International Business Machines Corporation · NYSE:IBM
International Business Machines — Investor Day (March 2018)
34 slides from International Business Machines's investor day presentation, Mar 8, 2018
Slide 1: Agenda
Agenda Thursday, March 8 10–11:30 am Q&A Ginni Rometty James Kavanaugh Introduction Patricia Murphy Vice President, Investor Relations IBM Strategic Overview Ginni Rometty Chairman, President and CEO IBM Financial Discussion James Kavanaugh Senior Vice President and Chief Financial Officer IBM With
Slide 2: Forward looking statements and non-GAAP information
Forward looking statements and non-GAAP information 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 f
Slide 3: Strategic Overview
Strategic Overview Ginni Rometty Chairman, IBM President and CEO 5
Slide 4: Financial Discussion
Financial Discussion James Kavanaugh Senior Vice President and Chief IBM Financial Officer 6
Slide 5: IBM 2018 Investor Briefing
IBM 2018 Investor Briefing Our differentiated value proposition is driven by innovative technology, industry expertise, trust and security — delivered through an integrated model IBM is repositioned to lead in high value segments of enterprise IT IBM’s value is driven through building new platforms
Slide 6: We are a high value profitable business positioned to deliver value to our clients
We are a high value profitable business positioned to deliver value to our clients and our shareholders 2017 $79B 47% Revenue Operating Gross Profit Margin $13B $6 17% Free Cash Flow Annualized Dividend per Share Return on Invested Capital Top quartile of S&P 500 Note 1,2,3 8 High Value and Financia
Slide 7: Increased investments in key emerging high value segments while returning capital
We have increased investments in key emerging high value segments while continuing to return capital to shareholders 2015-2017 2012-2014 ~$17B Research and Development • • • AI market leadership with Watson Expanding security capability Modernizing systems portfolio Returned Returned to shareholders
Slide 8: Increased investments in key emerging high value segments while returning capital
We have increased investments in key emerging high value segments while continuing to return capital to shareholders $13B $25B $34B $47B $62B $71B 2012 2013 2014 2015 2016 2017 2012-2014 2015-2017 • AI market leadership with Watson • Expanding security capability • Modernizing systems portfolio • De
Slide 9: Increased investments and portfolio actions have driven a different business mix
Our increased investments and portfolio actions have driven a fundamentally different business mix 2007 2014 2017 Software 20% 28% 31% 75% 87% 90% 55% Services 59% 59% Hardware & IGF 25% 13% 10% 47% Annuity Mix 42% Gross Profit % 58% Annuity Mix 51% Operating Gross Profit % $34B Investments prior 3
Slide 10: … while building new business models
… while building new business models 2007 2014 2017 2017 Cognitive Solutions Software 20% 28% 31% 75% Technology Services & 87% 90% 43% 55% Services Cloud Platforms 59% 59% Global Business Services 21% Hardware & IGF 25% 13% 13% 10% Systems & IGF 47% Annuity Mix 42% Gross Profit % 58% Annuity Mix 51
Slide 11: We have redesigned our operating model and changed the way we work
We have redesigned our operating model and changed the way we work Streamlined Management System Improve speed and responsiveness to clients Scaling agile and new ways of working Strengthen capacity for rapid innovation Reduction in layers 35% -50% of employees are new in last 5 years 30% Improvemen
Slide 12: IBM has made bold changes to reposition for the future
IBM has made bold changes to reposition for the future Repositioned For The Future + Invested in key emerging high value segments and rebuilt innovation pipeline Portfolio actions have driven a fundamentally different business mix Built new business models for the new IT era Remixed skills and imple
Slide 13: … building on our enterprise leadership and integrated model
… building on our enterprise leadership and integrated model Repositioned For The Future IBM Differentiation + + + Invested in key emerging high value segments and rebuilt innovation pipeline Portfolio actions have driven a fundamentally different business mix Built new business models for the new I
Slide 14: IBM leverages innovation and expertise to build new platforms and solutions
IBM leverages innovation and expertise to build new platforms and solutions while modernizing our enduring platforms Integrated Model Value Drivers 1. Integrated model and trusted client relationships 2. First mover in the most promising, emerging technologies 3. Unique ability to provide integrated
Slide 15: Integrated model and trusted client relationships provide competitive advantage
1. IBM’s integrated model and trusted client relationships provide competitive advantage Note 7 Integrated IBM Model… Health Financial Services IoT Security … Go To Market + Ecosystem Systems - Infrastructure Software - Services and Services Industry and Integrated Solutions ...Drives Value for Clie
Slide 16: IBM is a first mover in emerging technologies: IBM Blockchain
2. IBM is a first mover in the most promising, emerging technologies e.g. IBM Blockchain Disrupting Multiple Markets e.g. $2T Global Payment & $1.8T Global Supply Chain by 2020 Value Drivers + Industry’s first enterprise-grade blockchain platform for permissioned networks + Leverages IBM Z and perva
Slide 17: Integrated industry solutions: IBM Watson Health
3. IBM has the unique ability to provide integrated industry solutions e.g. IBM Watson Health GBS Consulting Services ~$360B of Health Total Addressable Market Opportunity by 2020 Value Drivers + Leveraging the IBM Cloud designed for Health (HIPAA / GxP) + 80+ Watson AI Services specifically built f
Slide 18: Integrated model and trusted client relationships provide competitive advantage
