<?xml version="1.0"?>
<ownershipDocument>
    <schemaVersion>X0101</schemaVersion>

    <documentType>4</documentType>
<periodOfReport>2003-07-15</periodOfReport>
<notSubjectToSection16>0</notSubjectToSection16>
    <issuer>
        <issuerCik>0000051143</issuerCik>
        <issuerName>INTERNATIONAL BUSINESS MACHINES CORP</issuerName>
        <issuerTradingSymbol>IBM</issuerTradingSymbol></issuer>
<reportingOwner>
<reportingOwnerId>
            <rptOwnerCik>0001180459</rptOwnerCik>
            <rptOwnerName>MILLS STEVEN A</rptOwnerName>
        </reportingOwnerId>
        <reportingOwnerAddress>
            <rptOwnerStreet1>  </rptOwnerStreet1>
            <rptOwnerStreet2>  </rptOwnerStreet2>
            <rptOwnerCity>  </rptOwnerCity>
            <rptOwnerState>  </rptOwnerState>
            <rptOwnerZipCode>  </rptOwnerZipCode>
        </reportingOwnerAddress>
            <reportingOwnerRelationship>
<isDirector>0</isDirector>
<isOfficer>1</isOfficer>
<isTenPercentOwner>0</isTenPercentOwner>
<isOther>0</isOther>
<officerTitle>Senior Vice President</officerTitle>
<otherText></otherText></reportingOwnerRelationship></reportingOwner>
<derivativeSecurity>
<securityTitle>
<value>Phantom Stock Unit</value></securityTitle>
<conversionOrExercisePrice>
<value>0</value>
<footnoteId id="F1"/></conversionOrExercisePrice>
<transactionDate>
<value>2003-07-15</value></transactionDate>
<transactionCoding>
<transactionFormType>4</transactionFormType>
<transactionCode>A</transactionCode>
<equitySwapInvolved>0</equitySwapInvolved>
<footnoteId id="F2"/></transactionCoding>
<transactionAmounts>
<transactionShares>
<value>8</value></transactionShares>
<transactionValue>
<value>0</value></transactionValue>
<transactionAcquiredDisposedCode>
<value>A</value></transactionAcquiredDisposedCode></transactionAmounts>
<exerciseDate>
<value>1988-08-08</value>
<footnoteId id="F3"/></exerciseDate>
<expirationDate>
<value>1988-08-08</value>
<footnoteId id="F3"/></expirationDate>
<underlyingSecurity>
<underlyingSecurityTitle>
<value>Common Stock</value></underlyingSecurityTitle>
<underlyingSecurityShares>
<value>8</value></underlyingSecurityShares></underlyingSecurity>
<postTransactionAmounts>
<sharesOwnedFollowingTransaction>
<value>21402</value></sharesOwnedFollowingTransaction></postTransactionAmounts>
<ownershipNature>
<directOrIndirectOwnership>
<value>D</value></directOrIndirectOwnership>
<natureOfOwnership>
<value></value></natureOfOwnership></ownershipNature></derivativeSecurity>
<footnotes>
<footnote id="F1">Phantom stock units convert to the cash value of the company&apos;s common stock on a one-for-one basis.</footnote>
<footnote id="F2">Acquisition of phantom stock units under the IBM Executive Deferred Compensation Plan.</footnote>
<footnote id="F3">Distribution of phantom stock units under the IBM Executive Deferred Compensation Plan is deferred until separation from the company.</footnote></footnotes>
<ownerSignature>
<signatureName>D. Cummins for S. A. Mills by power-of-attorney</signatureName>
<signatureDate>2003-07-16</signatureDate></ownerSignature></ownershipDocument>


