Ibm and Lenovo New Leadership in Global pcs New advantages for all pc customers

IBM and Lenovo New Leadership in Global PCs

• New advantages for all PC customers

The New Lenovo: Overview

• $13B sales (last 12 months)

• 19,000 employees

• WW Headquarters: New York, USA

• Principal operations: Raleigh, Beijing

• Public company with ownership positions by Lenovo and IBM

• Closing date: 2Q05

• Est. combined share data: 34% in China

Customer Value

Transaction Summary

• Lenovo acquires IBM PC operations

• IBM: ownership stake, long-term alliances with the new Lenovo in sales, services and financing

Lenovo Group LTD

• Founded 1984

• FY04: Revenue, $3B; Net Profit, $135M

• Approx. 9,000 employees

• #1 market share in China for seven years

• (27% market share, source: IDC)

• #1 PC company in Asia Pacific (excl. Japan)

• #1 IT company in China

• Small Business and Consumer market strength

• Market capitalization: approx. $2.6B

IBM Personal Computing Division

• Established in 1981, creator of personal computer

• $9B 2003 revenue; 10,000 employees in PCD and supporting operations

• #2 in WW commercial notebooks revenue

• Undisputed leader in enterprise PC design, business productivity, and lowest total cost of ownership

• Enterprise and Mid-market strength

• (15% share total client)

• Client, notebook and SMB double-digit growth, outpacing industry

• ThinkPad notebooks have won over 1,000 industry awards

• 100-million PCs shipped

Global PCs: Where are the opportunities?

The New Lenovo: Leveraging strengths to pursue opportunities

Global PCs: Where are the opportunities?

• Top six emerging countries will represent 39% of the 2004 – 2006 growth opportunity*

• IBM is performing well on the premium product segments in these countries with the proper sales and distribution channels to reach these markets

• The new Lenovo will have a broader product portfolio to capture this opportunity

A Perfect Fit between Complementary Organizations

Lenovo’s Chairman Yang

The New Lenovo Announcement HR Transition

• Peter Haddad

• VP Human Resources, PSG

The New Lenovo Value Proposition

• The new Lenovo will offer an exciting opportunity to participate in a new and expanding business venture
• The new Lenovo will offer an attractive employment package
• Lenovo and IBM are committed to make this a smooth transition that minimizes personal disruptions and loss of work productivity

IBM Employees Joining the new Lenovo

• Employees who are part of PCD and their primary work responsibility is in support of the PCD mission/business

• Employees in other business units whose primary work responsibility is in support of the PCD mission/business

• Additional employees deemed necessary to meet the new Lenovo’s requirements may be selected based upon business need and an assessment of their current job responsibilities

Attractive Employee Compensation & Benefit Package*

• The new Lenovo will provide total compensation and benefits that are comparable to IBM’s:

• Cash Compensation
• Same or Similar Job Responsibilities
• Comprehensive Benefit Plans
• Pension / Retirement Plan**
• Vacation

Attractive Employee Compensation & Benefit Package* (continued)

• Employee Health Benefit Package

• Immediate access for employee & dependents – no exclusions
• Pre-existing conditions are covered
• Credit for current year plan deductibles

• Years of service credit for:

• The new Lenovo Vacation Plan will be based on combined IBM and Lenovo years of service and will provide the same benefits as the IBM plan guidelines
• IBM accrued and unused vacation transfers with you according to country legal standards
• Other selected benefit programs (varies by geography)

US Benefits: the new Lenovo

• Pension Plans with comparable benefits and service credit for purposes of determining eligibility and vesting:

• IBM Personal Pension Plan (Prior DB Plan) – new Lenovo Pension Plan (DB)
• IBM Personal Pension Account (Cash Balance) – new Lenovo Defined Contribution Plan
• IBM Savings Plan – the new Lenovo 401(k) Plan

• Health benefits

• Continuous coverage
• Medical
• Dental

• Compensation

• Same base salary
• Performance bonus targets maintained for one year
• Similar incentive and sales commission plans

• Vacation – Same as IBM plan

• More details about the new Lenovo benefits will be forthcoming

IBM / Lenovo Transition Schedule

HR Summary