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International Business Machines 8-K 2011

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934

 

Date of Report:  January 18, 2011

(Date of earliest event reported)

 

INTERNATIONAL BUSINESS MACHINES
CORPORATION

(Exact name of registrant as specified in its charter)

 

New York

 

1-2360

 

13-0871985

(State of Incorporation)

 

(Commission File Number)

 

(IRS employer Identification No.)

 

 

 

 

 

ARMONK, NEW YORK

 

10504

(Address of principal executive offices)

 

(Zip Code)

 

914-499-1900

(Registrant’s telephone number)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

o            Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o            Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o            Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o            Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 



 

Item 2.02.   Results of Operations and Financial Condition.

 

The registrant’s press release dated January 18, 2011, regarding its financial results for the periods ended December 31, 2010, including consolidated financial statements for the periods ended December 31, 2010, is Attachment I of this Form 8-K.  Attachment II are the slides for IBM’s Chief Financial Officer Mark Loughridge’s fourth quarter earnings presentation on January 18, 2011, as well as certain reconciliation and other information (“Non-GAAP Supplementary Materials”) for information in Attachment I (press release), Attachment II (slides) and in Mr. Loughridge’s presentation. All of the information in Attachment I and II is hereby filed.

 

IBM’s web site (www.ibm.com) contains a significant amount of information about IBM, including financial and other information for investors (www.ibm.com/investor/).  IBM encourages investors to visit its various web sites from time to time, as information is updated and new information is posted.

 

2



 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

 

 

Date: January 18, 2011

 

 

 

 

 

 

By:

/s/ James J. Kavanaugh

 

 

 

 

 

James J. Kavanaugh

 

 

Vice President and Controller

 

3



 

ATTACMENT I

 

IBM REPORTS 2010 FOURTH-QUARTER AND FULL-YEAR RESULTS

 

Fourth-Quarter 2010:

 

·                  Diluted earnings per share of $4.18, up 16 percent;

·                  Record revenue of $29.0 billion, up 7 percent as reported and adjusting for currency;

·                  Record net income of $5.3 billion, up 9 percent;

·                  Pre-tax income of $7 billion, up 9 percent;

·                  Gross profit margin of 49 percent, up 0.8 points;

·                  Software revenue excluding divested PLM operations up 11 percent, 12 percent adjusting for currency; 7 percent including PLM;

·                  Systems and Technology revenue up 21 percent, 22 percent adjusting for currency;

·                  System z mainframe revenue up 69 percent; MIPS up 58 percent;

·                  Services revenue up 2 percent as reported and adjusting for currency;

·                  Services backlog of $142 billion, up $5 billion year over year and up $8 billion quarter to quarter;

·                  Growth markets revenue up 15 percent, 13 percent adjusting for currency;

·                  Business analytics revenue up 19 percent;

·                  Free cash flow of $8.7 billion, up $1.5 billion.

 

Full-Year 2010:

 

·                  Diluted earnings per share of $11.52, up 15 percent and $0.52 ahead of high end of 2010 roadmap; 8th consecutive year of double-digit EPS growth;

·                  Revenue of $99.9 billion, up 4 percent, up 3 percent adjusting for currency; up 5 percent, 4 percent adjusting for currency, excluding PLM operations;

·                  Record net income of $14.8 billion, up 10 percent;

·                  Record free cash flow of $16.3 billion, up $1.2 billion;

·                  Gross profit margin of 46.1 percent, 7th consecutive year of increase.

 

Full-Year 2011:

 

·                  Expect GAAP EPS of at least $12.56 and operating (non-GAAP) EPS of at least $13.00, on track for 2015 roadmap.

 

ARMONK, N.Y., January 18, 2011 . . . IBM (NYSE: IBM) today announced fourth-quarter 2010 diluted earnings of $4.18 per share, compared with diluted earnings of $3.59 per share in the fourth quarter of 2009, an increase of 16 percent.

 

Fourth-quarter net income was $5.3 billion compared with $4.8 billion in the fourth quarter of 2009, an increase of 9 percent.  Total revenues for the fourth quarter of 2010 of $29.0 billion increased 7 percent (7 percent, adjusting for currency) from the fourth quarter of 2009.

 

“We completed an outstanding year, with record profit and free cash flow, and exceeded the high end of our 2010 earnings per share roadmap objective,” said Samuel J. Palmisano, IBM chairman, president and chief executive officer.  “We also capped a decade in which our shift to high-value businesses, our global integration of IBM, our investment in research and development of almost $60 billion and our acquisition of 116 companies have helped us to nearly triple our EPS and return more than $100 billion to shareholders.

 

“As IBM enters its second century, we will continue to focus on our long-term strategic initiatives — growth markets, Smarter Planet Solutions, cloud and business analytics — as we drive to achieve our new roadmap target of operating earnings per share of at least $20 in 2015.”

 



 

Full-Year 2011 Expectations

 

IBM said that it expects to deliver full-year 2011 GAAP earnings per share of at least $12.56; and operating (non-GAAP) earnings per share of at least $13.00, which puts the company on track for the 2015 road map of at least $20 of operating (non-GAAP) earnings per share.  The 2011 operating (non-GAAP) earnings exclude $0.44 per share for the amortization of purchased intangible assets, other acquisition-related charges and certain retirement-related costs that the company has defined as non-operating.

 

The company announced in May 2010 that it would begin using operating (non-GAAP) earnings as the basis for its 2015 roadmap, quarterly earnings reporting and future EPS guidance.

