Transcript
© 2009 IBM Corporation
IBM Business Perspective
Patricia Murphy, Vice President Investor Relations
September 2009
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Certain comments made in the presentation may be characterized as forward looking under the Private Securities Litigation Reform Act of 1995. 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.
These charts and the associated remarks and comments are integrally related, and are intended to be presented and understood together.
In an effort to provide additional and useful information regarding the company’s results as determined by generally accepted accounting principles (GAAP), certain materials presented include non-GAAP information. The rationale for management’s use of this non-GAAP information, the reconciliation of that information to GAAP, and other related information is included in supplementary materials entitled “Non- GAAP Supplementary Materials” that are posted on the Company’s investor relations web site at http://www.ibm.com/investor/events/analyst0509/The Non-GAAP Supplementary Materials are also included as Attachment II to the Company’s Form 8-K dated May 13, 2009.
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Individual/ Consumer Focused
Enterprise Focused
TraditionalIT Industry
High Business Value
Lowest Cost IT Producer
The traditional IT industry is undergoing fundamental shifts
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I. Changes in world markets: We are at the forefront of global integration
II. Changes in client needs: We are focused on integration and innovation
III. Changes in IT: We are shifting to higher value segments
IBM strategy addresses shifts in IT industry
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We became a globally integrated enterprise in order to capture the best growth opportunities and improve IBM’s profitability
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GROSS MARGIN TREND
37.1%
38.4%
36.6% 36.5% 36.9%
40.1%
41.9% 42.2%
44.1%
30%
32%
34%
36%
38%
40%
42%
44%
46%
48%
50%
00 01 02 03 04 05 06 07 08
PRE-TAX INCOME MARGIN TREND
The mix to higher value segments, global integration and productivity have driven margin expansion
12.0%11.8%
10.6%11.1%
13.4%
14.6%14.7%
16.1%
7.2%
5%
7%
9%
11%
13%
15%
17%
19%
00 01 02 03 04 05 06 07 08
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We have been able to invest in future sources of growth and provide record return to investors...
...while continuing to invest in R&D
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$6.05
~$11~$10
~$9
2006 EPS Estimated 2010 EPS
(Base)
2010 EPS w/o
Retirement Related
Costs Yr/Yr
2010 EPS Objective
Retirement Related
Costs Yr/Yr
Historical Revenue
Growth of 3%
Margin Expansion
Share Repurchases
Growth Initiatives
Future Acquisitions
~$1.20
~$0.90
~$0.75
~$1.00
~$1.10
5% Revenue Growth
+1 to 2 pts Revenue Growth
Long Term EPS Roadmap: May 200710%CGR
14%CGR
16%CGR
10% - 12% CGR EPS Model
Note: EPS has been restated to reflect the adoption of EITF 03-6-1
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$6.05
~$11
~$10
~$9
2006 EPS Estimated 2010 EPS
(Base)
2010 EPS w/o
Retirement Related
Costs Yr/Yr
2010 EPS Objective
Retirement Related
Costs Yr/Yr
Historical Revenue
Growth of 3%
Margin Expansion
Share Repurchases
Growth Initiatives
Future Acquisitions
~$1.20
~$0.90
~$0.75~$1.00
~$1.10
5% Revenue Growth
+1 to 2 pts Revenue Growth
Exceeded revenue growth of 3% in 2007 and achieved 2.3%
in 2008 @ CC
Net margin expansion in model
Share repurchases of ~ $30 B
Revenue growth and margin expansion
above model
Will vary based on interest rates and
market performance
~ 0.35 ~ 0.90 ~ 0.65 ~ 0.45
Long Term EPS Roadmap: Progress through 2008~ 0.50
EPS of $8.89 through 2008
Total ~ 2.85
Progress through 2008 Note: EPS has been restated to reflect the adoption of EITF 03-6-1
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We are well ahead of pace to achieve the 2010 roadmap objective
Transformed business mix
Significant annuity content
Competitive cost structure
Strong cash generation
Financial flexibility
EPS
2006
2010
$6.05
$10-$11
2007 $7.15
2008 $8.89
Note: EPS has been restated to reflect the adoption of EITF 03-6-1
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Agenda
