Passport Advantage Structural Change Announcement September 9 2005

Passport Advantage Structural Change Announcement September 9, 2005 1 IBM Confidential

Price Action Overview Structural Change Highlights: • • Effective Tuesday, October 11, 2005 No other Passport Advantage program modifications have been made Why Entitled Prices are Changing: • • • Improved functionality, security, stability, and new product releases have been provided across IBM’s entire software portfolio (see “Portfolio Product Improvements” chart). Service support and development costs continue to increase, on average ~5% per year. The entitled increases are consistent with competition and IBM prices are still very comparable. Several major competitors have recently raised prices as well. Improvements have been made to Passport Advantage Online for customers: – Allocate Entitlement tool available to eligible customers to help manage their enterprise’s central software purchasing with distributed deployment strategy. – Improved software download capabilities: primary and back-up contact can pull a report of who is ordering media and how many times they are downloading the software. – Media ordering from the Internet. – Implemented a multi-year maintenance agreement. – Improved the entitlement process and linkages of changed products for asset management. Various pricing flexibility programs have been recently announced, offering better price performance to customers. Such programs include sub-capacity, dual core licensing on x 86 architecture, and entry pricing. Cost of acquiring new versions is still less expensive than the new license. 2 IBM Confidential

Concluding Comments • IBM will continue to provide industry-leading software solutions and strive to generate higher return on investment for clients. • Additional information is available: – FAQ document – A list of recent product improvements for each software brand 3 IBM Confidential

Portfolio Product Improvements IBM continues to deliver product improvements across the entire portfolio. 4 IBM Confidential