International Business Machines Corporation · NYSE:IBM
International Business Machines — Investor Presentation (March 2017)
76 slides from International Business Machines's investor presentation, Mar 7, 2017
Slide 1: IBM's Platforms and Capabilities: Global Technology Services
IBM's Platforms and Capabilities: Global Technology Services IBM 2 Global Technology Services $31B 2016 Revenue Revenue and Backlog* #1 Market share . . . . . . Industry and Domain Specialization Integrated Solutions Healthcare Financial Services IoT Analytics Security Customer Engagement Global Eco
Slide 2: Market opportunity: Hybrid Cloud and Multi-Vendor Services
Market opportunity Hybrid Cloud (2019) GTS is well positioned for continued growth by providing leading Managed Hybrid Cloud and Multi-Vendor Services over the long term Strategy Continued market share leadership and industry penetration as a Services Integrator: 1. New markets 2. Augmented intellig
Slide 3: As-a-Service portfolio and new markets
As-a-Service portfolio New markets Hybrid Cloud service provider for IT service providers Multi-Vendor support services across industries 1. GTS’ services integration approach extends our reach by addressing new markets through differentiated offerings IBM 4 Cloud Resiliency Networking Systems Secur
Slide 4: GTS differentiates through services delivery platform with augmented intelligence
2. GTS differentiates through an industry-leading services delivery platform that incorporates augmented intelligence IBM 5 ~500 Clients with Cognitive Insights Dashboards 650+ Clients with advanced automation 99.7% of ~30,000 Service Level Agreements met or exceeded Cognitive Technology Services Pl
Slide 5: Transformation to a services integrator improves operational performance
Our continued transformation to a services integrator enables us to improve our operational performance IBM 6 ~30 bps per year PTI margin improvement Technology Services & Cloud Platforms ~20 bps per year PTI margin improvement Technology Services & Cloud Platforms Delivers revenue growth, cost prod
Slide 6: Summary
Summary IBM 7 New markets Growing through new markets, leveraging a portfolio of as-a-Service offerings Services Integration Transforming to a services integrator to capture Hybrid Cloud and Multi-Vendor Services opportunity Augmented intelligence Infusing augmented intelligence and executing via a
Slide 7: Summary
Summary Services Integration Transforming to a services integrator to capture Hybrid Cloud and Multi-Vendor Services opportunity New markets Growing through new markets, leveraging a portfolio of as-a-Service offerings Augmented intelligence Infusing augmented intelligence and executing via a cognit
Slide 8: The Journey of Enterprise Software to Hybrid Cloud
The Journey of Enterprise Software to Hybrid Cloud Arvind Krishna Senior Vice President, Hybrid Cloud and Director, Research
Slide 9: IBM's Platforms and Capabilities: Software
Healthcare Financial Services IoT . . . Industry and Domain Specialization IBM's Platforms and Capabilities: Software IBM 2 IBM Software $24.5B 2016 Revenue Integration Software WebSphere, MQ, API Connect Analytics Platform DB2, SPSS, InfoServer Transaction Processing Software TPF, CICS, IMS Global
Slide 10: Enterprise transformations required for cloud adoption
Enterprise transformations required for cloud adoption: Governance Integration Security Architecture Culture Maintain & Evolve 44%* Private Cloud 31%* Public Cloud 25%* Highly customized applications Not yet virtualized appllications Mature workloads Workloads needing low latency to back ends Applic
Slide 11: Our software is the foundation of hybrid cloud
Our software is the foundation of hybrid cloud IBM 4 transactions per day handled on IBM environments top banks in the world rely on IBM DB2 active instances of IBM WebSphere of the Fortune Global 500 companies use IBM MQ 241M 22 of 25 100B 70%+