 

Geographic Regions

 

The Americas’ fourth-quarter revenues were $12.2 billion, an increase of 9 percent (9 percent, adjusting for currency) from the 2009 period.  Revenues from Europe/Middle East/Africa were $9.5 billion, down 2 percent (up 4 percent, adjusting for currency).  Asia-Pacific revenues increased 14 percent (7 percent, adjusting for currency) to $6.6 billion.  OEM revenues were $784 million, up 21 percent compared with the 2009 fourth quarter.

 

Growth Markets

 

Revenues from the company’s growth markets organization increased 15 percent (13 percent, adjusting for currency).  Revenues in the BRIC countries — Brazil, Russia, India and China — increased 19 percent (17 percent, adjusting for currency), and a total of 50 growth market countries had double-digit revenue growth.  For the full year, growth markets revenue represents 21 percent of IBM’s total geographic revenue.

 

Services

 

Total Global Services revenues increased 2 percent (2 percent, adjusting for currency).  Global Technology Services segment revenues increased 1 percent (1 percent, adjusting for currency) to $10.2 billion.  Global Business Services segment revenues were up 4 percent (4 percent, adjusting for currency) at $4.8 billion.

 

Global Services pre-tax income increased to $2.4 billion, up 3 percent year over year.  Pre-tax income from Global Technology Services increased 6 percent; pre-tax margin increased to 15.8 percent.  Global Business Services pre-tax income decreased 3 percent; pre-tax margin decreased to 15.0 percent.

 

The estimated services backlog at December 31 was $142 billion, up $8 billion quarter to quarter ($7 billion, adjusting for currency), and $5 billion year over year at actual rates ($4 billion, adjusting for currency).  IBM signed services contracts in the quarter of $22.1 billion, up 18 percent (18 percent, adjusting for currency), of which 19 contracts were greater than $100 million.  Transactional signings were $8.0 billion, an increase of 8 percent (9 percent, adjusting for currency).  Outsourcing signings were $14.1 billion, up 24 percent (23 percent, adjusting for currency).

 

Software

 

Revenues from the Software segment were $7.0 billion, an increase of 7 percent (8 percent, adjusting for currency), or 11 percent (12 percent, adjusting for currency) excluding the first-quarter 2010 divestiture of the Product Lifecycle Management operations (PLM), compared with the fourth quarter of 2009.  Software pre-tax income of $3.2 billion increased 4 percent year over year.

 

Revenues from IBM’s key middleware products, which include WebSphere,  Information Management, Tivoli, Lotus and Rational products, were $4.7 billion, an increase of 13 percent (15 percent, adjusting for currency) versus the fourth quarter of 2009.  Operating systems revenues of $690 million increased 11 percent (12 percent, adjusting for currency) compared with the prior-year quarter.

 



 

Revenues from the WebSphere family of software products increased 32 percent year over year.  Information Management software revenues increased 10 percent.  Revenues from Tivoli software increased 12 percent.  Revenues from Lotus software decreased 3 percent, and Rational software increased 10 percent.

 

Revenues from the company’s business analytics operations across services and software segments increased 19 percent.

 

Hardware

 

Revenues from the Systems and Technology segment totaled $6.3 billion for the quarter, up 21 percent (22 percent, adjusting for currency) from the fourth quarter of 2009.  Systems and Technology pre-tax income was $1.2 billion, an increase of 45 percent.

 

Systems revenues increased 20 percent (21 percent, adjusting for currency).  Revenues from System z mainframe server products increased 69 percent compared with the year-ago period.  Total delivery of System z computing power, as measured in MIPS (millions of instructions per second), increased 58 percent.  Revenues from System x increased 18 percent.  Revenues from Power Systems increased 2 percent compared with the 2009 period; entry systems revenues were up 30 percent and mid-range systems grew 7 percent.  Revenues from System Storage increased 8 percent, and revenues from Retail Store Solutions increased 26 percent year over year.  Revenues from Microelectronics OEM increased 30 percent.

 

Financing

 

Global Financing segment revenues increased 1 percent (1 percent, adjusting for currency) in the fourth quarter to $628 million.  Pre-tax income for the segment increased 14 percent to $567 million.

 

***

 

The company’s total gross profit margin was 49.0 percent in the 2010 fourth quarter compared with 48.3 percent in the 2009 fourth-quarter period, with increases in Systems and Technology and Software.

 

Total expense and other income increased 7 percent to $7.3 billion compared with the prior-year period.  SG&A expense of $6.0 billion increased 7 percent year over year compared with prior-year expense.  RD&E expense of $1.6 billion increased 8 percent compared with the year-ago period.  Intellectual property and custom development income increased to $318 million compared with $313 million a year ago.  Other (income) and expense was income of $42 million compared with prior-year income of $24 million.  Interest expense increased to $102 million compared with $81 million in the prior year.

 

Pre-tax income increased 9 percent to $7.0 billion.  Pre-tax margin was 24.0 percent, up 0.5 points.

 

IBM’s tax rate was 24.4 percent, down 0.2 points year over year.

 

Net income margin increased 0.4 points to 18.1 percent.

 

The weighted-average number of diluted common shares outstanding in the fourth-quarter 2010 was 1.26 billion compared with 1.34 billion shares in the same period of 2009.

 

Full-Year 2010 Results

 

Net income for the year ended December 31, 2010 was $14.8 billion compared with $13.4 billion in the year-ago period, an increase of 10 percent.  Diluted earnings were $11.52 per share compared with $10.01 per diluted share in 2009, an increase of 15 percent, the 8th consecutive year of double-digit EPS growth.  Revenues for 2010 totaled $99.9 billion, an increase of 4 percent (3 percent, adjusting for currency), compared with $95.8 billion in 2009.

