# PART I

## Item 1. Business:

IBM is the largest manufacturer of data processing equipment and systems in the information-handling field, which is highly competitive and comprised of many companies. More than 95 percent of IBM's operations are in the industry segment encompassing information-handling systems, equipment and services to solve the increasingly complex problems of business, government, science, space exploration, defense, education, medicine and many other areas of human activity. IBM's products include information processing products and systems, program products, telecommunications systems, information distributors, office systems, typewriters, copiers, educational and testing materials, and related supplies and services.

While most products are both leased and sold through IBM's worldwide marketing organizations, the Company continues to broaden and expand marketing channels. These channels complement IBM's traditional marketing activities in meeting the increased demand for IBM products and services and providing opportunities to reach a broader base of customers. These channels include:

- IBM product centers that offer office equipment, small computers, terminals, software and supplies.
- IBM authorized dealer networks that market IBM supplies, Personal Computers, typewriters and printers.
- Direct sales to other equipment manufacturers.
- Direct response channels to market typewriters, supplies, displays, educational offerings and software. Direct response channels include both internal activities (i.e., IBM's telephone ordering, catalog and direct mail) and external activities (i.e., typewriters marketed through the American Express Company via direct mail to its card members).
- Value-added dealers and remarketers who enhance the IBM product with their own software or hardware and market the combined product to end-user customers. Some of the products marketed through these channels are the Personal Computer, Series/1, System/36 and the 4300 series.

The value of unfilled orders is not a meaningful indicator of future revenues due to the increasing proportion of gross income from services, the volume of products delivered from shelf inventories, and the shortening of product delivery schedules. Therefore, the company believes that backlog information is not material to an understanding of its business.

IBM owns or is licensed under a number of patents relating to its products. Licenses under patents owned by IBM have been and are being granted to others. IBM believes its business as a whole is not materially dependent upon any particular patent or license, or any particular group of patents or licenses.

The following information is included in IBM's 1984 Annual Report to Stockholders and is incorporated herein by reference:

1. Gross income by industry segments and classes of similar products or services—Page 43
2. Financial information by geographic area—Page 42
3. Amount spent during each of the last three years on research and development activities—Page 40
4. The number of persons employed by the registrant—Page 1