BAKER HUGHES INCORPORATED

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

April 28, 20042005

To the Stockholders of Baker Hughes Incorporated:

     The Annual Meeting of the Stockholders of Baker Hughes Incorporated (“Company” or “Baker Hughes”) will be held at the offices of the Company, 3900 Essex Lane, Suite 210, Houston, Texas on Wednesday,Thursday, April 28, 2004,2005, at 9:00 a.m., Central Daylight Time, for the purpose of considering and voting on:

	1.		Election of threefour directors to serve for three-year terms;
	2.		Ratification of Deloitte & Touche LLP as the Company’s Independent Auditor for Fiscal Year 2004;2005;
	3.	Proposal to amend the Company’s Restated Certificate of Incorporation to declassify the Board of Directors and provide for the annual election of all directors;
	4.	Stockholder Proposal No. 1 regarding classified boards;
	4.		Stockholder Proposal No. 2 regarding poison pills;majority votes protocol; and
	5.		Such other business as may properly come before the meeting and any reconvened meeting after an adjournment thereof.

       The Board of Directors has fixed March 3, 2004February 25, 2005 as the record date for determining the stockholders of the Company entitled to notice of, and to vote at, the meeting and any reconvened meeting after an adjournment thereof, and only holders of Common Stock of the Company of record at the close of business on that date will be entitled to notice of, and to vote at, that meeting or a reconvened meeting after an adjournment.

       You are invited to attend the meeting in person. Whether or not you plan to attend the meeting personally, please complete, sign and date the enclosed proxy, and return it as soon as possible in the enclosed postage prepaid envelope. You may revoke your proxy any time prior to its exercise, and you may attend the meeting and vote in person, even if you have previously returned your proxy. In some cases, you may be able to exercise your proxy by telephone or by the internet.Internet. Please refer to the Proxy Statement for further information on telephone and internetInternet voting.

PROXY STATEMENT
TABLE OF CONTENTS

PROXY STATEMENT

     This Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors of Baker Hughes Incorporated, a Delaware corporation (“Company,” “Baker Hughes,” “we,” “us” and “our”), to be voted at the Annual Meeting of Stockholders scheduled to be held on Wednesday,Thursday, April 28, 20042005 and at any and all reconvened meetings after adjournments thereof.

     Solicitation of proxies by mail is expected to commence on or about March 17, 200414, 2005 (the approximate date this Proxy Statement and accompanying proxy were first sent to security holders). The Company will bear the cost of the solicitation. In addition to solicitation by mail, certain of the directors, officers and regular employees of the Company may, without extra compensation, solicit proxies by telephone, facsimile and personal interview. The Company will make arrangements with brokerage houses, custodians, nominees and other fiduciaries to send proxy material to their principals, and the Company will reimburse them for postage and clerical expenses. The Company has retained Mellon Investor Services LLC, Baker Hughes’ transfer agent and registrar, to assist in the solicitation of proxies from stockholders of the Company for an anticipated fee of $9,500, plus out-of-pocket expenses.

     Stockholders with shares registered in their names with Mellon Investor Services LLC may authorize a proxy by the Internet at the following internetInternet address:http://www.eproxy.com/bhi, or telephonically by calling Mellon Investor Services LLC at 1-800-435-6710. Proxies submitted through Mellon Investor Services LLC by the internetInternet or telephone must be received by 11:59 p.m. Eastern time (10:59 p.m. Central time) on April 27, 2004.2005. The giving of a proxy will not affect your right to vote in person if you decide to attend the meeting.

     A number of banks and brokerage firms participate in a program that also permits stockholders to direct their vote by the internetInternet or telephone. This option is separate from that offered by Mellon Investor Services LLC and will be reflected on the voting form from a bank or brokerage firm that accompanies this Proxy Statement. If your shares are held in an account at a bank or brokerage firm that participates in such a program, you may direct the vote of these shares by the internetInternet or telephone by following the instructions on the voting form enclosed with the proxy from the bank or brokerage firm. Votes directed by the internetInternet or telephone through such a program must be received by Mellon Investor Services LLC by 11:59 p.m. Eastern time (10:59 p.m. Central time) on April 27, 2004.2005. Directing the voting of your shares will not affect your right to vote in person if you decide to attend the meeting; however, you must first request a proxy either on the internetInternet or the voting form that accompanies this Proxy Statement. Requesting a proxy prior to the deadlines described above will automatically cancel any voting directions you have previously given by the internetInternet or by telephone with respect to your shares.

