International Business Machines Corporation · NYSE:IBM
International Business Machines — Q4 2009 Earnings Presentation
42 slides from International Business Machines's earnings presentation, Jan 19, 2010
Slide 1: 4Q 2009 Earnings Presentation
® 4Q 2009 Earnings Presentation January 19, 2010 www.ibm.com/investor
Slide 2: Forward Looking Statements
Forward Looking Statements Certain comments made in this 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 concerni
Slide 3: 2009 Financial Highlights
2009 Financial Highlights 4Q 2009 Full Year ¾EPS $3.59 +10% yr/yr ¾EPS $10.01 +13% yr/yr ¾Hardware / Software Share Gains ¾Hardware / Software Share Gains •POWER, System x, Blades, Storage •POWER, System x, Blades, Storage, •WebSphere, Tivoli, Branded MW Total Servers •Middleware, WebSphere, Tivoli,
Slide 4: IBM Financial Performance History
IBM Financial Performance History $22 $11 Revenue $20 $10 Divested Revenue Pre-tax Income & Free Cash Flow ($B) $18 $9 Pre-tax income $16 $8 EPS Free Cash Flow* $14 $7 EPS $12 $6 $10 $5 $8 $4 $6 $3 $4 $2 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Note: 2005-2008 EPS reflects the adoption of a
Slide 5: Transformational Impact on Profit Mix
Transformational Impact on Profit Mix Segment Pre-tax Income * % of Segments $8.1B 42% % of Segments $2.8B 25% $8.1B 42% $4.5B 40% $1.2B 11% $1.7B 9% $2.7B 24% $1.4B 7% 2000** 2009 Hardware Financing Services Software * Sum of external segment pre-tax income not equal to IBM pre-tax income ** Stock-
Slide 6: Transformational Drivers
Transformational Drivers Initiative 2009 Result ¾ Shifting to Higher Value Areas ¾ Software $8B PTI Î 42% of total segments ¾ Services $8B PTI Î 42% of total segments ¾ Continued acquisitions; 108 companies since 2000 ¾ Improving Operating Leverage ¾ $3.7B cost & expense savings through Productivity
Slide 7: 4Q / FY 2009 Financial Summary
4Q / FY 2009 Financial Summary $ in Billions, except EPS B/(W) B/(W) 4Q09 Yr/Yr FY09 Yr/Yr Revenue $27.2 1% $95.8 (8%) @CC (5%) (5%) GP % 48.3% 0.4 pts 45.7% 1.7 pts Expense $6.8 5% $25.6 11% Pre-Tax Income $6.4 10% $18.1 9% PTI Margin 23.4% 1.9 pts 18.9% 2.8 pts Tax Rate 24.6% (0.8 pts) 26.0% 0.2 p
Slide 8: Revenue by Geography
Revenue by Geography $ in Billions B/(W) Yr/Yr 4Q09 Rptd @CC Canada/ Americas $11.1 (3%) (6%) LA Europe/ME/A 9.7 2% (7%) U.S. EMEA Asia Pacific 5.8 6% (3%) -8% Total Geographies $26.6 1% (6%) APac Japan +3% -9% @CC IBM $27.2 1% (5%) @CC OEM Major Markets (2%) (7%) +5% Growth Markets 14% 2% BRIC Coun
Slide 9: Revenue and Gross Margin by Segment
Revenue and Gross Margin by Segment Revenue Gross Profit Margin $ in Billions B/(W) Yr/Yr B/(W) 4Q09 Rptd @CC 4Q09 Yr/Yr Pts Global Technology Services $10.1 4% (3%) 35.8% 0.9 pts Global Business Services 4.6 (3%) (9%) 30.3% 1.7 pts Software 6.6 2% (4%) 87.7% Flat Systems & Technology 5.2 (4%) (9%)
Slide 10: Expense Summary
Expense Summary B/(W) Yr/Yr Drivers B/(W) $ in Billions 4Q09 Yr/Yr Currency Acq.* Ops SG&A $5.6 5% (7 pts) (1 pts) 13 pts RD&E 1.5 4% (3 pts) (1 pts) 8 pts IP and Development Income (0.3) (5%) Other (Income)/Expense 0.0 nm Interest Expense 0.1 58% Total Expense & Other Income $6.8 5% (9 pts) (1 pts)
Slide 11: Margins by Segment
Margins by Segment External Total Gross Profit Margins Pre-Tax Margins B/(W) B/(W) 4Q09 Yr/Yr Pts 4Q09 Yr/Yr Pts Global Technology Services 35.8% 0.9 pts 15.0% 0.6 pts Global Business Services 30.3% 1.7 pts 16.0% 1.1 pts Software 87.7% Flat 41.5% 2.4 pts Systems & Technology 42.5% 2.6 pts 15.4% 2.6