Strategy and Transformation
2010 Roadmap
Driving Long Term Performance
• Growth Markets
• Acquisitions
• Technology Leadership
• Margin Expansion
• New Growth Initiatives
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Growth Markets: Leading future growth requires differentiated strategies and approaches based on market stages and client needs
*Served IT Market Opportunity is IBM Global Market View, 2H09 at constant currency
GDP (2009) $3.2T GDP (2009) $1.5TGDP Growth (2008 - 2012) 1% GDP Growth (2008 - 2012) 3%Served IT Market (2009)* $799B Served IT Market (2009)* $139BServed IT Market Growth (2008 - 2012) 2% Served IT Market Growth (2008 - 2012) 6%
# of Countries ~ 30 # of Countries ~ 140% of IBM Revenue 82% % of IBM Revenue 18%Yr/Yr Revenue Growth 5% Yr/Yr Revenue Growth 10% Yr/Yr Growth @ CC 2% Yr/Yr Growth @ CC 10%
Manage for productivity
FY08 Results
Growth MarketsKey Market Statistics
IBM Focus
Invest for growth
FY08 Results
Major MarketsKey Market Statistics
IBM Focus
17 Note: Includes 2002-2005 acquisitions less than $500M, and all 2006 & 2007 acquisitions
0%
10%
20%
30%
40%
Yr 1 Yr 2 Yr 3 Yr 4 Yr 5
ProjectedActual Without amortization of acquired intangibles
ESTIMATED ACQUISITION REVENUE GROWTH
-20%
-10%
0%
10%
20%
30%
Yr 1 Yr 2 Yr 3 Yr 4 Yr 5
25%
35%
14% 13% 13%
24%21%
20%
11%
-13%
-2% 3%
13%
19%22%
ESTIMATED ACQUISITION PRE-TAX INCOME MARGIN
Acquisitions: Our acquisition portfolio continues to deliver attractive revenue and profit growth
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Technology Leadership: R&D spending enables technology leadership
36
30
2018
10
0
5
10
15
20
25
30
35
40
MSFT IBM Cisco HP Oracle
R&D SPENDINGLast 5 fiscal years ($B)
IBM spends more on R&D than most of our Tech peers– Enhancing our leadership in
enterprise servers & software– Leveraging IP assets to remain the
#1 provider of IT services
Making the right organic investments– Virtualization– Cloud Computing– SOA– Service Product Lines & Quality– Business Analytics– Smarter Planet
Note: As of May 7, 2009
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Margin Expansion: We have further opportunity to expand margin
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
IBM
S&P 500
PRE-TAX INCOME MARGIN
Tech Universe *
*Note: As of April 21, 2009. Includes 333 worldwide technology companies with market cap > $1B
30% of companies in Tech Universe have PTI margins in excess of 20%
25% of companies in S&P 500 have PTI margins in excess of 20%
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New Growth Initiatives: We are investing to capture future growth
IBM is leading the charge to think and act in new ways –
Economically, Socially, and Technically
Smarter Planet Cloud Computing
Benefits:
Self-serviceRapid ProvisioningAutomationStandardizationEconomies-of-scale
Business Analytics & Optimization
Smarter Traffic SystemsSmarter OilSmarter Energy Grids Smarter HealthcareSmarter Cities
Business Optimization
Business Intelligence
Resource planning
Business Automation
Business Optimization
Business Intelligence
Resource planning
Business Automation
The Enterprise Cloud
What’s required? The world is getting smarter New consumption & delivery model
Insight on our clients and industry
Foundational software platforms
Mathematical and analytical skills of IBM Research
Balanced price performance and scale
Market validating client experience
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Well ahead of pace for 2010 Well ahead of pace for 2010 roadmaproadmap0%
5%
10%
15%
20%
25%
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09e
PTI M
argi
n %
$2
$3
$4
$5
$6
$7
$8
$9
$10
$11
EPS
PTI Margin %
EPS
IBM’s strategy and execution drives improved financial performance
Objective$10 to $11
in 2010
Divested Revenue: PC, HDD, Printers, Displays, EDI, Interconnectivity ProductsRevenue
Shifting portfolio to higher value spaces with greater opportunity for margin expansion
Driving productivity and efficiency in our cost structure
Investing in skills and capabilities to drive future growth
Returning capital to shareholders
Significant operating leverage in businesses with improved long-term growth prospects
Note: EPS has been restated to reflect the adoption of EITF 03-6-1
Transformation
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