Slide 12: New capabilities are redefining enterprise software
New capabilities are redefining enterprise software IBM 5 Unlock more value from your critical data Leader in next-gen data science tools (Gartner) Market leader in high-speed data file transfer (IDC) Integrate cognitive insights into your business processes Market-leading business process managemen
Slide 13: Hybrid transformation at Bendigo and Adelaide Bank
Hybrid transformation at Bendigo and Adelaide Bank IBM 6 “IBM Cloud gives us the agility and security needed to better deliver innovative customer solutions across multiple platforms. It means we can operate with a startup mindset ” Stella Thredgold, Business Enablement Executive, Bendigo and Adelai
Slide 14: Summary
Summary IBM’s hybrid strategy uniquely drives additional value for enterprise clients IBM 7 Leverages IBM’s history solving critical enterprise data and transactional challenges Redefines hybrid software by leveraging next-generation machine learning and cloud technology Builds on a footprint of mil
Slide 15: Summary
Summary IBM's hybrid strategy uniquely drives additional value for enterprise clients Leverages Builds Redefines IBM's history on a footprint hybrid software solving critical of millions of by leveraging enterprise data software installs next-generation and transactional over decades machine learnin
Slide 16: Hybrid Systems
Hybrid Systems Tom Rosamilia Senior Vice President, IBM Systems
Slide 17: IBM's Platforms and Capabilities: Systems
Global Ecosystem . . . Analytics Customer Engagement Security Healthcare Financial Services IoT . . . Data (Public, Private, Partner) Industry and Domain Specialization Integrated Solutions IBM's Platforms and Capabilities: Systems IBM Systems are designed for cognitive workloads and cloud scale— fo
Slide 18: IBM Systems Re-positioning for Growth
IBM Systems IBM 3 Re-positioning for Growth Traditional IT segments are projected to grow at 4%. We are positioned for new growth opportunities: New Architectural Battles Building new industry transaction platforms for business model innovation – with z Systems and LinuxONE Optimizing data for cost,
Slide 19: z Systems and LinuxONE: Building new industry transaction platforms
Bring analytics and machine learning to the data Analyze transactions in 2 milliseconds or less7 z Systems and LinuxONE – Building new industry transaction platforms Blockchain and Instant Payments 50 IBM blockchain high security business network projects Unlock value in existing apps Manage up to 3
Slide 20: Flash and Software Defined Storage
Reclaim share with new flash products >20x faster response times9 Flash and Software Defined Storage – Optimizing data for cost, performance and compliance in the cloud Transparent cloud tiering with Cloud Object Storage >25% lower cost over a leading vendor10 Hybrid scalability with IBM Software De
Slide 21: Power Systems: Remixing portfolio for cognitive and cloud
Hybrid and private cloud Up to 4x more cache, memory bandwidth, multithreading vs. x8613 Acceleration for AI and machine learning workloads >2.5x performance for analytics-intensive workloads over x8611 Power Systems – Remixing portfolio for cognitive and cloud opportunities Advanced analytics and o
Slide 22: Google collaborates with OpenCAPI and Rackspace on POWER9 server
Google collaborates with OpenCAPI and Rackspace on Zaius server running POWER9 Advanced, accelerated computing platform Open platform, open interfaces, open compute Up to 10x faster server performance14 “We look forward to a future of heterogeneous architectures within our cloud. And, as we continue
Slide 23: Strongest pipeline of technology in a decade
Beyond silicon Industry transformation Cognitive computing Next- generation cloud infrastructure zNext POWER9 All-flash Object storage Open ecosystems LinuxONE Blockchain With IBM Research, we have the strongest pipeline of technology in a decade IBM 8 Trillions of operations technology Quantum
