Rule 424(b)(3)
Registration No. 333-37034
PRICING SUPPLEMENT NO. 5
TO PROSPECTUS DATED June 20, 2000
(As supplemented June 22, 2000)
INTERNATIONAL BUSINESS MACHINES CORPORATION
MEDIUM-TERM NOTES
(Fixed Rate Note)
(Due from one year to 30 years from date of issue)
Designation: 4.375% Original Issue Date:
Medium-Term Notes Due May 25, 2004
June 1, 2009
Principal Amount: $500,000,000 Maturity Date:
June 1, 2009
Issue Price (as a percentage of Regular Record Dates:
Principal Amount): 99.701% Fifteenth calendar day, whether
or not a Business Day prior to
the corresponding Interest
Payment Date.
Interest Rate: 4.375% per annum Interest Payment Dates:
Semi-Annual on June 1 and December 1
beginning December 1, 2004
Commission or Discount (as a
percentage of Principal
Amount): 0.25%
CUSIP: 459 20Q ES9 Redemption Provisions: see below
Form: [X] Book-Entry
[ ] Certificated
INTRODUCTION
This is a Pricing Supplement. It describes the Fixed Rate Notes being
issued under the Medium Note Program of International Business Machines
Corporation (the 'Company' or 'IBM').
This document adds to, or 'supplements' the description of the Notes referred
to in the accompanying Prospectus Supplement and Prospectus. It does so by
providing specific pricing and other information about the Notes issued in this
particular transaction. This Pricing Supplement also amends the Prospectus
Supplement and Prospectus to the extent that the description of the Notes in
this Pricing Supplement is different from the terms which are set forth in the
Prospectus Supplement and Prospectus.
INTEREST
The Notes will bear interest from May 25, 2004. Interest on the Notes
will be calculated based on a year of 360 days consisting of 12 months
of 30 days each.
If any payment of principal or interest is due on a day that is not a
Business Day, that payment may be made on the next day which is a
Business Day. No additional interest will accrue as a result of the delay in
payment. For purposes of this offering, the term "Business Day" means each day
on which commercial banks settle payments
in The City of New York. We have capitalized a number of terms
in this document. If you do not see a definition for those terms in this
document, those terms will have the meanings which we have already given to
them in the Prospectus Supplement and the Prospectus.
OPTIONAL REDEMPTION BY IBM
The Notes will be redeemable, as a whole or in part, at IBM's option,
At any time or from time to time, on at least 30 days,
but not more than 60 days, prior notice to holders of the Notes at a
redemption price equal to the greater of:
- 100% of the principal amount of the Notes to be redeemed, plus accrued
interest, if any, to the redemption date; or
- the sum of the present values of the Remaining Scheduled Payments, as
defined below, discounted, on a semiannual basis, assuming a 360-day year
consisting of twelve 30-day months, at the Treasury Rate, as defined below,
plus 12.5 basis points plus accrued interest to the date of redemption which
has not been paid.
"Treasury Rate" means, with respect to any redemption date for the Notes:
- the yield, under the heading which represents the average for the
immediately preceding week, appearing in the most recently published
statistical release designated "H.15(519)" or any successor publication
which is published weekly by the Board of Governors of the Federal Reserve
System and which establishes yields on actively traded United States
Treasury securities adjusted to constant maturity under the caption
"Treasury Constant Maturities," for the maturity corresponding to the
Comparable Treasury Issue; provided that if no maturity is within three
months before or after the maturity date for the Notes,
yields for the two published maturities most closely corresponding to the
Comparable Treasury Issue will be determined and the Treasury Rate will be
interpolated or extrapolated from those yields on a straight line basis
rounding to the nearest month; or
- if that release, or any successor release, is not published during the
week preceding the calculation date or does not contain such yields, the rate
per annum equal to the semiannual equivalent yield to maturity of the
Comparable Treasury Issue, calculated using a price for the Comparable Treasury
Issue (expressed as a percentage of its principal amount) equal to the
Comparable Treasury Price for that redemption date.
The Treasury Rate will be calculated on the third business day preceding
the redemption date.
"Comparable Treasury Issue" means the United States Treasury security
selected by an Independent Investment Banker as having a maturity comparable to
the remaining term of the Notes to be redeemed that would be utilized, at the
time of selection and in accordance with customary financial practice, in
pricing new issues of corporate debt securities of comparable maturity to the
remaining term of such Notes.
"Independent Investment Banker" means one of the Reference Treasury
Dealers, to be appointed by IBM.
"Comparable Treasury Price" means, with respect to any redemption date for
the Notes:
- the average of four Reference Treasury Dealer Quotations for that
redemption date, after excluding the highest and lowest of such Reference
Treasury Dealer Quotations; or
- if the trustee obtains fewer than four Reference Treasury
Dealer Quotations, the average of all quotations obtained by
the trustee.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any redemption date, the average, as determined
by the trustee, of the bid and asked prices for the Comparable Treasury
Issue, expressed in each case as a percentage of its principal amount,
quoted in writing to the trustee by such Reference Treasury Dealer
at 3:30 p.m., New York City time on the third business day preceding
such redemption date.
"Reference Treasury Dealer" means each of Morgan Stanley & Co.
Incorporated, UBS Securities LLC, Lehman Brothers Inc., and one other treasury
dealer selected by IBM, and their respective successors; provided, however,
that if any of the foregoing shall cease to be a primary
U.S. Government securities dealer, which we refer
to as a "Primary Treasury Dealer," IBM will substitute
another nationally recognized investment banking
firm that is a Primary Treasury Dealer.
"Remaining Scheduled Payments" means, with respect to each Note to be
redeemed, the remaining scheduled payments of the principal thereof and
interest thereon that would be due after the related redemption date but
for such redemption; provided, however, that, if such redemption date is
not an interest payment date with respect to such Note, the amount
of the next succeeding
scheduled interest payment thereon will be deemed to be reduced
by the amount of interest accrued thereon to such redemption date.
On and after the redemption date, interest will cease to accrue on the
Notes or any portion thereof called for redemption, unless IBM defaults in the
payment of the redemption price and accrued interest. On or before the
redemption date, IBM will deposit with the trustee money sufficient to pay the
redemption price of and accrued interest on the Notes to be redeemed on such
date. If less than all of the Notes are to be redeemed, the Notes to be
redeemed shall be selected by the trustee by such method as the
trustee shall deem fair and appropriate.
PLAN OF DISTRIBUTION
We have entered into a purchase agreement with the following dealers,
under which each dealer has agreed to purchase the principal amount of Notes
listed:
Morgan Stanley & Co. Incorporated $ 225,001,000
UBS Securities LLC 225,001,000
ABN AMRO Incorporated 8,333,000
Blaylock & Partners, L.P. 8,333,000
Greenwich Capital Markets, Inc. 8,333,000
HSBC Securities (USA) Inc. 8,333,000
Lehman Brothers Inc. 8,333,000
Samuel A. Ramirez & Co., Inc. 8,333,000
____________
Total: $ 500,000,000
These dealers will initially offer the Notes at the Issue Price set
forth in the Pricing Supplement. Thereafter, they may change
the offering price and other selling terms.
The dealers named above have also agreed to reimburse us
for certain of our expenses.
Dated: May 20, 2004