Slide 12: Services Segments
Services Segments Global Technology Services (GTS) Global Business Services (GBS) $ in Billions B/(W) Yr/Yr $ in Billions B/(W) Yr/Yr 4Q09 Rptd @CC 4Q09 Rptd @CC Revenue (External) $10.1 4% (3%) Revenue (External) $4.6 (3%) (9%) Gross Margin (External) 35.8% 0.9 pts Gross Margin (External) 30.3% 1.7
Slide 13: Software Segment
Software Segment B/(W) Yr/Yr $ in Billions 4Q09 Rptd @CC Revenue (External) $6.6 2% (4%) Gross Margin (External) 87.7% Flat PTI Margin 41.5% 2.4 pts 4Q09 Revenue Yr/Yr 4Q09 Revenue Rptd @CC (% of Total Software) WebSphere Family 13% 6% Information Management 7% 1% Other Tivoli 7% 1% Key Middleware B
Slide 14: Systems & Technology Segment
Systems & Technology Segment $ in Billions B/(W) Yr/Yr 4Q09 Rptd @CC Revenue (External) $5.2 (4%) (9%) Gross Margin (External) 42.5% 2.6 pts PTI Margin 15.4% 2.6 pts 4Q09 Revenue Yr/Yr 4Q09 Revenue Rptd @CC (% of Total Sys & Tech) System z (27%) (31%) Converged System p (14%) (18%) System x Servers
Slide 15: Cash Flow Analysis
Cash Flow Analysis B/(W) B/(W) $ in Billions 4Q09 Yr/Yr FY09 Yr/Yr Net Cash from Operations $6.4 ($0.2) $20.8 $2.0 Less: Global Financing Receivables (1.9) 0.3 1.9 1.9 Net Cash from Operations 8.4 (0.5) 18.9 0.0 (excluding GF Receivables) Net Capital Expenditures (1.1) (0.1) (3.7) 0.8 Free Cash Flow
Slide 16: Balance Sheet Summary
Balance Sheet Summary $ in Billions Dec. 08 Dec. 09 Cash & Marketable Securities $12.9 $14.0 Non-GF Assets* 61.8 61.7 Global Financing Assets 34.9 33.3 Total Assets 109.5 109.0 Other Liabilities 62.0 60.2 Non-GF Debt* 9.6 3.7 Global Financing Debt 24.4 22.4 Total Debt 33.9 26.1 Total Liabilities 95.
Slide 17: EPS Bridge – 4Q08 to 4Q09
EPS Bridge – 4Q08 to 4Q09 $0.24 ($0.04) $0.03 $3.59 $0.06 $0.03 $3.27 Operating Leverage 4Q08 EPS* Revenue Growth Gross Margin Expense Tax Share 4Q09 EPS @ Actual Productivity Rate Repurchases * Reflects the adoption of amendments to ASC 260, “Earnings Per Share” www.ibm.com/investor 17
Slide 18: EPS Bridge – FY08 to FY09
EPS Bridge – FY08 to FY09 $0.34 $10.01 $0.58 $0.03 $0.85 $8.89 ($0.68) Operating Leverage 2008 EPS* Revenue Growth Gross Margin Expense Tax Share 2009 EPS @ Actual Productivity Rate Repurchases * Reflects the adoption of amendments to ASC 260, “Earnings Per Share” www.ibm.com/investor 18
Slide 19: Well-Positioned for 2010
$11.00+ Well-Positioned for 2010 2010 2009 $10.01 ¾ Shifting portfolio to higher value spaces 2008 $8.89 2007 $7.15 ¾ Improving operating leverage through 2006 productivity $6.05 ¾ Investing in skills and capabilities to drive future growth EPS Expect EPS of at least $11.00 in 2010 Note: 2006-2008 E
Slide 20: www.ibm.com/investor
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Slide 21: Supplemental Materials
Supplemental Materials Some columns and rows in these materials, including the supplemental exhibits, may not add due to rounding ¾ Currency – Year/Year Comparison ¾ Supplemental Segment Information – Global Services ¾ Supplemental Segment Information – Systems & Technology, Software ¾ Global Financ
Slide 22: Currency – Year/Year Comparison
Currency – Year/Year Comparison Quarterly Averages per US $ 1/18 Yr/Yr @ 1/18 Spot 3Q09 Yr/Yr 4Q09 Yr/Yr Spot 1Q10 2Q10 3Q10 4Q10 Euro 0.70 (5%) 0.68 11% 0.70 9% 5% 1% (3%) Pound 0.61 (15%) 0.61 4% 0.61 12% 5% 0% 0% Yen 94 13% 90 6% 91 3% 7% 3% (1%) IBM Revenue (2 pts) 6 pts ~6-7 pts ~4-5 pts ~1-2 p
