IBM’s model is the anti-model. Whichever country the company is working in, it has a game plan exclusively catered to it. It encompasses not only the determination of the customer needs, but also the provision of every aspect of the required technology solutions – including recurring maintenance, updating and even financing.
And financing is crucial these days. IBM’s long history in the world’s markets has given the company a recognition and credibility abroad, helping to mitigate competitive threats from unproven newcomers.
Its presence in India will yield dividends as India’s economy emerges from the global financial crisis.
IBM leaders have shrewdly increased the company’s investments in the fastest growth areas of the world, increasing its unparalleled geographic diversification as it keeps emphasizing its higher-value businesses – especially software, highly profitable middleware and services.
At the beginning of 2009, 71% of IBM’s nearly 400,000 employees are working overseas – a 65% increase from two years prior.
In fact, IBM incorporates the words “global” or “world” in nearly every sentence of the business strategy outlined in its annual earnings report of 2008.
“The Internet has enabled communication and collaboration across the world and brought with it a new computing model premised on continuous global connection. In that landscape, companies can distribute work and technology anywhere in the world,” the report said.
It continues: “At the same time, the current economic crisis increases the pressure on both businesses and governments around the world to adapt…. Given these opportunities and economic challenges, IBM is working with its clients to develop new business designs and technical architectures that allow their businesses the flexibility required to compete in this new landscape.”
IBM Boosts Profits with Business Overhaul
In addition to global diversification, IBM has also successfully employed a versatile and aggressive business model. Between 2000 and 2008, IBM acquired more than 100 companies and poured more than $50 billion into research and development.
In 2000, the distribution of IBM’s business model was: Hardware (24%), software (25%), financing (10%) and services (40%).
But by the end of last year, the model had evolved to: Hardware (9%), software (40%), financing (9%) and services (42%).
The result was a 130% increase in annual earnings per share (EPS) on more than 22% annual revenue growth in that span.
For 2008 – by far one of the worst years for companies around the world – IBM posted an 18.4% increase in net income and 23.9% increase in earnings per share. And IBM blew away analysts’ estimates with a fourth-quarter net income of $4.4 billion, or $3.38 a share – a 12% increase from 2007. Analysts had expected IBM to earn only $3.03 per share.
IMB will try to sell low-priced computer desktop applications to companies and governments in Africa, challenging Microsoft Corp. and other rivals in the region.
The applications include basic programs like word processing and email. They would be made available to customers via remote "cloud computing" facilities, meaning users could access the programs from the Web.
IBM is charging $10 per month per user, and can run on so-called netbook computers, or low-cost PCs priced around $300.
The IT industry in Africa is relatively small compared to Europe and the U.S., however, it is growing even in the recession. Analyst predicts it will rise 2.3% this year to $22.1 billion.
IBM aims to revolutionize the businesses in Africa. With emerging markets still developing despite recession, long IBM seems to be a good bet.
Tech giant IBM (IBM) retained its full-year earnings outlook, saying that service contracts are grew in January. "Recognizing that it is still early in the quarter, the company expects double-digit growth in long term signings, and growth in total signings in first quarter 2009,” IBM said in a regulatory filing, Reuters reported.
"We've upgraded IBM(IBM Quote - Cramer on IBM - Stock Picks) from hold to buy, driven by its impressive record of earnings per share growth, increase in net income, notable return on equity, expanding profit margins and relatively strong performance when compared with the S&P 500 during the past year. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook."