SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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International Business Machines Corporation
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(Name of Registrant as Specified In Its Charter)
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Page 1
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March 23, 1999
[Name]
[Address]
Re: IBM's New Equity Plan
Dear [Name]:
Enclosed is a copy of IBM's 1999 Proxy Statement and 1998 Annual Report we are
mailing today to our stockholders. As you will note, we are seeking stockholder
approval of a number of management proposals this year, including a new equity
plan. The purpose of this letter is to highlight the importance to IBM of this
new plan, and to ask for your support.
The new plan, called the 1999 Long -Term Performance Plan (at Appendix B of the
Proxy Statement), will authorize 6.5% of IBM's outstanding shares (approximately
59 million shares) for use as options, restricted stock and other equity awards.
This plan is an integral part of IBM's efforts to attract and retain top talent.
IBM has found that its use of equity falls behind the usage by others in the
information technology industry, and as a result we have embarked on an effort
to expand the use of stock options, particularly among non-executive employees
with critical skills. (Attached is a short overview of the facts and
justification behind our proposal to expand the use of equity in our
compensation programs.)
Your support of this new equity plan is critical to the success of IBM's
efforts.
I understand the demands on your time during this season, and appreciate your
reviewing these materials. Please do not hesitate to call me at 914-499-4825
with any questions or comments you may have.
Sincerely,
D. E. O'Donnell
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IBM 1999 Long Term Performance Plan
o IBM's use of equity falls behind the level of usage at other leading
information technology (IT) companies against which IBM competes for
critical talent
Average Equity Usage as a Percent of Outstanding Shares
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'95 '96 '97 '98
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IBM 1.1 1.4 1.8* 2.2
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40 IT Competitors 5.1 4.6 5.7 NA
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10 IT Competitors
with Market Cap >
$10B 3.1 3.0 3.2 NA
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* Excluding CEO grant of 2M shares
Participation as a Percent of Total Employee Population
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Information Technology
Comparator Companies IBM
'95 '97 '95 '97
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75th Percentile 17% 59% 2.1% 5.1%
Median 8% 21% (actual) (actual)
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o IBM is expanding the use of stock options among non-executive employees
'94 '95 '96 '97 '98
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IBM Employees 300 1,000 1,700 3,500 13,000
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o IBM's total dilution "overhang" is in-line with the levels at other IT
companies
o IBM is requesting 6.5% of its outstanding shares for its new 1999
Long-Term Performance Plan.
o With the new plan, total dilution overhang from equity plans and
outstanding awards will be 17.5%.
o In 1997, industry average rates of total dilution were approximately
18.8%.
o For a comparison group of IT companies with market capitalization in
excess of $10B, the average was 18.2%.
<PAGE>
o In 1998, IBM continued to deliver outstanding stockholder value
o Market capitalization grew $69 billion.
o Revenues grew to a record $81.7 billion.
o Share price rose 76%.