 

From a geographic perspective, the Americas’ full-year revenues were $42.0 billion, an increase of 5 percent (3 percent, adjusting for currency) from the 2009 period.  Revenues from Europe/Middle East/Africa were $31.9 billion, a

 



 

decrease of 2 percent (up 1 percent, adjusting for currency).  Asia-Pacific revenues increased 12 percent (5 percent, adjusting for currency) to $23.2 billion.  OEM revenues were $2.8 billion, up 23 percent compared with 2009.

 

Revenues from the company’s growth markets organization increased 16 percent (11 percent, adjusting for currency).

 

Total Global Services revenues increased 3 percent (1 percent, adjusting for currency).  Revenues from the Global Technology Services segment totaled $38.2 billion, an increase of 2 percent (1 percent, adjusting for currency) compared with 2009.  Revenues from the Global Business Services segment were $18.2 billion, up 3 percent (2 percent, adjusting for currency).  Total services signings were $57.7 billion.  Software segment revenues in 2010 totaled $22.5 billion, an increase of 5 percent (5 percent, adjusting for currency).  Systems and Technology segment revenues were $18.0 billion, an increase of 11 percent (11 percent, adjusting for currency).  Global Financing segment revenues totaled $2.2 billion, a decrease of 3 percent (4 percent, adjusting for currency).

 

The company’s total gross profit margin was 46.1 percent in 2010 compared with 45.7 percent in 2009, with increases in Systems and Technology and Software.  Overall gross profit margins improved year over year for the 7th consecutive year.

 

The weighted-average number of diluted common shares outstanding in 2010 was 1.29 billion compared with 1.34 billion shares in 2009.  As of December 31, 2010, there were 1.23 billion basic common shares outstanding.

 

Debt, including Global Financing, totaled $28.6 billion, compared with $26.1 billion at year-end 2009.  From a management segment view, Global Financing debt totaled $22.8 billion versus $22.4 billion at year-end 2009, resulting in a debt-to-equity ratio of 7.0 to 1.  Non-global financing debt totaled $5.8 billion, an increase of $2.1 billion since year-end 2009, resulting in a debt-to-capitalization ratio of 22.6 percent from 16.0 percent.

 

IBM ended 2010 with $11.7 billion of cash on hand and generated free cash flow of $16.3 billion excluding Global Financing receivables, up approximately $1.2 billion year over year.  The company returned $18.6 billion to shareholders through $3.2 billion in dividends and $15.4 billion of share repurchases.  The balance sheet remains strong, and the company is well positioned to support the business over the long term.

 

Forward-Looking and Cautionary Statements

 

Except for the historical information and discussions contained herein, statements contained in this release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on the company’s current assumptions regarding future business and financial performance.  These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially, including the following: a downturn in economic environment and corporate IT spending budgets; the company’s failure to meet growth and productivity objectives, a failure of the company’s innovation initiatives; risks from investing in growth opportunities; failure of the company’s intellectual property portfolio to prevent competitive offerings and the failure of the company to obtain necessary licenses; breaches of data security; fluctuations in revenue and purchases, impact of local legal, economic, political and health conditions; adverse effects from environmental matters, tax matters and the company’s pension plans; ineffective internal controls; the company’s use of accounting estimates; the company’s ability to attract and retain key personnel and its reliance on critical skills; impact of relationships with critical suppliers; currency fluctuations and customer financing risks; impact of changes in market liquidity conditions and customer credit risk on receivables; reliance on third party distribution channels; the company’s ability to successfully manage acquisitions and alliances; risk factors related to IBM securities; and other risks, uncertainties and factors discussed in the company’s Form 10-Q, Form 10-K and in the company’s other filings with the U.S. Securities and Exchange Commission (SEC) or in materials incorporated therein by reference.  Any forward-looking statement

 



 

in this release speaks only as of the date on which it is made.  The company assumes no obligation to update or revise any forward-looking statements.

 

Presentation of Information in this Press Release

 

In an effort to provide investors with additional information regarding the company’s results as determined by generally accepted accounting principles (GAAP), the company has also disclosed in this press release the following non-GAAP information which management believes provides useful information to investors:

 

IBM results and expectations —

 

·                  presenting operating earnings per share expectations;

·                  presenting non-global financing debt-to-capitalization ratio;

·                  adjusting for free cash flow;

·                  adjusting for currency (i.e., at constant currency);

·                  excluding divested PLM operations.

 

The rationale for management’s use of non-GAAP measures is included as part of the supplementary materials presented within the fourth-quarter earnings materials.  These materials are available on the IBM investor relations Web site at www.ibm.com/investor and are being included in Attachment II (“Non-GAAP Supplementary Materials”) to the Form 8-K that includes this press release and is being submitted today to the SEC.

 

Conference Call and Webcast

 

IBM’s regular quarterly earnings conference call is scheduled to begin at 4:30 p.m. EST, today.  Investors may participate by viewing the Webcast at www.ibm.com/investor/4q10.  Presentation charts will be available on the Web site shortly before the Webcast.

 



 

Financial Results Below (certain amounts may not add due to use of rounded numbers; percentages presented are calculated from the underlying whole-dollar amounts).