     The internetInternet and telephone proxy procedures are designed to authenticate stockholders’ identities, to allow stockholders to give their proxy instructions and to confirm that those instructions have been properly recorded. Stockholders authorizing proxies or directing the voting of shares by the internet should understand that there may be costs associated with electronic access, such as usage charges from access providers and telephone companies, and those costs must be borne by the stockholder.

Shares for which proxies have been executed will be voted as specified in the proxies. If no specification is made, the shares will be voted FOR the election of nominees listed herein as directors, FOR ratification of Deloitte & Touche LLP as the Company’s Independent Auditor for fiscal year 2004, AGAINST Stockholder Proposal No. 12005, FOR amendment to the Company’s Restated Certificate of Incorporation to declassify the Board of Directors and provide for the annual election of all directors and AGAINST Stockholder Proposal No. 2.1.

       Proxies may be revoked at any time prior to the exercise thereof by filing with the Corporate Secretary, at the Company’s executive offices, a written revocation or a duly executed proxy bearing a later date. The executive offices of the Company are located at 3900 Essex Lane, Houston, Texas 77027-5177. For a period of at least ten days prior to the Annual Meeting of Stockholders, a complete list of stockholders entitled to vote at the Annual Meeting will be available for inspection during ordinary business hours at the Company’s executive offices by stockholders of record for proper purposes.

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VOTING SECURITIES

       The securities of the Company entitled to be voted at the Annual Meeting consist of shares of its Common Stock, par value $1 per share (“Common Stock”), of which 332,602,611338,185,465 shares were issued and outstanding at the close of business on March 3, 2004.February 25, 2005. Only stockholders of record at the close of business on that date will be entitled to vote at the meeting. Each share of Common Stock entitles the holder thereof to one vote on each matter to be considered at the meeting.

       Assuming a quorum is present at the Annual Meeting, either in person or represented by proxy, with respect to the election of directors, the threefour nominees receiving the greatest number of votes cast by the holders of the Common Stock entitled to vote on the matter will be elected as directors, and the affirmative vote of the holders of a majority of the shares of Common Stock present in person or represented by proxy at the Annual Meeting and entitled to vote on the matter is required for the approval of the ratification of Deloitte & Touche LLP as the Company’s Independent Auditor for fiscal year 2004,2005 and Stockholder Proposal Nos. 1No. 1. The affirmative vote of the holders of 75% of the total voting power of all shares of Common Stock entitled to vote on the matter is required for the approval of the Amendment of the Company’s Restated Certificate of Incorporation to declassify the Board of Directors and 2.provide for the annual election of all directors. There will be no cumulative voting in the election of directors. Under Delaware law, abstentions are treated as present and entitled to vote and thus, will be counted in determining whether a quorum is present and will have the effect of a vote against a matter, except for the election of directors in which case an abstention will have no effect. Shares held by brokers or nominees for which instructions have not been received from the beneficial owners or persons entitled to vote and for which the broker or nominee does not have discretionary power to vote on a particular matter (called “broker non-votes”), will be considered present for quorum purposes but not considered entitled to vote on that matter. Accordingly, broker non-votes will not have any impact on the vote on a matter.matter, except the proposed Amendment of the Company’s Restated Certificate of Incorporation, for which a broker non-vote will count as a vote against the proposed Amendment.

       Under the rules of the New York Stock Exchange (“NYSE”) in effect at the time this Proxy Statement was printed, if you hold your shares through a broker, your broker is permitted to vote your shares on “routine” matters, which includes the election of directors and the ratification of the Independent Auditor, even if the broker does not receive instructions from you. Your shares will only be voted with respect to the Amendment to the Restated Certificate of Incorporation to declassify the Board of Directors and provide for the annual election of all directors and Stockholder Proposal No. 1 if you have provided specific voting instructions to your broker.

       The following table sets forth information about the holders of the Common Stock known to the Company on March 3, 2004February 25, 2005 to own beneficially 5% or more of the Common Stock, based on filings by the holders with the Securities and Exchange Commission (“SEC”). For the purposes of this Proxy Statement, beneficial ownership of securities is defined in accordance with the rules of the SEC to mean generally the power to vote or dispose of securities regardless of any economic interest therein.