Slide 24: Summary: Why IBM Systems for the cognitive era
Summary Why IBM Systems for the cognitive era IBM 9 Winning architectural battles in AI, hybrid cloud and new industry platforms Capturing new growth opportunities Introducing new innovations
Slide 25: IBM Market Estimates
IBM Market Estimates Worldwide External Enterprise Storage Systems Forecast, 2016: AFA Market Still Continues to Significantly Outpace Overall Enterprise Storage Growth. Jul 2016. Doc # US41581116 IDC Storage Forecast for Controller SW that aligns with Spectrum portfolio; 2017-2020 IDC – Worldwide S
Slide 26: Sources
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Slide 27: The Cognitive Developer
The Cognitive Developer Empowering a New Era of Computing Bob Lord Chief Digital Officer
Slide 28: IBM's History with Developers
In 1995, IBM became a key contributor to Java, helping to evolve Java to unleash its potential and offer a more dynamic browsing experience in the Internet era. Furthering commitment to Open Source. Putting 3,500+ IBM researchers and developers to work on Spark-related projects and educating 1 milli
Slide 29: A New Era of Computing
Cognitive computing is the system of the future. Developers will code what needs to be learned. The machine will learn what needs to be coded. of developers worldwide made purchasing decisions in 2016.1 A New Era of Computing consumer devices with embedded intelligent assistants will be installed in
Slide 30: Solving the next generation of problems requires a new set of skills
IBM 4 Solving the next generation of problems requires a new set of skills
Slide 31: A Conversation
A Conversation IBM 5 Joshua Browder Academic Developer DoNotPay.co.uk Brandan Wright Vice President Topcoder
Slide 32: IBM is building the skills of the future
IBM is building the skills of the future. Through learning opportunities, new certifications and community building – we are defining what it means to be a “Cognitive Developer.” tutorials, training and online resources through IBM Watson Academy, DeveloperWorks and the Learning Lab Fostering a New
Slide 33: Sources
Evans Data, “Global Development Survey: Regional Breakouts 2016, Vol 1 June 2016: Evans Data, Developer Marketing 2014; Evans Data, “Developer Marketing 2015,” Mar 2015 IDC FutureScape: Worldwide IT Industry 2017 Predictions IDC FutureScape: Worldwide Analytics, Cognitive/AI and Big Data 2017 Predic
Slide 34: Sources
Sources 1. Evans Data, “Global Development Survey: Regional Breakouts 2016, Vol 1 June 2016: Evans Data, Developer Marketing 2014; Evans Data, “Developer Marketing 2015,” Mar 2015 2. IDC FutureScape: Worldwide IT Industry 2017 Predictions 3, IDC FutureScape: Worldwide Analytics, Cognitive/Al and Big
Slide 35: Research and Future Trends
Research and Future Trends Arvind Krishna Senior Vice President, Hybrid Cloud and Director, Research
Slide 36: IBM Research strategic imperatives
IBM Research strategic imperatives IBM 2 Defining and optimizing blockchain Transforming industries through science and AI Developing core AI Reimagining computing
Slide 37: Recent highlights
Recent highlights IBM 3 14nm commercialization DOE supercomputing IBM containers on Bluemix Skin cancer image analysis IBM blockchain Augmenting creativity The IBM Quantum Experience Stochastic phase-change neurons Cognitive in-car companion TJ Bot Watson Beat Partnership on AI Olli Fighting Zika Bl
Slide 38: Widen IBM's leadership in core AI
Widen IBM’s leadership in core AI IBM 4 Capable of ingesting 45 million articles to learn essential vocabulary of over 100,000 topics Created world’s first cognitive movie trailer using audio-visual emotional analysis Watson for Genomics absorbs 10,000 new medical articles and details from 100 clini
Slide 39: IBM systems leadership is unmatched