 

INTERNATIONAL BUSINESS MACHINES CORPORATION

COMPARATIVE FINANCIAL RESULTS

(Dollars in millions except per share amounts)

 

 

 

Three Months

 

 

 

Twelve Months

 

 

 

 

 

Ended December 31,

 

Percent

 

Ended December 31,

 

Percent

 

 

 

2010

 

2009

 

Change

 

2010

 

2009

 

Change

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

REVENUE

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Global Technology Services

 

$

10,165

 

$

10,051

 

1.1

%

$

38,201

 

$

37,347

 

2.3

%

Gross margin

 

34.7

%

35.8

%

 

 

34.7

%

35.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Global Business Services

 

4,758

 

4,579

 

3.9

%

18,223

 

17,653

 

3.2

%

Gross margin

 

28.3

%

30.3

%

 

 

28.3

%

28.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Software

 

7,039

 

6,577

 

7.0

%

22,485

 

21,396

 

5.1

%

Gross margin

 

88.5

%

87.7

%

 

 

86.9

%

86.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Systems and Technology

 

6,277

 

5,190

 

21.0

%

17,973

 

16,190

 

11.0

%

Gross margin

 

43.9

%

42.5

%

 

 

38.5

%

37.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Global Financing

 

628

 

621

 

1.2

%

2,238

 

2,302

 

-2.8

%

Gross margin

 

51.8

%

52.0

%

 

 

51.3

%

47.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

151

 

213

 

-29.0

%

750

 

869

 

-13.7

%

Gross margin

 

25.5

%

-62.4

%

 

 

-0.9

%

11.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL REVENUE

 

29,019

 

27,230

 

6.6

%

99,870

 

95,758

 

4.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GROSS PROFIT

 

14,227

 

13,145

 

8.2

%

46,014

 

43,785

 

5.1

%

Gross margin

 

49.0

%

48.3

%

 

 

46.1

%

45.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EXPENSE AND OTHER INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

S,G&A

 

5,951

 

5,560

 

7.0

%

21,837

 

20,952

 

4.2

%

% of revenue

 

20.5

%

20.4

%

 

 

21.9

%

21.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

R,D&E

 

1,578

 

1,461

 

8.0

%

6,026

 

5,820

 

3.5

%

% of revenue

 

5.4

%

5.4

%

 

 

6.0

%

6.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Intellectual property and custom development income

 

(318

)

(313

)

1.6

%

(1,154

)

(1,177

)

-1.9

%

Other (income) and expense

 

(42

)

(24

)

70.5

%

(787

)

(351

)

124.5

%

Interest expense

 

102

 

81

 

25.6

%

368

 

402

 

-8.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL EXPENSE AND OTHER INCOME

 

7,271

 

6,765

 

7.5

%

26,291

 

25,647

 

2.5

%

% of revenue

 

25.1

%

24.8

%

 

 

26.3

%

26.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME BEFORE INCOME TAXES

 

6,956

 

6,381

 

9.0

%

19,723

 

18,138

 

8.7

%

Pre-tax margin

 

24.0

%

23.4

%

 

 

19.7

%

18.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

1,698

 

1,568

 

8.3

%

4,890

 

4,713

 

3.8

%

Effective tax rate

 

24.4

%

24.6

%

 

 

24.8

%

26.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME

 

$

5,257

 

$

4,813

 

9.2

%

$

14,833

 

$

13,425

 

10.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net margin

 

18.1

%

17.7

%

 

 

14.9

%

14.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EARNINGS PER SHARE OF COMMON STOCK:

 

 

 

 

 

 

 

 

 

 

 

 

 

ASSUMING DILUTION

 

$

4.18

 

$

3.59

 

16.4

%

$

11.52

 

$

10.01

 

15.1

%

BASIC

 

$

4.24

 

$

3.65

 

16.2

%

$

11.69

 

$

10.12

 

15.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

WEIGHTED-AVERAGE NUMBER OF COMMON SHARES OUT-STANDING (M’s):

 

 

 

 

 

 

 

 

 

 

 

 

 

ASSUMING DILUTION

 

1,258.4

 

1,340.7

 

 

 

1,287.4

 

1,341.4

 

 

 

BASIC

 

1,240.1

 

1,318.4

 

 

 

1,268.8

 

1,327.2

 

 

 

 


 


 

INTERNATIONAL BUSINESS MACHINES CORPORATION

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

 

 

 

At December 31,

 

At December 31,

 

(Dollars in Millions)

 

2010

 

2009

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

Cash and cash equivalents

 

$

10,661

 

$

12,183

 

Marketable securities

 

990

 

1,791

 

Notes and accounts receivable - trade (net of allowances of $324 in 2010 and $217 in 2009)

 

10,834

 

10,736

 

Short-term financing receivables (net of allowances of $342 in 2010 and $438 in 2009)

 

16,257

 

14,914

 

Other accounts receivable (net of allowances of $10 in 2010 and $15 in 2009)

 

1,134

 

1,143

 

Inventories, at lower of average cost or market:

 

 

 

 

 

Finished goods

 

432

 

533

 

Work in process and raw materials

 

2,018

 

1,960

 

Total inventories

 

2,450

 

2,494

 

Deferred taxes

 

1,564

 

1,730

 

Prepaid expenses and other current assets

 

4,226

 

3,946

 

Total Current Assets

 

48,116

 

48,935

 

 

 

 

 

 

 

Plant, rental machines, and other property

 

40,289

 

39,596

 

Less: Accumulated depreciation

 

26,193

 

25,431

 

Plant, rental machines, and other property - net

 

14,096

 

14,165

 

Long-term financing receivables (net of allowances of $58 in 2010 and $97 in 2009)

 

10,548

 

10,644

 

Prepaid pension assets

 

3,068

 

3,001

 

Deferred taxes

 

3,220

 

4,195

 

Goodwill

 

25,136

 

20,190

 

Intangible assets - net

 