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PROPOSAL NO. 1
ELECTION OF DIRECTORS

       ThreeFour Class III directors will be elected at the Annual Meeting of Stockholders to serve for three-year terms expiring at the Annual Meeting of Stockholders expected to be held in April 2007.2008. However, if Proposal No. 3 to declassify the Company’s Board of Directors is adopted, all directors have agreed to stand for re-election at the Company’s 2006 Annual Meeting of Stockholders.

       The following table sets forth each nominee director’s name, all positions with the Company held by the nominee, the nominee’s principal occupation, age, year in which the nominee first became a director of the Company and class. Each nominee director has agreed to serve if elected.

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Information Concerning Directors Not Standing for Election

       The following table sets forth certain information for those directors whose present terms will continue after the Annual Meeting of Stockholders. The term of each Class III and Class III director expires at the 20052007 and 2006 Annual Meeting of Stockholders, respectively. If Proposal No. 3 to declassify the Company’s Board of Directors is adopted, all directors have agreed to stand for re-election at the 2006 Annual Meeting of Stockholders.

       Pursuant to the Company’s Bylaws, in case of a vacancy on the Board of Directors, a majority of the remaining directors will appoint a successor, and the director so elected will hold office for the remainder of the full term of the director whose death, retirement, resignation, disqualification or other cause created the vacancy, and thereafter until the election of a successor director. Mr. Richard D. Kinder has advised the Company that he is retiring as a director of the Company effective as of this Annual Meeting of Stockholders. Mr. Brady has been elected by the remaining Class II directors in accordance with the Company’s Bylaws to fill the vacancy created upon the retirement of Mr. Kinder. Mr. Brady will complete the term of Mr. Kinder and serve until the 2005 Annual Meeting of Stockholders.

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CORPORATE GOVERNANCE

     The Company’s Board of Directors believes that the purpose of corporate governance is to maximize stockholder value in a manner consistent with legal requirements and the highest standards of integrity. The Board has adopted and adheres to corporate governance practices, which practices the Board and management believe promote this purpose, are sound and represent best practices. The Board continually reviews these governance practices, Delaware law (the state in which the Company is incorporated), the rules and listings standards of the NYSE and SEC regulations, as well as best practices suggested by recognized governance authorities. The Board has established the Company’s Corporate Governance Guidelines (“Governance Guidelines”) as the principles of conduct of the Company’s business affairs to benefit its stockholders. Upon the recommendation of the Company’s Governance Committee, the Board has amended the Governance Guidelines tostockholders, which guidelines conform such guidelines to the final NYSE corporate governance listing standards and the recent rules promulgated by the SEC. The Governance Guidelines are attached as Annex A to this Proxy Statement and are also posted under the About“About Baker HughesHughes” section of the Company’s website at www.bakerhughes.com.www.bakerhughes.com and are also available upon request to the Company’s Corporate Secretary.

Board of Directors

     During the fiscal year ended December 31, 2003,2004, the Board of Directors held nine meetings and each director attended at least 75% of the total number of meetings of the Company’s Board of Directors and respective Committees on which he or she served, except for Messrs. Clarence P. Cazalot, Jr., and J. Larry Nichols, each of whom attended at least 70% of the total number of meetings of the Company’s Board of Directors and respective Committees on which they served. In fiscal year 2003,2004, each non-employee director was paid an annual retainer of $60,000, with each Committee Chairman receiving an additional annual fee of $10,000. Effective as of July 1, 2003, eachEach member of the Audit/Ethics Committee, including the Chairman, began receivingreceived an additional annual retainer fee of $5,000. Mr. Anthony G. Fernandes, received a one-time special payment of $10,000 for his services as Chairman of the Special Committee of the Board of Directors, which was formed in connection with the succession of Mr. Michael E. Wiley. Each non-employee director receivesreceived annual non-retainer equity in a total amount of $50,000, with $30,000 issued in the form of restricted shares of the Company’s Common Stock and $20,000 issued in the form of stock options in the Company’s Common Stock. Restricted stock grants in the amount of $15,000 and stock option grants in the amount of $10,000 will bewere made in January and July of each year starting in January 2003.2004. The restricted stock will vest upon retirement from the Company’s Board of Directors, and the stock options vest one-year from the date of grant. The Company used to providepreviously provided benefits under a Directors Retirement Plan, which plan remains in effect until all benefits accrued thereunder are paid in accordance with the current terms and conditions of that Plan. No additional benefits have been accrued under the Plan since December 31, 2001.