IBM systems leadership is unmatched IBM 5 World’s fastest commercial processor capable of handling 2.5 billion transactions/day POWER8 has 4x more cache, memory bandwidth and threads per core than competition 14nm IBM processor chips contain ~8 billion transistors operating at industry-leading 5.3 G
Slide 40: IBM Quantum Experience
IBM Quantum Experience IBM 6 In May 2016, IBM made a quantum computing platform available via the IBM Cloud, giving students, scientists and enthusiasts hands-on access to run algorithms and experiments Quantum computer at IBM Research IBM quantum bit device IBM Quantum Experience
Slide 41: Why quantum computing matters
Why quantum computing matters Medicine & Materials Machine Learning Searching Big Data Easy Problems Hard Problems for Classical Computing Quantum Possible Quantum computing will enable us to perform some computations that would take more than the age of the universe to do on a classical computer IB
Slide 42: Classical systems cannot accurately solve certain problems
Classical systems cannot accurately solve certain categories of problems IBM 8 A laptop can simulate a molecule with 25 electrons, but to simulate one with 43 electrons, we’d need to use the most powerful supercomputer in the world No classical computer we could ever build could simulate a 50-electr
Slide 43: IBM building first universal quantum computers for business and science
On March 6, 2017, IBM announced industry-first initiative to build commercially available universal quantum computing systems Leveraging IBM’s quantum research breakthroughs, IBM plans to deliver “IBM Q” quantum systems and services via the IBM Cloud platform Also releasing a new application program
Slide 44: IBM building first universal quantum computers for business and science
IBM building first universal quantum computers for business and science On March 6, 2017, IBM announced industry-first initiative to build commercially available universal quantum computing systems. Leveraging IBM's quantum research breakthroughs, IBM plans to deliver “IBM Q” quantum systems and ser
Slide 45: Financial Discussion
Financial Discussion Martin Schroeter Senior Vice President and Chief Financial Officer
Slide 46: IBM's Platforms
IBM’s Platforms IBM 2 Global Ecosystem . . . Analytics Customer Engagement Security Healthcare Financial Services IoT Services Hybrid Software and Systems . . . Data (Public, Private, Partner) Industry and Domain Specialization Integrated Solutions
Slide 47: The technology industry and IBM's platforms: Programmable Era
Note 1 The technology industry and IBM’s platforms IBM 3 Industry Trends: The World’s Data: Evolution of IBM Platforms: 1960-1990: The Programmable Era Rise of the computer industry Increase in banking and transactions Primitive and structured data For example: U.S. Commercial Bank Assets ~$250B ~$3
Slide 48: The technology industry and IBM's platforms: Digital Era
Note 2 The technology industry and IBM’s platforms IBM 4 Megabytes Terabytes 1990-2010: The Digital Era The Internet and World Wide Web Beginning of e-commerce and mobile Clients need help managing their I/T 1 Terabyte/ month 1990 Exabytes Industry Trends: The World’s Data: Evolution of IBM Platform
Slide 49: The technology industry and IBM's platforms: Cognitive Era
Note 3 The technology industry and IBM’s platforms IBM 5 Industry Trends: The World’s Data: Evolution of IBM Platforms: Going Forward: The Cognitive Era Cloud as the pervasive delivery platform Complex, unstructured data requires cognitive insights Solutions must be tailored to industries ~34B ~10B
Slide 50: Investments to build IBM's platforms: Watson Platform
Investments to build IBM’s platforms and create new opportunities IBM 6 Note 4 Foundation for cognitive platform Organic investment Jeopardy!: 2011 Watson Group: 2014 Watson Platform Recent Investment Examples: Market Opportunity (by 2020): Cognitive Decision Support >$500B Over 4,000 patents in AI
Slide 51: Investments to build IBM's platforms: IBM Cloud