1. IBM’s integrated model and trusted client relationships provide competitive advantage ...Drives Value for Clients and IBM Integrated IBM Model… 95% of Fortune 500 are IBM clients 90% of Top 100 clients purchased cross-IBM solutions Industry and Integrated Solutions Consistent Wallet share in Top
Slide 19: IBM is a first mover in emerging technologies: IBM Blockchain
2. IBM is a first mover in the most promising, emerging technologies e.g. IBM Blockchain Disrupting Multiple Markets e.g. $2T Global Payment & $1.8T Global Supply Chain by 2020 Value Drivers + + + Industry’s first enterprise-grade blockchain platform for permissioned networks Leverages IBM Z and per
Slide 20: Integrated industry solutions: IBM Watson Health
3. IBM has the unique ability to provide integrated industry solutions e.g. IBM Watson Health ~$360B of Health Total Addressable Market Opportunity by 2020 Value Drivers + + + Leveraging the IBM Cloud designed for Health (HIPAA / GxP) 80+ Watson AI Services specifically built for health Industry-spe
Slide 21: Leading market position in high value segments: IBM Security
4. IBM has a leading market position in several high value segments e.g. IBM Security ~$120B of Security Total Addressable Market Opportunity by 2020 Value Drivers + + + Industry’s largest integrated product and services business Digital immune system for compliance and threat protection Industry le
Slide 22: Strong R&D track record through multiple technology eras: IBM Z
5. IBM has a strong R&D track record through multiple technology eras e.g. IBM Z Continuous Reinvention of Enduring Platforms for Business Workload as measured by installed Million Instructions Per Second (MIPS) IBM Z Value Drivers + + + Industry first pervasive encryption capabilities Open and conn
Slide 23: Deep expertise with global customer base: IBM Services
6. IBM has deep expertise with unrivaled global customer base e.g. IBM Services [GTS + GBS] Stable Outsourcing Backlog moving clients to the future GTS + GBS Outsourcing Value Drivers + + + Market leader with 2x the share of nearest competitor Expertise and innovation-based leadership Global scale w
Slide 24: IBM's differentiation results in high value and financial returns
IBM’s differentiation results in high value and financial returns IBM Longer-Term Model Integrated Model High Value and Financial Returns Note 8, 9 22 Revenue Low single-digit growth Pre-Tax Income Mid single-digit growth Earnings Per Share High single-digit growth Free Cash Flow Realization >90% Tr
Slide 25: Deliver pre-tax income dollar growth
Deliver pre-tax income dollar growth 23 Mid Single-Digit PTI Dollar Growth Mix and ScaleOperating Leverage ~2 pts of annual PTI dollar growth Deliver segment revenue models Scale efficiencies, net of as a Service mix ~3 pts of annual PTI dollar growth Expand services margins Drive enterprise product
Slide 26: Revenue model of low single-digit growth driven by as a Service momentum
IBM revenue model of low single-digit growth is driven by as a Service momentum Cognitive Solutions Technology Services and Cloud Platforms Mid-Single Digit PTI Dollar Growth Revenue Growth: + Scale new platforms and solutions Momentum in as a Service offerings Revenue Growth: + + Shift clients to c
Slide 27: Revenue model of low single-digit growth driven by as a Service momentum
IBM revenue model of low single-digit growth is driven by as a Service momentum Mid-Single Digit PTI Dollar Growth Revenue Growth: Revenue Growth: solutions offerings workloads Cloud is accretive to Pre-Tax Income Dollars Note 8 25 Mix and Scale ~2pts Cognitive SolutionsTechnology Services and Cloud
Slide 28: Services deliver higher margin through AI differentiation and efficiencies
Services deliver higher margin through AI differentiation and efficiencies Technology Services & Cloud Platforms ~ 50bps Margin Expansion Per Year Global Business Services ~ 50bps Margin Expansion Per Year Mid-Single Digit PTI Dollar Growth Productivity and Talent Optimization + Reduce layers and st
Slide 29: Enterprise productivity fuels investment and contributes to profit growth
Enterprise productivity fuels investment and contributes to profit growth Spending Profile Initiatives Mid-Single Digit PTI Dollar Growth + Unlock new value through a cognitive enterprise support model Design end-to-end workflows across the enterprise Embed digitization and cognition in processes Pr
Slide 30: Strong free cash flow and balance sheet provide financial flexibility
IBM’s strong free cash flow and balance sheet provide financial flexibility Continue to invest for future + R&D to expand innovation pipeline + + Capital to build out Cloud and as a Service Acquisitions to strengthen IBM platforms and solutions Realization Investment Continue to return to shareholde
Slide 31: IBM is well positioned to deliver longer-term financial model
IBM is well positioned to grow and deliver longer-term financial model IBM Longer-Term Model + Our differentiated value proposition is driven by innovative technology, industry expertise, trust and security, delivered through an integrated model IBM is repositioned to lead in high value segments of
Slide 32: Forward-looking statements and non-GAAP information
Forward-looking statements and non-GAAP information Certain comments made in this presentation may be characterized as forward looking under the Private Secutities Litigation Reform Act of 1995. Forward-looking statements are based on the company's current assumptions regarding future business and f
Slide 33: Notes
Notes Note 1 Gross Profit Margin and Free Cash Flow are non-GAAP measures. For additional information on these non-GAAP measures, please refer to slide 32. Note 2 Annualized Dividend equals most recent quarterly dividend per share multiply by four. Note 3 ROIC is based on GAAP from Continuing Operat
Slide 34: IBM Investor Briefing 2018
IBM Investor Briefing 2018
International Business Machines — Investor Day (March 2018) on 6ix