     Effective as of January 1, 2005, each non-employee director is paid an annual retainer of $60,000. The Audit/Ethics Committee Chairman receives an additional annual retainer of $20,000. Each of the other non-employee Committee Chairmen receives an additional annual retainer of $15,000. Each of the members of the Audit/Ethics Committee, excluding the Chairman, receives an additional annual retainer of $10,000. Each of the members, excluding the Chairmen of the Compensation, Finance and Governance Committees receives an additional annual retainer of $5,000. Each non-employee director also receives annual non-retainer equity in a total amount of $70,000, in the form of restricted shares of the Company’s Common Stock with $35,000 issued in January and July of each year starting in January 2005.

Director Independence

     All members of the Board of Directors, other than the Chairman/CEO,Chairman and Chief Executive Officer, Mr. Wiley,Deaton, satisfy the independence requirements of the NYSE. In addition, the Board has adopted a “Policy for Director Independence, Audit/Ethics Committee Members and Audit Committee Financial Expert” included as Exhibit C to the Governance Guidelines which isand attached as Annex A to this Proxy Statement. Such Policy supplements the independence requirements recently promulgated by the NYSE. Directors who meet these standards are considered to be “independent.” The Board has determined that the nominees for election at this Annual Meeting, Messrs. Djerejian, RileyBrady, Cazalot, Fernandes and Watson,Nichols, as

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well as all other directors, Ms. Gargalli and Messrs. Brady, Cazalot, Fernandes, Kinder,Djerejian, Lash, McCall, Riley and Nichols,Watson, other than Mr. Wiley,Deaton, meet these standards and are, therefore, considered to be independent directors.standards.

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Regularly Scheduled Executive Sessions of Non-Management Directors

     The Governance Guidelines provide for executive sessions of independent non-management directors to followbe held at every regularly scheduled meeting of the Board of Directors. The Governance Committee will reviewreviews and recommendrecommends to the Board a director to serve as Lead Director during executive sessions. Currently, Mr. Riley serves as Lead Director during executive sessions of independent non-management directors.

     Stockholders wishing to communicate directly with any director, including the Lead Director or non-management directors as a group, may do so as prescribed in the “Stockholder Communications with the Board of Directors” procedures included as Exhibit E to the Governance Guidelines, which is attached as Annex Aare posted under the “About Baker Hughes” section of the Company’s website at www.bakerhughes.com and are also available upon request to this Proxy Statement.the Company’s Corporate Secretary.

Committees of the Board

     The Board of Directors has, in addition to other committees, an Audit/Ethics Committee, a Compensation Committee and a Governance Committee. The Audit/Ethics Committee, Compensation Committee and Governance Committees are comprised solely of independent directors in accordance with NYSE corporate governance listing standards. The Board of Directors adopted revised charters for the Audit/Ethics, Compensation and Governance Committees that comply with the requirements of the NYSE standards, applicable provisions of the Sarbanes-Oxley Act of 2002 ( “SOX”(“SOX”) and SEC rules. Each of the charters has been posted and is available for public viewing under the About“About Baker HughesHughes” section of the Company’s website at www.bakerhughes.com.www.bakerhughes.com and are also available upon request to the Company’s Corporate Secretary.