Investments to build IBM’s platforms and create new opportunities IBM 7 Note 4 Transforming infrastructure with an enterprise-grade, secure cloud platform World-class Bluemix development environment, data services and cloud managed services Cognitive solutions delivered through the Cloud as-a-Servic
Slide 52: Investments to build IBM's platforms: Watson Health
Investments to build IBM’s platforms and create new opportunities IBM 8 Note 4 Broad dataset including health records, claims records, images, clinical data and payer data 7,000 Watson Health employees including doctors and health policy experts Secure and HIPAA-compliant Watson Health Cloud, built
Slide 53: Investments to build IBM's platforms: Watson IoT
Investments to build IBM’s platforms and create new opportunities IBM 9 Note 4 The Weather Company’s high-volume data platform serves as the foundation for Watson IoT Capitalizes on the growth of connected objects across all industries Built-in security and risk management Watson IoT Recent Investme
Slide 54: Investments to build IBM's platforms: Watson Financial Services
Investments to build IBM’s platforms and create new opportunities IBM 10 Note 4 Launched Watson Financial Services in 2016 Promontory acquisition brings expertise in regulatory compliance and risk management consulting to train Watson in financial services More than 5,000 GBS consultants with financ
Slide 55: Investments to build IBM's platforms: Blockchain
Investments to build IBM’s platforms and create new opportunities IBM 11 Blockchain platform and ecosystem Securely transfer any asset across any business network Industry specific solutions z Systems infrastructure powers Blockchain, with unmatched scale and security Blockchain Recent Investment Ex
Slide 56: Investments position us to capitalize on macroeconomic trends
Investments position us to capitalize on macroeconomic trends IBM 12 Healthcare – 1.5 billion people aged 65 or older by 2050, compared to ~500 million today Telecom and Banking – 8X increase in mobile data traffic from 2015 to 2020, mobile banking users double Industry Cognitive 34B connected devic
Slide 57: Our business units are tied into these macroeconomic trends
Our business units are tied into these macroeconomic trends IBM 13 Cognitive Cloud Industry Cognitive Solutions Explosion of data creates a requirement for cognitive Cognitive workloads optimized for cloud delivery Flagship industries in health and financial services Global Business Services Cogniti
Slide 58: Cognitive Solutions Segment
Cognitive Solutions Segment IBM 14 2016 Revenue $18.2B Mid single-digit growth Pre-tax Income $6.4B Mid single-digit growth Going Forward: Solutions Software revenue +6% Strategic Imperatives +8% Cloud +54% Segment as-a-Service exit run rate $1.8B Watson API calls for conversational services increas
Slide 59: Global Business Services Segment
Global Business Services Segment IBM 15 Going Forward: Strategic Imperatives +16%, mix of total GBS revenue >50% Cloud +66% Segment as-a-Service exit run rate $1.1B >30K consultants with industry expertise – from retail to industrial – delivering industry-specific solutions Cognitive Consulting and
Slide 60: Technology Services & Cloud Platforms Segment
Technology Services & Cloud Platforms Segment IBM 16 Going Forward: Infrastructure Services +3% Strategic Imperatives +40% Cloud +50% Segment as-a-Service exit run rate $5.8B GTS backlog growth for two consecutive years 20K practitioners trained and using Agile/DevOps Over 50 cloud datacenters acros
Slide 61: Systems Segment
Systems Segment IBM 17 Going Forward: Double-digit growth in: Mainframe shipped MIPs cycle to cycle Power Linux Flash storage z Systems powers new workloads such as Blockchain Power is the platform for cognitive with its high performance in data-intensive workloads; ecosystem growth with OpenPOWER S
Slide 62: Global Financing Segment