3,488

 

2,513

 

Investments and sundry assets

 

5,778

 

5,379

 

Total Assets

 

$

113,452

 

$

109,022

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

Taxes

 

$

4,216

 

$

3,826

 

Short-term debt

 

6,778

 

4,168

 

Accounts payable

 

7,804

 

7,436

 

Compensation and benefits

 

5,028

 

4,505

 

Deferred income

 

11,580

 

10,845

 

Other accrued expenses and liabilities

 

5,156

 

5,223

 

 

 

 

 

 

 

Total Current Liabilities

 

40,562

 

36,002

 

 

 

 

 

 

 

Long-term debt

 

21,846

 

21,932

 

Retirement and nonpension postretirement benefit obligations

 

15,978

 

15,953

 

Deferred income

 

3,666

 

3,562

 

Other liabilities

 

8,226

 

8,819

 

Total Liabilities

 

90,279

 

86,267

 

 

 

 

 

 

 

Contingencies and Commitments

 

 

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

IBM Stockholders’ Equity:

 

 

 

 

 

Common stock

 

45,418

 

41,810

 

Retained earnings

 

92,532

 

80,900

 

Treasury stock — at cost

 

(96,161

)

(81,243

)

Accumulated other comprehensive income/(loss)

 

(18,743

)

(18,830

)

Total IBM stockholders’ equity

 

23,046

 

22,637

 

 

 

 

 

 

 

Noncontrolling interests

 

126

 

118

 

Total Equity

 

23,172

 

22,755

 

Total Liabilities and Equity

 

$

113,452

 

$

109,022

 

 



 

INTERNATIONAL BUSINESS MACHINES CORPORATION

CASH FLOW ANALYSIS

 

 

 

Three Months Ended

 

Twelve Months Ended

 

 

 

December 31,

 

December 31,

 

(Dollars in Millions)

 

2010

 

2009

 

2010

 

2009

 

 

 

 

 

 

 

 

 

 

 

Net Cash from Operations

 

$

6,795

 

$

6,448

 

$

19,549

 

$

20,773

 

 

 

 

 

 

 

 

 

 

 

Less: Global Financing (GF) Accounts Receivable

 

(2,991

)

(1,932

)

(734

)

1,899

 

 

 

 

 

 

 

 

 

 

 

Net Cash from Operations (Excluding GF Accounts Receivable)

 

9,786

 

8,380

 

20,283

 

18,873

 

 

 

 

 

 

 

 

 

 

 

Net Capital Expenditures

 

(1,103

)

(1,150

)

(3,984

)

(3,747

)

 

 

 

 

 

 

 

 

 

 

Free Cash Flow (Excluding GF Accounts Receivable)

 

8,683

 

7,230

 

16,299

 

15,127

 

 

 

 

 

 

 

 

 

 

 

Acquisitions

 

(2,928

)

(1,069

)

(5,922

)

(1,194

)

Divestitures

 

55

 

(6

)

55

 

400

 

Share Repurchase

 

(3,601

)

(3,063

)

(15,375

)

(7,429

)

Dividends

 

(808

)

(727

)

(3,177

)

(2,860

)

Non-GF Debt

 

745

 

1,475

 

2,279

 

(4,709

)

Other (including GF Accounts Receivable, GF Debt)

 

(1,582

)

(1,379

)

3,518

 

1,731

 

 

 

 

 

 

 

 

 

 

 

Change in Cash and Marketable Securities

 

$

564

 

$

2,461

 

$

(2,322

)

$

1,066

 

 



 

INTERNATIONAL BUSINESS MACHINES CORPORATION

SEGMENT DATA

 

 

 

FOURTH-QUARTER 2010

 

 

 

 

 

Revenue

 

 

 

Pre-tax

 

Pre-tax

 

(Dollars in Millions)

 

External 

 

Internal

 

Total

 

Income

 

Margin

 

 

 

 

 

 

 

 

 

 

 

 

 

SEGMENTS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Global Technology Services

 

$

10,165

 

$

299

 

$

10,464

 

$

1,657

 

15.8

%

Y-T-Y Change

 

1.1

%

-13.9

%

0.6

%

6.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Global Business Services

 

4,758

 

199

 

4,957

 

746

 

15.0

%

Y-T-Y Change

 

3.9

%

-8.3

%

3.3

%

-2.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Software

 

7,039

 

774

 

7,813

 

3,172

 

40.6

%

Y-T-Y Change

 

7.0

%

-2.4

%

6.0

%

3.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Systems and Technology

 

6,277

 

232

 

6,509

 

1,208

 

18.6

%

Y-T-Y Change

 

21.0

%

-0.1

%

20.1

%

45.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Global Financing

 

628

 

575

 

1,203

 

567

 

47.1

%

Y-T-Y Change

 

1.2

%

11.0

%

5.7

%

14.0

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL REPORTABLE SEGMENTS

 

$

28,867

 

$

2,079

 

$

30,947

 

7,349

 

23.7

%

Y-T-Y Change

 

6.8

%

-1.3

%

6.3

%

9.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Eliminations / Other

 

151

 

(2,079

)

(1,928

)

(394

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL IBM CONSOLIDATED

 

$

29,019

 

$

0

 

$

29,019

 

$

6,956

 

24.0

%

Y-T-Y Change

 

6.6

%

 

 

6.6

%

9.0

%

 

 

 

 

 

FOURTH-QUARTER 2009

 

 

 

 

 

Revenue

 

 

 

Pre-tax

 

Pre-tax

 

(Dollars in Millions)

 

External 

 

Internal

 

Total

 

Income

 