     Audit/Ethics Committee.The Audit/Ethics Committee, which is comprised of Messrs. McCall (Chairman), Cazalot, Fernandes, Lash and Nichols, held 1311 meetings during fiscal year 2003.2004. The Board of Directors has determined that the Audit/Ethics Committee members meet the NYSE standards for independence.independence and the Company’s “Policy for Director Independence, Audit/Ethics Committee Members and Audit Committee Financial Expert.” The Audit/Ethics Committee Charter which was revised in July of 2003 and subsequently approved by the Board, is attached as Annex B to this Proxy Statement and can be accessed electronically under the About“About Baker HughesHughes” section of the Company’s website at www.bakerhughes.com.www.bakerhughes.com. The General Auditor and the Corporate internal audit function report directly to the Audit/Ethics Committee. The Company’s Corporate Audit Department sends written reports quarterly to the Audit/EthicsEthics. The Committee on its audit findings and the status of its internal audit projects. The Audit/Ethics Committee provides assistance to the Board of Directors in overseeing matters relating to the accounting and reporting practices of the Company, the adequacy of the Company’s disclosure controls and internal controls, the quality and integrity of the quarterly and annual financial statements of the Company, the performance of the Company’s internal audit function, the review and pre-approval of the current year audit and non-audit fees and the Company’s risk analysis and risk management procedures. In addition, the Audit/Ethics Committee oversees the Company’s compliance programs relating to legal and regulatory requirements. The Audit/Ethics Committee has developed “Procedures for the Receipt, Retention and Treatment of Complaints” to address complaints received by the Company regarding accounting, internal controls or auditing matters. Such procedures are included as Exhibit F to the Governance Guidelines. The Governance Guidelines which is attached as Annex Aare posted under the “About Baker Hughes” section of the Company’s website at www.bakerhughes.com and are also available upon request to this Proxy Statement.the Company’s Corporate Secretary.

     The Audit/Ethics Committee also is also responsible for the selection and hiring of the Company’s independent auditor. To promote independence of the audit, the Committee consults separately and jointly with the independent auditors,auditor, the internal auditors and management.

     The Board has reviewed the experience of the members of the Audit/Ethics Committee and has found that all five members of the Committee meet the qualifications to be an “audit committee financial expert” under the SEC rules issued pursuant to the SOX. In addition, the Board has designated Anthony G. Fernandes as the member of the Committee who will serveserves as the “audit committee financial expert” of the Company’s Audit/Ethics Committee.

     Compensation Committee.The Compensation Committee, which is comprised of Messrs. KinderRiley (Chairman), Brady, Djerejian, Riley, Watson and Ms. Gargalli, held fiveseven meetings during fiscal year 2003.2004. The Board of Directors has determined that the Compensation Committee members meet the NYSE standards for independence.independence and the Company’s “Policy for Director Independence, Audit/Ethics Committee Members and Audit Committee Financial Expert.” The Compensation Committee Charter which was revised in July of 2003 and subsequently approved by the Board can be accessed electronically under the About“About Baker HughesHughes” section of the Company’s website at www.bakerhughes.com.www.bakerhughes.com. The functions performed by the Compensation Committee

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include reviewing and approving Baker Hughes’ executive salary and bonus structure; reviewing Baker Hughes’ stock option plans (and making grants thereunder), employee retirement income plans, the employee thrift plan and the employee stock purchase plan; setting bonus

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goals; approving salary and bonus awards to key executives; recommending incentive compensation and stock award plans for approval by stockholders; and reviewing management succession plans.

Governance Committee.The Governance Committee, which is comprised of Messrs. RileyCazalot (Chairman), Cazalot, Djerejian, McCall, Riley and Watson, held threefour meetings during fiscal year 2003.2004. The Board of Directors has determined that the Governance Committee members meet the NYSE standards for independence.independence and the Company’s “Policy for Director Independence, Audit/Ethics Committee Members and Audit Committee Financial Expert.” A current copy of the Governance Committee Charter which was revised in July of 2003 and subsequently approved by the Board, can be accessed electronically under the About“About Baker HughesHughes” section of the Company’s website at www.bakerhughes.com.www.bakerhughes.com. The functions performed by the Governance Committee include overseeing the Company’s corporate governance affairs and monitoring compliance with the Governance Guidelines. In addition, the Governance Committee nominates candidates for the Board of Directors, selects candidates to fill vacancies on the Board, reviews the structure and composition of the Board, considers the qualifications required for continuing Board service and recommends directors’ fees.

     The Governance Committee has established, in accordance with the Company’s Bylaws regarding stockholder nominees, a policy that it will consider director candidates recommended by stockholders. Stockholders desiring to make such recommendations should submit, between October 18, 2004 and November 17, 2004, in accordance with the Company’s Bylaws and “Policy and Submission Procedures for Stockholder Recommended Director Candidates” included as Exhibit D to the Governance Guidelines attached as Annex A to this Proxy Statement, to: Chairman, Governance Committee of the Board of Directors, P.O. Box 4740, Houston, Texas 77210-4740, or to the Corporate Secretary c/o Baker Hughes Incorporated, 3900 Essex Lane, Suite 1200, Houston, Texas 77027-5177 and should be accompanied by substantially the same types of information as are required under the Company’s Bylaws for stockholder nominees.

