENDER OFFER STATEMENT
(PURSUANT TO SECTION 13(E)(1) OF THE SECURITIES EXCHANGE ACT OF 1934)

INTERNATIONAL BUSINESS MACHINES CORPORATION
(NAME OF ISSUER)

INTERNATIONAL BUSINESS MACHINES CORPORATION
(NAME OF PERSON(S) FILING STATEMENT)

DEPOSITARY SHARES, EACH REPRESENTING A ONE-FOURTH INTEREST IN A SHARE OF
SERIES A 7- 1/2% PREFERRED STOCK
(TITLE OF CLASS OF SECURITIES)

459200309
(CUSIP NUMBER OF CLASS OF SECURITIES)

JOHN E. HICKEY

VICE PRESIDENT AND SECRETARY
INTERNATIONAL BUSINESS MACHINES CORPORATION
ONE OLD ORCHARD ROAD
ARMONK, NEW YORK 10504
(914) 765-1900
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON
AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS
ON BEHALF OF THE PERSON FILING STATEMENT)

Copy to:

ROBERT ROSENMAN, ESQ.
CRAVATH, SWAINE & MOORE
WORLDWIDE PLAZA
825 EIGHTH AVENUE
NEW YORK, NEW YORK 10019
(212) 474-1300

JANUARY 11, 1995
(DATE TENDER OFFER FIRST PUBLISHED,
SENT OR GIVEN TO SECURITY HOLDERS)

CALCULATION OF FILING FEE

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TRANSACTION VALUATION* AMOUNT OF FILING FEE**
--------------------------------------------------------------------------------
$1,114,500,000 $222,900
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
* Assumes purchase of 44,580,000 shares at $25 per share.
** Calculated based on the transaction valuation multiplied by one-fiftieth of
one percent.

[_] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form or
Schedule and the date of its filing.

Amount Previously Paid: N/A Filing Party: N/A

Form or Registration No.: N/A Date Filed: N/A

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>

ITEM 1. SECURITY AND ISSUER.

(b) The information set forth in the front cover page, "Introduction",
"Section 1. Purpose of the Offer; Certain Effects of the Offer; Plans of the
Company After the Offer", "Section 4. Expiration Date; Extension of the Offer"
and "Section 12. Transactions and Arrangements Concerning the Depositary
Shares" of the Offer to Purchase, a copy of which is attached hereto as Exhibit
(a)(1), (the "Offer to Purchase") is incorporated herein by reference.

(c) The information set forth in the "Introduction" and "Section 9. Price
Range of the Depositary Shares; Dividends" of the Offer to Purchase is
incorporated herein by reference.

(d) This statement is being filed by the issuer.

ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.

(a)-(b) The information set forth in "Section 11. Source and Amount of Funds"
of the Offer to Purchase is incorporated herein by reference.

ITEM 3. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE ISSUER OR
AFFILIATE.

(a)-(j) The information set forth in "Section 1. Purpose of the Offer;
Certain Effects of the Offer; Plans of the Company After the Offer" of the
Offer to Purchase is incorporated herein by reference.

ITEM 4. INTEREST IN SECURITIES OF THE ISSUER.

The information set forth in "Section 12. Transactions and Arrangements
Concerning the Depositary Shares" of the Offer to Purchase is incorporated
herein by reference.

ITEM 5. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE ISSUER'S SECURITIES.

The information set forth in "Section 12. Transactions and Arrangements
Concerning the Depositary Shares" of the Offer to Purchase is incorporated
herein by reference.

ITEM 6. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.

The information set forth in the front cover page and "Section 14. Fees and
Expenses" of the Offer to Purchase is incorporated herein by reference.

ITEM 7. FINANCIAL INFORMATION.

(a)-(b) The financial information set forth in "Section 10. Certain
Information Concerning the Company" of the Offer to Purchase is incorporated
herein by reference.

ITEM 8. ADDITIONAL INFORMATION.

(a) Not applicable.

(b) The information set forth in "Section 3. Certain Legal Matters;
Regulatory and Foreign Approvals; No Appraisal Rights" of the Offer to Purchase
is incorporated herein by reference.

1
<PAGE>

(c) The information set forth in "Section 1. Purpose of the Offer; Certain
Effects of the Offer; Plans of the Company After the Offer" of the Offer to
Purchase is incorporated herein by reference.

(d) Not applicable.

(e) Reference is hereby made to the Offer to Purchase and the related Letter
of Transmittal, copies of which are attached hereto as Exhibits (a)(1) and
(a)(2), respectively, and incorporated in their entirety herein by reference.

ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.

(a)(1) Form of Offer to Purchase dated January 11, 1995.

(a)(2) Form of Letter of Transmittal.

(a)(3) Form of Notice of Guaranteed Delivery.

(a)(4) Form of letter to brokers, dealers, commercial banks, trust companies
and other nominees dated January 11, 1995.

(a)(5) Form of letter to clients for use by brokers, dealers, commercial
banks, trust companies and other nominees dated January 11, 1995.

(a)(6) Letter to shareholders dated January 10, 1995.

(a)(7) Form of press release dated January 10, 1995.

(a)(8) Form of summary advertisement dated January 11, 1995.

(a)(9) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.

(a)(10) Summary of conditions for payment of fees to Soliciting Dealers.

(b) Not applicable.

(d) Not applicable.

(e) Not applicable.

(f) Not applicable.

After due inquiry and to the best of my knowledge and belief, I certify that
the information set forth in this statement is true, complete and correct.

International Business Machines
Corporation

/s/ Richard F. Wallman
By:__________________________________
Richard F. Wallman
Vice President and Controller

Dated: January 11, 1995

2
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT NO. DESCRIPTION PAGE
----------- ----------- ------------
<C> <S> <C>
(a)(1) --Form of Offer to Purchase dated January 11, 1995.
(a)(2) --Form of Letter of Transmittal....................
(a)(3) --Form of Notice of Guaranteed Delivery............
(a)(4) --Form of letter to brokers, dealers, commercial
banks, trust companies and other nominees dated
January 11, 1995..................................
(a)(5) --Form of letter to clients for use by brokers,
dealers, commercial banks, trust companies and
other nominees dated January 11, 1995.............
(a)(6) --Letter to shareholders dated January 10, 1995....
(a)(7) --Form of press release dated January 10, 1995.....
(a)(8) --Form of summary advertisement dated January 11,
1995..............................................
(a)(9) --Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9......
(a)(10) --Summary of conditions for payment of fees to
Soliciting Dealers................................
</TABLE>