Global Financing Segment IBM 18 Changes in 2017: Client Financing – Leases and loans to IBM clients Commercial Financing – Working capital for IBM Business Partners Global Asset Recovery Services – Used equipment sales and asset disposition services Supports IBM through: Consolidation of IGF’s Finan
Slide 63: Segment Model Summary
IBM 19 IBM Segment Model Summary Revenue Yr/Yr Pre-tax Income Yr/Yr Cognitive Solutions Mid single-digit Mid single-digit Global Business Services Low single-digit Mid single-digit Technology Services & Cloud Platforms Low single-digit Mid single-digit Systems Stable, adjusting for product cycles Hi
Slide 64: Revenue Dynamics
Revenue Yr/Yr @CC from Continuing Ops for each year from 2013-2016 and excludes divested businesses in 2014 & 2015 Note 6 IBM 20 Revenue Dynamics As-a-Service annualized run rate ($B): Strategic Imperatives revenue and mix: Revenue growth Yr/Yr $21B, 22% $29B, 35% $25B, 27% $2.2 $5.3 $3.5 $33B, 41%
Slide 65: Pre-tax Income Contribution
IBM 21 Pre-tax Income Contribution Cognitive Solutions All Other Segments Technology Services & Cloud Platforms Global Business Services Pre-tax Income Dollars ~2pts ~1pt ~1.5pts ~0.5pts ~5% / Year Longer-term model: Mid single-digit growth IBM Model: Low single-digit revenue growth with mix shiftin
Slide 66: Free Cash Flow Realization
Note 8, 9 IBM 22 Free Cash Flow Realization Above 90% over the long term FCF Realization Adjusted* FCF Realization as Reported *Adjusted for book/cash tax differential and cash from gains 108% 103% 107% 89% 79% 98% 97% 101% 98% 97% 94% 98% 100% 103% 2010 2011 2012 2013 2014 2015 2016
Slide 67: Cash Flow and Uses of Cash
Note 8, 9,10 23 Last 2 years Free Cash Flow Realization: 98% Above 90% Longer-term model: Free Cash Flow: ~$25B Steady capital investment Net Cash from Operations: ~$32B Growth in line with profit Acquisitions Uses of cash (last 2 years) 30% 22% 22% 26% Returned Reinvested Dividends CapEx Share repu
Slide 68: IBM Financial Model
Low single-digit revenue growth Mid single-digit pre-tax income growth High single-digit EPS growth with return to shareholders Free cash flow realization above 90% IBM Financial Model IBM 24 Note 6, 9
Slide 69: Summary
Summary IBM 25 Investments position us to capitalize on macroeconomic trends Enduring, high value platforms Balanced investment and return of capital to shareholders Global Ecosystem . . . Analytics C ustomer Engagement Security Healthcare Financial Services Industry and Domain Specialization IoT Se
Slide 70: Summary
Summary Balanced investment and return of capital to shareholders Enduring, high value Investments position platforms us to capitalize on macroeconomic trends Integrated Solutions Industry and Domain Specialization oe
Slide 71: Notes
Notes IBM 27 Note 1 Source: FDIC U.S. Commercial Bank Reports (online database) Note 2 Source: Adapted from Cisco report “The History and Future of Internet Traffic,” August 2015 Note 3 Source: Adapted from Business Insider report “How the ‘Internet of Things’ will impact consumers, businesses, and
Slide 72: 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 73: Non-GAAP Supplemental Materials
Non-GAAP Supplemental Materials
Slide 74: Non-GAAP Supplemental Materials: Reconciliation of Revenue Growth
Non-GAAP Supplemental Materials Reconciliation of Revenue Growth FY 16 Yr/Yr FY 15 Yr/Yr FY 14 Yr/Yr FY 13 Yr/Yr GAAP @CC GAAP @CC @CC excl. Divested Businesses GAAP @CC @CC excl. Divested Businesses GAAP @CC Strategic Imperatives 13% 14% 17% 24% 26% 16% 18% 19% 17% 19% Total IBM (2.2%) (1.6%) (11.9
Slide 75: Non-GAAP Supplemental Materials: Reconciliation of Revenue Growth
Non-GAAP Supplemental Materials Reconciliation of Revenue Growth FY 16 Yi/¥r FY 15 Yi¥r EY 14 Yor EV 13 Yor GAAP @cC | GAAP «@CC) «@CCex| | GAAP @CC @CCexl | GAAP @cc Divested Divested Businesses Businesses Strategic 19% 14% «| 17% — 24% «26% 16% 18% 19% 17% 19% Imperatives Total IBM (2.2%) (1.6%) |
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