     The Governance Committee has implemented policies regarding Board membership. The Governance Committee will consider candidates based upon the size and existing composition of the Board, the number and qualifications of candidates, the benefit of continuity on the Board and the relevance of the candidate’s background and experience to issues facing the Company. The criteria used for selecting directors are described in the Company’s “Guidelines for Membership on the Board of Directors,” included as Exhibit A to the Governance Guidelines, which are attached as Annex AC to this Proxy Statement. In addition, the Company has established a formal process for the selection of candidates, as described in the Company’s “Selection Process for New Board of Directors Candidates” included as Exhibit B to the Governance Guidelines which are attached as Annex AD to this Proxy Statement, and candidates are evaluated based on their background, experience and other relevant factors as described in the Guidelines for Membership on the Board of Directors. The Board or the Governance Committee will evaluate candidates properly proposed by stockholders in the same manner as all other candidates.

     The Governance Committee has established, in accordance with the Company’s Bylaws regarding stockholder nominees, a policy that it will consider director candidates recommended by stockholders. Recommendations that stockholders desire to make should be submitted between October 16, 2005 and November 15, 2005 in accordance with the Company’s Bylaws and “Policy and Submission Procedures for Stockholder Recommended Director Candidates” included as Exhibit D to the Governance Guidelines, which are posted under the “About Baker Hughes” section of the Company’s website at www.bakerhughes.com and are also available upon request to: Chairman, Governance Committee of the Board of Directors, P.O. Box 4740, Houston, Texas 77210-4740, or to the Corporate Secretary c/o Baker Hughes Incorporated, 3900 Essex Lane, Suite 1200, Houston, Texas 77027-5177 and should be accompanied by substantially the same types of information as are required under the Company’s Bylaws for stockholder nominees.

Each of the current nominees for director listed under the caption “Election of Directors” is an existing director standing for re-election. The Company has not paid any fee to a third party to identify or evaluate or to assist in identifying or evaluating potentialsuch nominees. In connection with the 20042005 Annual Meeting, the Governance Committee did not receive any recommendation for a nominee proposed from any stockholder or group of stockholders owning more than 5% of the Company’s Common Stock.stockholders.

Stockholder Communications with the Board of Directors

     The Company’s Annual Meeting provides an opportunity each year for stockholders to ask questions of or otherwise communicate directly with members of the Company’s Board of Directors on matters relevant to the Company. In accordance with the Company’s “Annual Meeting Director Attendance Policy,” which has been incorporated into the Governance Guidelines, attached as Annex A to this Proxy Statement, all directors and nominees for election as directors are requested and encouraged to personally attend the Company’s Annual Meeting. AllTen of the Company’s directors and director nominees attended the Company’s 20032004 Annual Meeting.

     In order to provide the Company’s stockholders and other interested parties with a direct and open line of communication to the Company’s Board of Directors, a process has been established for communications with any member of the Board of Directors, including the Company’s Lead Director, any of the Chairman of anyChairmen of the Company’s Governance Committee, Audit/Ethics Committee, Compensation Committee, Finance Committee or with the non-managementnon-

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management directors as a group. The procedures for “Stockholder Communications with the Board of Directors” are

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included as Exhibit E to the Governance Guidelines attached as Annex Aand can be accessed electronically under the “About Baker Hughes” section of the Company’s website at www.bakerhughes.com and are also available upon request to this Proxy Statement.the Company’s Corporate Secretary.

Business Code of Conduct

     The Company has a Business Code of Conduct that applies to all officers, directors and employees, which includes the code of ethics for the Company’s principal executive officer, principal financial officer, principal accounting officer or controller and all other persons performing similar functions within the meaning of the regulations adopted by the SEC under the SOX.securities laws and regulations. In addition, each of such officers has certified compliance with the Company’s Business Code of Conduct as well as with the applicable NYSE and SOX provisions. The Company’s Business Code of Conduct and Code of Ethical Conduct Certification are posted under the About“About Baker HughesHughes” section of the Company’s website at www.bakerhughes.com.www.bakerhughes.com and are also available upon request to the Company’s Corporate Secretary.

SECURITY OWNERSHIP OF MANAGEMENT

     Set forth below is certain information with respect to beneficial ownership of the Common Stock as of March 3, 2004February 25, 2005 by each director and director nominee, the persons named in the Summary Compensation Table below and the directors and executive officers as a group. The table includes transactions effected prior to the close of business on March 3, 2004.

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Under the Corporate Executive Loan Program, Mr. Andrew J. Szescila, retired Senior Vice President and Chief Operating Officer, received a loan from the Company on March 29, 1999, in the principal amount of $125,000. In December 2003, Mr. Szescila repaid prior to the March 29, 2004 maturity, the remaining $62,500 principal balance of his loan, together with interest at the rate of 6.2% per annum up to and including the date of payment. In accordance with the provisions of the SOX, the Company has discontinued the Corporate Executive Loan Program, with Mr. Szescila’s loan grandfathered since it was made prior to the enactment of the statute.

CHARITABLE CONTRIBUTIONS

     Within the preceding year, the Company did not make any contributions to any charitable organization in which an independent director served as an executive officer, which exceeded the greater of $1 million or 2% of the charitable organization’s consolidated gross revenues.

COMPLIANCE WITH SECTION 16(a)16(a) OF THE SECURITIES EXCHANGE ACT OF 1934

     Section 16(a) of the Securities Exchange Act of 1934, as amended (“Exchange Act”), requires executive officers, and directors and persons who beneficially own more than 10% of the Common Stock to file initial reports of ownership and reports of changes in ownership with the SEC and the NYSE. SEC regulations require executive officers, directors and greater than 10% beneficial owners to furnish the Company with copies of all Section 16(a) forms they file.

     Based solely on a review of the copies of those forms furnished to the Company and written representations from the executive officers and directors, the Company believes, that during its fiscal year ended December 31, 2003,2004, the Company’s executive officers and directors complied with all applicable Section 16(a) filing requirements.

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EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

     The following table sets forth the compensation earned by the Chief Executive Officer and the four most highly compensated executive officers of the Company for services rendered to the Company and its subsidiaries for the fiscal years ended December 31, 2004, 2003 2002 and 2001.2002. Compensation information is also included for Mr. Wiley who served as our Chief Executive Officer during our most recently completed fiscal year but retired prior to our fiscal-year end. Bonuses are paid under the Company’s applicable incentive compensation guidelines and are generally paid in the year following the year in which the bonus is earned.

	*Mr. Szescila	*Mr. Wiley retired on December 31, 2003October 25, 2004 and was not vested in the pension accountCompany contributed portion of his SRP or his Baker Hughes Pension Plan Account. Thus, Mr. SzescilaWiley is not eligible to receive the pension portions of these accounts.amounts.

(2)		See Footnote (1) to table in “– Stock Options Granted During 2003”2004” below.