Margin

 

 

 

 

 

 

 

 

 

 

 

 

 

SEGMENTS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Global Technology Services

 

$

10,051

 

$

347

 

$

10,398

 

$

1,556

 

15.0

%

 

 

 

 

 

 

 

 

 

 

 

 

Global Business Services

 

4,579

 

217

 

4,796

 

766

 

16.0

%

 

 

 

 

 

 

 

 

 

 

 

 

Software

 

6,577

 

793

 

7,370

 

3,058

 

41.5

%

 

 

 

 

 

 

 

 

 

 

 

 

Systems and Technology

 

5,190

 

232

 

5,422

 

832

 

15.4

%

 

 

 

 

 

 

 

 

 

 

 

 

Global Financing

 

621

 

518

 

1,139

 

497

 

43.6

%

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL REPORTABLE SEGMENTS

 

$

27,017

 

$

2,108

 

$

29,125

 

$

6,710

 

23.0

%

 

 

 

 

 

 

 

 

 

 

 

 

Eliminations / Other

 

213

 

(2,108

)

(1,894

)

(329

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL IBM CONSOLIDATED

 

$

27,230

 

$

0

 

$

27,230

 

$

6,381

 

23.4

%

 



 

INTERNATIONAL BUSINESS MACHINES CORPORATION

SEGMENT DATA

 

 

 

TWELVE-MONTHS 2010

 

 

 

 

 

Revenue

 

 

 

Pre-tax

 

Pre-tax

 

(Dollars in Millions)

 

External 

 

Internal

 

Total

 

Income

 

Margin

 

 

 

 

 

 

 

 

 

 

 

 

 

SEGMENTS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Global Technology Services

 

$

38,201

 

$

1,313

 

$

39,514

 

$

5,568

 

14.1

%

Y-T-Y Change

 

2.3

%

-5.3

%

2.0

%

0.6

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Global Business Services

 

18,223

 

798

 

19,021

 

2,569

 

13.5

%

Y-T-Y Change

 

3.2

%

-10.0

%

2.6

%

0.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Software

 

22,485

 

2,950

 

25,436

 

9,097

 

35.8

%

Y-T-Y Change

 

5.1

%

10.2

%

5.7

%

12.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Systems and Technology

 

17,973

 

804

 

18,777

 

1,586

 

8.4

%

Y-T-Y Change

 

11.0

%

-11.8

%

9.8

%

11.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Global Financing

 

2,238

 

1,842

 

4,080

 

1,959

 

48.0

%

Y-T-Y Change

 

-2.8

%

3.8

%

0.1

%

13.3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL REPORTABLE SEGMENTS

 

$

99,120

 

$

7,707

 

$

106,827

 

$

20,778

 

19.5

%

Y-T-Y Change

 

4.5

%

0.9

%

4.2

%

7.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Eliminations / Other

 

750

 

(7,707

)

(6,956

)

(1,055

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL IBM CONSOLIDATED

 

$

99,870

 

$

0

 

$

99,870

 

$

19,723

 

19.7

%

Y-T-Y Change

 

4.3

%

 

 

4.3

%

8.7

%

 

 

 

 

 

TWELVE-MONTHS 2009

 

 

 

 

 

Revenue

 

 

 

Pre-tax

 

Pre-tax

 

(Dollars in Millions)

 

External 

 

Internal

 

Total

 

Income

 

Margin

 

 

 

 

 

 

 

 

 

 

 

 

 

SEGMENTS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Global Technology Services

 

$

37,347

 

$

1,386

 

$

38,734

 

$

5,537

 

14.3

%

 

 

 

 

 

 

 

 

 

 

 

 

Global Business Services

 

17,653

 

887

 

18,540

 

2,555

 

13.8

%

 

 

 

 

 

 

 

 

 

 

 

 

Software

 

21,396

 

2,677

 

24,073

 

8,095

 

33.6

%

 

 

 

 

 

 

 

 

 

 

 

 

Systems and Technology

 

16,190

 

911

 

17,102

 

1,419

 

8.3

%

 

 

 

 

 

 

 

 

 

 

 

 

Global Financing

 

2,302

 

1,774

 

4,076

 

1,730

 

42.4

%

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL REPORTABLE SEGMENTS

 

$

94,889

 

$

7,635

 

$

102,524

 

$

19,335

 

18.9

%

 

 

 

 

 

 

 

 

 

 

 

 

Eliminations / Other

 

869

 

(7,635

)

(6,766

)

(1,197

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL IBM CONSOLIDATED

 

$

95,758

 

$

0

 

$

95,758

 

$

18,138

 

18.9

%

 



 

Contact:

IBM

 

Mike Fay, 914/499-6107

 

mikefay@us.ibm.com

 

 

 

John Bukovinsky, 732/618-3531

 

jbuko@us.ibm.com

 


 


 

ATTACMENT II

 

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 4Q 2010 Earnings Presentation January 18, 2011

 


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Forward Looking Statements Certain comments made in this presentation may be characterized as forward looking under the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on the company's current assumptions regarding future business and financial performance. Those statements by their nature address matters that are uncertain to different degrees. Those statements involve a number of factors that could cause actual results to differ materially. Additional information concerning these factors is contained in the Company's filings with the SEC. Copies are available from the SEC, from the IBM web site, or from IBM Investor Relations. Any forward-looking statement made during this presentation speaks only as of the date on which it is made. The company assumes no obligation to update or revise any forward-looking statements. These charts and the associated remarks and comments are integrally related, and are intended to be presented and understood together.

