International Business Machines Corporation · NYSE:IBM
International Business Machines — Investor Day (2015)
36 slides from International Business Machines's investor day presentation, 2015
Slide 1: Financial Overview
FINANCIAL OVERVIEW MARTIN SCHROETER SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
Slide 2: Agenda
Agenda 1 2 3 4 Portfolio Strategic Core Longer-term Imperatives Portfolio financial model • Data, Cloud and • Deep client • Segment models Engagement relationships, • Capital deployment • Scaling businesses solutions based and Free Cash Flow • Innovation drives value Well positioned to Differentiati
Slide 3: Portfolio — Well positioned to deliver value in enterprise IT
PORTFOLIO — Well positioned to deliver value in enterprise IT
Slide 4: Portfolio Mix
IBM Portfolio includes: Strategic Imperatives • Data, Cloud and Engagement FY2014 Hardware/ Software Services Recurring Core Franchises IGF • Annuity businesses in Services, Software and Financing • Highly recurring portions of our Hardware, Software and Portfolio Mix Services transactional business
Slide 5: Portfolio Performance
Portfolio Performance FY2014 Signposts 2014 Performance Hardware/ Software Services Strategic • Double-digit • Revenue up 16% yr/yr IGF Imperatives Revenue growth ⁻ Cloud +60% ⁻ Mobile > 200% ⁻ Analytics +7% ⁻ Security +19% Portfolio Mix • Maintain high • Software mix > overall IBM mix of Software R
Slide 6: Portfolio — Well positioned to deliver value in enterprise IT
Strategic Imperatives • Continued momentum with strong double-digit growth • Shifting $4 billion of spending, investments continue to be focused on Imperatives • Solution units focused on specific markets and industries • Partnerships and ecosystems PORTFOLIO — Recurring Core Franchises Well positio
Slide 7: Strategic Imperatives — Differentiation driven growth and value
STRATEGIC IMPERATIVES — Differentiation driven growth and value
Slide 8: Strategic Imperatives performance
Strategic Imperatives performance 2014 Revenue of $25 billion with High software content Revenue growth above market mix more than doubling since 2010 drives value IBM / Market Strategic Imperative Strategic Imperative Revenue mix 2014 Revenue growth Segment mix 13% 27% 20% 19% 19% 19% Hardware 19%
Slide 9: Strategic Imperatives capabilities and investments
Strategic Imperatives capabilities and investments Differentiators: Differentiators: Differentiators: Hybrid, Security, Domain Expertise, Real-Time, Understanding Workflow, Hybrid, Security Intelligence Designed for Data Structured and Unstructured Engagement Cloud Data Mobile & Social Security 18 1
Slide 10: IBM Cloud
IBM Cloud 2014 Cloud Revenue IBM is ranked as the #1 hybrid and 2018 Market Opportunity private cloud provider for the enterprise $7B, +60% Yr/Yr February 2015 ~$400B, Growth ahead of market 23% CAGR Annual “as-a-Service” run rate IBM is ranked #1 for current ~$3.5B /Yr hybrid cloud implementations
Slide 11: IBM Analytics
IBM Analytics 2014 Analytics Revenue IBM ranked a leader in Gartner Magic 2018 Market Opportunity Quadrant for Advanced Analytics $17B, +7% Yr/Yr ~$315B, Platforms & Data Integration tools Growth ahead of market July 2014 7% CAGR IBM is a leader in the Forrester wave for business intelligence profes
Slide 12: Engagement
Engagement 2014 Engagement Revenue For the fifth consecutive year, IDC ranked 2018 Market Opportunity IBM number one in worldwide market share Mobile ~$1B, Social ~$1B ~$290B, for enterprise social software Security >$1.5B April 2014 10% CAGR Revenue Growth >35% Yr/Yr IBM is #1 in market share for S
Slide 13: Strategic Imperatives grow to ~$40 billion by 2018
Strategic Imperatives grow to ~$40 billion by 2018 Continued double-digit revenue growth Mix increases to more than 40% of IBM longer-term $4B spending shift in 2015 drives growth 13% 27% >40% 20% 19% 19% 20% 19% 19% ~$40B Double Digits 10% $25B 0% 2010 2011 2012 2013 2014 … 2018 2010 2014 2018 IBM
Slide 14: Strategic Imperatives — Differentiation driven growth and value
Strategic Imperatives — Differentiation driven growth and value Core portfolio provides Strategic Imperatives Innovation and recent a broad platform for have scaled rapidly partnerships drive growth scaling businesses ~80% of IBM revenue is from Cloud Watson clients who have deployed 2014 annual ‘as
Slide 15: Core Portfolio — High value, essential client IT
CORE PORTFOLIO — High value, essential client IT © 2015 International Business Machines Corporation 15
Slide 16: The scope of what we manage for clients spans many industries
The scope of what we manage for clients spans many industries… More than 90 of the top 9 of the top 10 oil IBM serves 9 of the 80% of the global top 100 banks worldwide and gas companies top 10 electronics 50 retailers run their use IBM solutions to in the world are IBM companies in the business on
Slide 17: …and geographies
…and geographies 49 of the top 50 In the UK, 1/3 of the FTSE 100 5 of the top banks in China healthcare organizations use IBM mainframes, as do the use IBM to run their daily in the US work with IBM top 8 retail banks and the top 5 banking operations supermarkets IBM serves the 17 out of the 22 bank
Slide 18: Re-inventing the Core: Banking example
Re-inventing the Core: Banking example Banking transactions growth Mainframe capacity Re-invention of Mainframe of ~10% CAGR over ten years deployment continues to grow drives consistent performance Banking Transactions IBM Mainframe Historical Performance Eight quarters following announcement 100 G