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(5)(7)		On October 25, 2004, Mr. SzescilaDeaton was awarded 25,00080,000 shares of restricted Common Stock valued at $1,026,563 on January 24, 2001.$3,471,200. See Footnote (3)(6) to the table under the caption “Security Ownership of Management” above. After October 25, 2004, Mr. SzescilaDeaton received the Company’s ordinary dividend payment on the award on a quarterly basis in 2002.basis. The 25,000-share80,000-share award vests 25 percent on each of October 25, 2006, 2007, 2008 and 2009. At December 31, 2004, Mr. Deaton held 80,000 shares of restricted stock, valued at $3,413,600, based upon the three-year anniversaryclosing stock price of $42.67 per share of Common Stock on the award, January 24, 2004; however, the Board of Directors of the Company accelerated the vesting of the stock award toNYSE on December 31, 2003.2004.
	(6)(8)		On October 23, 2002, Mr. Finley was awarded 20,000 shares of restricted Common Stock valued at $554,600 on October 22, 2002.$554,600. See Footnote (4)(7) to the table under the caption “Security Ownership of Management” above. After October 23, 2002, Mr. Finley received the Company’s ordinary dividend payment on the award on a quarterly basis. The 20,000-share award vests on June 30, 2006. At December 31, 2003,2004, Mr. Finley held 20,000 shares of restricted stock, valued at $643,200,$853,400, based upon the closing stock price of $32.16$42.67 per share of Common Stock on the NYSE on December 31, 2003.
	(7)		Mr. Crain was appointed Vice President and General Counsel effective October 25, 2000. In 2001, Mr. Crain received other compensation in the amount of $182,885 related to his relocation to Houston (reflected in “Other Annual Compensation” for 2001).
	(8)		Mr. Clark was appointed President and Chief Operating Officer of the Company effective February 4, 2004. He served as Vice President, Marketing and Technology of the Company from August 2003 to February 2004.
(9)	(9)	On October 27, 2004, Mr. Clark was awarded 40,000 shares of restricted Common Stock valued at $1,768,000. See Footnote (8) to the table under the caption “Security Ownership of Management” above. After October 27, 2004, Mr. Clark received the Company’s ordinary dividend payment on the award on a quarterly basis. The 40,000-share award vests 25 percent on each of October 27, 2007 and 2008 with the remaining 50 percent vesting on October 27, 2009. At December 31, 2004, Mr. Clark held 40,000 shares of restricted stock, valued at $1,706,800 based upon the closing stock price of $42.67 per share of Common Stock on the NYSE on December 31, 2004.
(10)		Mr. Clark received a one-time, stock-matching award of 25,000 shares of restricted stock on September 2, 2002 valued at $687,500. After that date through December 3, 2003, Mr. Clark received a cash payment equivalent to the Company’s ordinary dividend payment on the award on a quarterly basis. As ofAfter December 3, 2003, Mr. Clark will receivereceived the ordinary quarterly cash dividendsdividend payment versus such cash payment equivalent. See Footnote (6)(8) to the table under the caption “Security Ownership of Management” above. At December 31, 2004, Mr. Clark held 25,000 shares of restricted stock, valued at $1,066,750, based upon the closing stock price of $42.67 per share of Common Stock on the NYSE on December 31, 2004.
(11)		On April 28, 2004, Mr. Crain was awarded 10,000 shares of restricted Common Stock valued at $382,700. See Footnote (9) to the table under the caption “Security Ownership of Management” above. After April 28, 2004, Mr. Crain received the Company’s ordinary dividend payment on the award on a quarterly basis. The 10,000-share award vests on April 28, 2008. At December 31, 2004, Mr. Crain held 10,000 shares of restricted stock, valued at $426,700, based upon the closing stock price of $42.67 per share of Common Stock on the NYSE on December 31, 2004.
(12)		On March 2, 2004, Mr. Wall was awarded 10,000 shares of restricted Common Stock valued at $384,200. See Footnote (10) to the table under the caption “Security Ownership of Management” above. After March 2, 2004, Mr. Wall received the Company’s ordinary dividend payment on the award on a quarterly basis. The 10,000-share award vests on March 2, 2008. At December 31, 2004, Mr. Wall held 10,000 shares of restricted stock, valued at $426,700, based upon the closing stock price of $42.67 per share of Common Stock on the NYSE on December 31, 2004.
(13)		Mr. Wall was appointed Group President, Completions and Production effective February 28, 2005. He served as President, Baker Oil Tools from 2003 to 2005.

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STOCK OPTIONS GRANTED DURING 20032004

     The following table sets forth certain information regarding stock options granted during fiscal year 20032004 to the persons named in the Summary Compensation Table above. The theoretical values on the date of the grant of stock options granted in 20032004 shown below are presented pursuant to SEC rules and are calculated using the Black-Scholes Model for pricing options. The theoretical values of options trading in the stock markets do not necessarily bear a relationship to the compensation cost to the Company or potential gain realized by an executive. The actual amount, if any, realized upon exercise of stock options will depend upon the market price of the Common Stock relative to the exercise price per share of the stock option at the time the stock option is exercised. There is no assurance that the theoretical values of stock options reflected in this table actually will be realized.

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AGGREGATED OPTION EXERCISES DURING 20032004
AND OPTION VALUES AT DECEMBER 31, 20032004

     The following table sets forth certain information regarding options that the persons named in the Summary Compensation Table above exercised during 20032004 and the options that those persons held at December 31, 2003.2004. The values of unexercised in-the-money stock options at December 31, 2003,2004, shown below, are presented pursuant to SEC rules. The actual amount, if any, realized upon exercise of stock options will depend upon the market price of the

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     Common Stock relative to the exercise price per share of the stock option at the time the stock option is exercised.

LONG-TERM INCENTIVE PLAN
AWARDS DURING 2003FOR 2004-2006 PERFORMANCE PERIOD