 


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4Q 2010 Financial Highlights 32nd consecutive quarter of EPS growth Best constant currency revenue growth in a decade, led by Hardware and Software Systems & Technology +22% yr/yr @CC with growth in all platforms Software +12% yr/yr @CC, excluding PLM divestiture Growth markets +13% yr/yr @CC Services backlog of $142B, up $4B yr/yr and $7B qtr/qtr excluding currency Continued margin expansion +$1.5B yr/yr $8.7B Free Cash Flow* +7% yr/yr $29.0B Revenue +16% yr/yr $4.18 EPS * Excluding Global Financing Receivables

 


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4Q 2010 Financial Summary 0.5 pts 24.0% PTI Margin 16% $4.18 EPS 6% 1,258.4 Shares (Diluted) (M) 9% $5.3 Net Income 0.2 pts 24.4% Tax Rate 9% $7.0 Pre-Tax Income (7%) $7.3 Expense 0.8 pts 49.0% GP % 7% @CC 7% $29.0 Revenue B/(W) Yr/Yr 4Q10 $ in Billions, except EPS Strong revenue growth drives profit performance

 


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4Q Earnings Presentation Agenda 4Q Highlights 2010 Roadmap Recap 4Q Results and FY 2010 Summary 2015 Roadmap

 


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2010 Long-Term EPS Roadmap (May 2007) 2006 EPS Estimated 2010 EPS (Base) 2010 EPS w/o Retirement Related Yr/Yr 2010 EPS Objective Retirement Related Yr/Yr Costs Historical Revenue Growth of 3% Margin Expansion Share Repurchases Growth Initiatives Future Acquisitions ~$1.20 ~$0.90 ~$0.75 ~$1.00 ~$1.10 14% CGR 16% CGR 10% CGR 5% Revenue Growth +1 to 2 pts Revenue Growth 10% -12% CGR EPS Model Note: 2006 EPS reflects the adoption of amendments to ASC 260, “ Earnings Per Share” $6.05 ~$11 ~$10 ~$9

 


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2010 EPS Roadmap Results Share Repurchases Historical Revenue Growth Growth Initiatives & Acquisitions Margin Expansion 2010 EPS Objective 2006 EPS $6.05 Retirement-Related Costs $10 -$11 $11.52 2006 EPS 2010 EPS Retirement Related Yr/Yr Costs Historical Revenue Growth of 3% Margin Expansion Share Repurchases Growth Initiatives & Acquisitions Revenue achievement impacted by market downturn ~ 0.20 Margin expansion within model ~ 1.35 Share repurchases of ~ $52B ~ 1.30 Mix and productivity driving margin expansion above model ~ 2.10 Market performance impacting pension expense ~ 0.55 Note: 2006 EPS reflects the adoption of amendments to ASC 260, “ Earnings Per Share” 2007 – 2010 Performance $6.05

 


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Note: 2006-2008 EPS reflects the adoption of amendments to ASC 260, “ Earnings Per Share” 2006 2010 EPS Roadmap Annual Progress 2007 2008 2009 2010 18% Yr/Yr 24% Yr/Yr 15% Yr/Yr 13% Yr/Yr Exceeded high end of objective by $0.52 $7.15 $8.89 $10.01 $10 $6.05 $11.52

 


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Success of IBM’s Business Model 4Q’10 IBM S&P 500 62% (3%) +17% CGR ~0% CGR Source: Bloomberg/CapitalIQ Total Return IBM EPS Indexed with S&P 500 IBM EPS $6.05 S&P 500 EPS ~$85 Created $47B of Shareholder Value $36B Market Capitalization + $11B Dividends Paid 0.25 0.50 0.75 1.00 1.25 1.50 1.75 2.00 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10

 


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Hardware / Financing Services Software Sum of external segment pre-tax income not equal to IBM pre-tax income GAAP PTI / EPS Segment PTI$ 2000 & 2001 segments not restated for stock based compensation IBM Transformation Added $10B revenue in growth markets 21% of geo revenue Tripled Software profit to $9.1B 44% of segment profit, up from 25% Added $10B of Pre-Tax Income EPS nearly tripled Generated $109B Free Cash Flow Returned $107B to shareholders Invested $32B to acquire 116 companies Highlights since 2000 EPS $11.52 Strong performance through the decade driven by IBM transformation '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10

 


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4Q Earnings Presentation Agenda 4Q Highlights 2010 Roadmap Recap 4Q Results and FY 2010 Summary 2015 Roadmap

 


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Revenue by Geography 5% 4% Major Markets 13% 15% Growth Markets 17% 19% BRIC Countries 4% (2%) 9.5 Europe/ME/A 21% 21% 0.8 OEM 7% 7% $29.0 IBM 4Q10 7% 14% 6.6 Asia Pacific 9% 9% $12.2 Americas Rptd @CC $ in Billions APac +14% @CC OEM +21% U.S. +10% EMEA Canada/ LA Japan - 2% @CC Strong major market and growth market performance B/(W) Yr/Yr

 


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Revenue by Segment @CC 12% 11% 7.0 Software * 4Q10 7% 7% $29.0 Total IBM 1% 1% 0.6 Global Financing 22% 21% 6.3 Systems & Technology 4% 4% 4.8 Global Business Services 1% 1% $10.2 Global Technology Services Rptd $ in Billions Transaction businesses drove revenue performance * Software revenue growth excludes PLM; growth including divested PLM is 7% as reported and 8% @CC Global Technology Services Global Business Services Systems & Technology Software Global Financing B/(W) Yr/Yr

 