Slide 23: Supplemental Segment Information – 4Q 2009
Supplemental Segment Information – 4Q 2009 Revenue Growth Signings ($B) Global Services Yr/Yr @CC Global Services 4Q09 Yr/Yr @CC Strategic Outsourcing 6% (2%) Global Services (C&SI / ITS) $7.4 1% (6%) Business Transformation 7% 1% GBS (C&SI) 4.6 3% (3%) Outsourcing GTS (ITS) 2.7 (3%) (10%) Integrate
Slide 24: Supplemental Segment Information – 4Q 2009
Supplemental Segment Information – 4Q 2009 Revenue Growth Revenue Growth Systems & Technology Yr/Yr @CC GP% Share Software Yr/Yr @CC System z (27%) (31%) WebSphere Family 13% 6% Information Management 7% 1% Converged System p (14%) (18%) Tivoli 7% 1% System x Servers 37% 31% Lotus (5%) (11%) Storage
Slide 25: Global Financing Portfolio
Global Financing Portfolio 4Q09 – $25.0B Net External Receivables Investment Grade Non-Investment Grade 59% 41% 40% 35% 30% 25% 20% 35% 15% 24% 22% 10% 5% 11% 3% 5% 0% Aaa-A3 Baa1-Baa3 Ba1-Ba2 Ba3-B1 B2-B3 Caa-D 4Q09 3Q09 4Q08 Identified Loss Rate 1.6% 1.7% 1.4% Anticipated Loss Rate 0.5% 0.6% 0.6%
Slide 26: Revenue by Key Industry Sales Unit
Revenue by Key Industry Sales Unit $ in Billions B/(W) Yr/Yr B/(W) Yr/Yr 4Q09 Rptd @CC FY09 Rptd @CC Financial Services $7.9 1% (6%) $27.2 (6%) (4%) Public 4.3 5% Flat 15.6 1% 4% Industrial 2.8 (9%) (15%) 10.1 (17%) (15%) Distribution 2.6 (1%) (6%) 9.0 (10%) (8%) Communications 2.6 (3%) (9%) 9.4 (8%
Slide 27: Revenue by Geography – FY 2009
Revenue by Geography – FY 2009 $ in Billions B/(W) Yr/Yr FY09 Rptd @CC Canada/ Americas $40.2 (6%) (5%) LA Europe/ME/A 32.6 (12%) (6%) U.S. EMEA Asia Pacific 20.7 (2%) (4%) -6% Total Geographies $93.5 (7%) (5%) APac Japan +3% -10% @CC IBM $95.8 (8%) (5%) @CC OEM Major Markets (8%) (6%) -15% Growth M
Slide 28: Revenue by Segment – FY 2009
Revenue by Segment – FY 2009 Revenue $ in Billions B/(W) Yr/Yr Global FY09 Rptd @CC Business Systems Global Technology Services $37.3 (5%) (2%) Services & Technology Global Business Services 17.7 (10%) (8%) Global Software 21.4 (3%) (1%) Technology Services Software Systems & Technology 16.2 (16%) (
Slide 29: Expense Summary – FY 2009
Expense Summary – FY 2009 B/(W) Yr/Yr Drivers B/(W) $ in Billions FY09 Yr/Yr Currency Acq.* Ops SG&A $21.0 10% 3 pts (1 pts) 9 pts RD&E 5.8 8% 2 pts (2 pts) 8 pts IP and Development Income (1.2) 2% Other (Income)/Expense (0.4) 18% Interest Expense 0.4 40% Total Expense & Other Income $25.6 11% 4 pts
Slide 30: Margins by Segment – FY 2009
Margins by Segment – FY 2009 External Total Gross Profit Margins Pre-Tax Margins B/(W) B/(W) FY09 Yr/Yr Pts FY09 Yr/Yr Pts Global Technology Services 35.0% 2.4 pts 14.3% 3.0 pts Global Business Services 28.2% 1.5 pts 13.8% 0.8 pts Software 86.0% 0.6 pts 33.6% 5.2 pts Systems & Technology 37.8% (0.2
Slide 31: Summary and Selected Items – FY 2009
Summary and Selected Items – FY 2009 $ in Billions, except EPS B/(W) Pre-Tax FY09 Yr/Yr Includes: Income Revenue $95.8 (8%) Retirement-Related Benefits (1.4) Pre-Tax Income $18.1 9% PTI Margin 18.9% 2.8 pts Stock-Based Compensation (0.6) Net Income $13.4 9% Amort. of Purchased Intangibles (0.5) EPS
Slide 32: Cash Flow (FAS 95)
Cash Flow (FAS 95) $ in Billions 4Q09 4Q08 FY09 FY08 Net Income from Operations $4.8 $4.4 $13.4 $12.3 Depreciation / Amortization of Intangibles 1.3 1.3 5.0 5.4 Stock-based Compensation 0.1 0.2 0.6 0.7 Working Capital / Other 2.2 3.0 (0.1) 0.4 Global Financing A/R (1.9) (2.3) 1.9 0.0 Net Cash provid