Slide 19: Re-inventing the Core: Mainframe and Application Middleware
Re-inventing the Core: Mainframe and Application Middleware Mainframe ~2000 ~2010 Current • Linux on Mainframe • Multi-site business • Advanced Analytics Accelerator • Data Encryption Standards continuity solutions • Enterprise Cloud Server; Accelerated Encryption • Capacity on Demand • Built for mo
Slide 20: Client environment evolution across industries
Client environment evolution across industries Banking Telecommunications Travel Banking transactions Mobile data traffic US Mobile and Desktop travel bookings 100 3,000 200 monthly traffic (PetaBytes) Total (uplink + downlink) 2,500 175 75 2,000 In Billions $ In Billions 150 50 1,500 125 1,000 25 1
Slide 21: Re-inventing the Core: Strategic Outsourcing and Power
Re-inventing the Core: Strategic Outsourcing and Power Strategic Outsourcing ~2000 ~2010 Current • Global delivery centers established • Process standardization • Cloud — Public / Hybrid / Private in multiple countries serving clients • Integrated service management • Automation and integration of s
Slide 22: Core Portfolio — High value, essential client IT
Core Portfolio — High value, essential client IT • The scope of what we manage for clients across industries and geographies is essential • Portfolio constantly re-invented to address evolving client needs around core IT processes and systems • High value to clients and IBM • Ongoing investment shif
Slide 23: Segment Models and Capital Deployment
Segment Models and Capital Deployment
Slide 24: Services Segments
Services Segments Longer-term financial model • Low single-digit Revenue growth • Mid single-digit Pre-tax income growth Revenue Growth Margin Expansion GTS • Advanced automation through analytics and • Leverage cloud investments, continue to expand security and intellectual property deployment mobi
Slide 25: Software Segment
Software Segment Longer-term financial model • Low single-digit Revenue growth • Mid single-digit Pre-tax income growth Revenue Growth 2014 Revenue Mix • Software Annuity content at ~70% Transactional growing low single-digits ~30% Annuity Revenue • Overall Software revenue impacted by the ’10 –’14
Slide 26: Hardware Segment
Hardware Segment Longer-term financial model • Stable, profitable and contributes to IBM Model Revenue Growth Profitability • New products across the portfolio drive growth in 2015 • 2014 actions stabilized profit performance • Next generation Mainframe (z13) • Profit performance tied to product • P
Slide 27: Global Financing Segment
Global Financing Segment Longer-term financial model • Grow asset base • Maintain high Return on Equity 2014 Performance • Client Financing — Leases and loans to IBM clients $39B $29B 37% • Commercial Financing — total debt return on Working capital for IBM Business Partners assets (71% of IBM) equi
Slide 28: Capital Deployment
Capital Deployment ’10 –’14 MODEL INVESTMENTS RETURNS EXAMPLES Organic Research and Development, • Build on existing competencies $48B High Capital • Create new markets Expenditures Well above • Address shorter-term portfolio gaps Acquisitions $15B Cost of Capital • Leverage IBM scale for growth Shi
Slide 29: Historical Free Cash Flow performance
Historical Free Cash Flow performance 108% 107% Free Cash Flow Realization in the 103% 90%’s longer-term 101% 98% 98% 97% 94% 89% • Historical Free Cash Flow realization in the 90%’s adjusting for book/cash 79% tax differential and cash from gains • Free Cash Flow realization below 100% driven by th
Slide 30: Free Cash Flow realization supports model
Free Cash Flow realization supports model Last 5 Years Longer-Term Over 100% of Free Cash Flow returned to shareholders 75% - 85% of Free Cash Flow returned to shareholders Free Cash Flow / Net Income: 97% Free Cash Flow / Net Income: 90%’s 101% Free Cash Flow 75% - 85% Share Repurchase ~6% annual F
Slide 31: IBM Financial Model
IBM Financial Model LONGER TERM Revenue Low single-digit growth • Double-digit Strategic Imperative growth — Opportunity, Investments, Partnerships • Continuous re-invention drives Core Portfolio performance moderation Pre-Tax Income Mid single-digit growth • Services margin expansion — Automation,
Slide 32: Summary
Summary Portfolio Strategic Imperatives Core Portfolio Well positioned to deliver Differentiation driven High value, essential value in enterprise IT growth and value client IT © 2015 International Business Machines Corporation 32
Slide 33: © 2015 International Business Machines Corporation
© 2015 International Business Machines Corporation 33
Slide 34: Notes
Notes Note 1 Note 4 Consistent with basis presented at May 2014 Investor Performance estimate — adjusted for currency Briefing, 2014 performance modeled on “Gross View” (inclusive of overlap with Strategic Imperatives), Recurring Core Franchises revenue growth modeled Note 5 net of Strategic Imperat
Slide 35: These charts and the associated remarks and comments are integrally related, and they are
These charts and the associated remarks and comments are integrally related, and they are intended to be presented and understood together. In an effort to provide additional and useful information regarding the company’s financial results and other financial information as determined by generally a
Slide 36: © 2015 International Business Machines Corporation
© 2015 International Business Machines Corporation 36
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