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Expense Summary (5 pts) (5 pts) Base (4 pts) 2 pts (7%) $7.3 Total Expense & Other Income (26%) 0.1 Interest Expense 70% 0.0 Other (Income)/Expense 2% (0.3) IP and Development Income (8%) 1.6 RD&E (4 pts) 2 pts (7%) $6.0 SG&A Acq.* Currency B/(W) Yr/Yr 4Q10 * Includes total expense for acquisitions made in the last twelve months $ in Billions B/(W) Yr/Yr Drivers Expense growth in line with revenue growth

 


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0.9 pts 15.8% PTI Margin @CC Rptd 4Q10 (1.1 pts) 34.7% Gross Margin (External) 1% 1% $10.2 Revenue (External) B/(W) Yr/Yr Services Segments GTS Outsourcing 39% Global Business Services 32% Integrated Technology Services 16% Maint. 13% $ in Billions Global Technology Services (GTS) Global Business Services (GBS) Services backlog up $4B yr/yr, $7B qtr/qtr @CC 4Q10 Revenues (% of Total Services) (Growth @CC) 1% Yr/Yr 4% Yr/Yr 3% Yr/Yr Flat Yr/Yr $4 $5 $142 Total Backlog @CC Rptd 4Q10 18% 18% $22.1 Total Signings 9% 8% 8.0 Transactional - ITS, Consulting, AMS SI 23% 24% $14.1 Outsourcing - GTS O/S, Appl. O/S (AMS) B/(W) Yr/Yr Global Services Signings $ in Billions (0.9 pts) 15.0% PTI Margin @CC Rptd 4Q10 (2.0 pts) 28.3% Gross Margin (External) 4% 4% $4.8 Revenue (External) B/(W) Yr/Yr $ in Billions

 


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Outsourcing Services Trending * Outsourcing includes Strategic Outsourcing, Business Transformation Outsourcing and Application Outsourcing (excludes U.S. Federal Business) Outsourcing* Backlog ($B) @ actual rates (1.5%) 0% 1.2% Outsourcing* - Yr/Yr Revenue & Signings Growth @CC Yr/Yr Change @CC 100 98 89 90 87 91 92 94 91 88 91 97 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 -25% -15% -5% 5% 15% 25% 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 Signings Yr/Yr Revenue Yr/Yr

 


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Outsourcing Services Backlog Run Out Note: See supplemental Services chart for additional details on analysis Revenue from Backlog +3% Yr/Yr @CC Revenue from 12/31/09 Backlog Projected Revenue from 12/31/10 Backlog Projected 2011 Revenue from Outsourcing Backlog +3% yr/yr @CC Revenue from base growth and new signings Revenue from Backlog Revenue from Base Growth Signings Revenue from New Signings 0 5 10 15 20 25 30 2010 2011 ($B)

 


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Transactional Services Trending * Transactional includes Integrated Technology Services and Consulting and Systems Integration (includes U.S. Federal Business) Transactional* - Yr/Yr Revenue & Signings Growth @CC -20% -15% -10% -5% 0% 5% 10% 15% 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 Signings Yr/Yr Revenue Yr/Yr

 


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Software Segment 8% 7% Growth incl. PLM @CC Rptd 4Q10 (0.9 pts) 40.6% PTI Margin 0.9 pts 88.5% Gross Margin (External) 12% 11% $7.0 Revenue (External) - Growth excl. PLM B/(W) Yr/Yr @CC Rptd 12% 11% 15% 12% (1%) 14% 12% 34% 11% Total Software excl. PLM 10% Total Middleware 13% Key Branded Middleware 10% Rational (3%) Lotus Yr/Yr 4Q10 Revenue 12% Tivoli 10% Information Management 32% WebSphere Family 4Q10 Revenue (% of Total Software) Key Branded Middleware 66% Operating Systems 10% Other Middleware 17% Other 7% $ in Billions Strong Branded Middleware growth

 


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Systems & Technology Segment @CC Rptd 4Q10 3.2 pts 18.6% PTI Margin 1.4 pts 43.9% Gross Margin (External) 22% 21% $6.3 Revenue (External) B/(W) Yr/Yr $ in Billions 4Q10 Revenue (% of Total Sys & Tech) Servers 68% Storage 19% Micro OEM 10% RSS Yr/Yr 4Q10 Revenue 22% 30% 21% 27% 10% 18% 3% 72% @CC 2% Power Systems 20% Total Systems 21% Total Systems & Technology 30% Microelectronics OEM 26% Retail Store Solutions 8% Storage 18% System x Rptd 69% System z Best Revenue growth in over a decade

 


GRAPHIC

Cash Flow Analysis (3.4) 1.8 7.0 (7.9) (0.3) (0.3) (4.7) 1.2 (0.2) 1.4 (2.6) ($1.2) B/(W) Yr/Yr (2.3) (1.9) 0.6 Change in Cash & Marketable Securities 3.5 2.3 (15.4) (3.2) 0.1 (5.9) 16.3 (4.0) 20.3 (0.7) $19.5 FY10 (0.2) (1.6) Other (includes GF A/R & GF Debt) (0.7) 0.7 Non-GF Debt (0.5) (3.6) Share Repurchases (0.1) (0.8) Dividends 0.1 0.1 Divestitures (1.9) (2.9) Acquisitions 1.5 8.7 Free Cash Flow (excluding GF Receivables) 0.0 (1.1) Net Capital Expenditures B/(W) Yr/Yr 4Q10 1.4 9.8 Net Cash from Operations (excluding GF Receivables) (1.1) (3.0) Less: Global Financing Receivables $0.3 $6.8 Net Cash from Operations $ in Billions