Slide 33: Computation of 2009 Global Financing Return on Equity
Computation of 2009 Global Financing Return on Equity The following are details on the computation of IBM’s Global Financing Return on Equity. The Global Financing segment is in the business of providing financing to IBM’s clients and its business partners, and is measured as if it were a standalone
Slide 34: Supplemental EPS Information – Acquisition-Related Activity
Supplemental EPS Information – Acquisition-Related Activity The company is including a view of the impact of certain acquisition- related charges on IBM’s earnings results. Management’s view is that this supplemental information provides additional insight into the company’s ongoing operations and e
Slide 35: Supplemental EPS Information – Acquisition-Related Activity - 2009
Supplemental EPS Information – Acquisition-Related Activity - 2009 $ in Millions, except EPS 1Q09 2Q09 3Q09 4Q09 FY09 As Reported Pre-Tax Income $3,122 $4,262 $4,373 $6,381 $18,138 Net Income $2,295 $3,103 $3,214 $4,813 $13,425 EPS $1.70 $2.32 $2.40 $3.59 $10.01 Adjustments Pre-Tax Income Total $125
Slide 36: Non-GAAP Supplementary Materials
Non-GAAP Supplementary Materials In an effort to provide investors with additional information regarding the company's results as determined by generally accepted accounting principles (GAAP), the company also discusses, in its earnings press release and/or earnings presentation materials, the follo
Slide 37: Non-GAAP Supplementary Materials
Non-GAAP Supplementary Materials Reconciliation of Free Cash Flows (excluding GF Receivables) $ in Billions 2000 2001 2002 2003 2004 Net Cash from Operations $8.6 $13.7 $13.8 $14.5 $15.3 Less: Global Financing Receivables (2.5) 2.0 3.3 1.9 2.5 Net Cash from Operations (excluding GF Receivables) 11.1
Slide 38: Non-GAAP Supplementary Materials
Non-GAAP Supplementary Materials Reconciliation of Acquired Business Revenue Growth FY09 Yr/Yr As Rptd @CC Business Analytics Acquisitions – Software 7% 9% The above serves to reconcile the Non-GAAP financial information contained in the “Transformational Drivers” discussion regarding revenue growth
Slide 39: Non-GAAP Supplementary Materials
Non-GAAP Supplementary Materials Reconciliation of Geography Revenue Growth 4Q09 Yr/Yr As Rptd @CC Asia Pacific, other than Japan 14% 3% Japan (3%) (9%) FY09 Yr/Yr As Rptd @CC China 11% 10% Asia Pacific, other than Japan (2%) 3% Japan (1%) (10%) The above serves to reconcile the Non-GAAP financial i
Slide 40: Non-GAAP Supplementary Materials
Non-GAAP Supplementary Materials Reconciliation of Software Segment Revenue Growth 4Q09 Yr/Yr As Rptd @CC Enterprise Asset Management – 63% 40% Emerging Markets The above serves to reconcile the Non-GAAP financial information contained in the “Software Segment” discussion regarding revenue growth in
Slide 41: Non-GAAP Supplementary Materials
Non-GAAP Supplementary Materials Reconciliation of Debt-to-Capital Ratio FY08 FY09 Non-GF Debt / Capital 49% 16% IBM Consolidated Debt / Capital 71% 53% The above serves to reconcile the Non-GAAP financial information contained in the “Balance Sheet Summary” discussion regarding the non-GF debt to c
Slide 42: www.ibm.com/investor
www.ibm.com/investor 42
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