International Business Machines Corporation · NYSE:IBM
International Business Machines — Q1 2008 Earnings Presentation
27 slides from International Business Machines's earnings presentation, Apr 16, 2008
Slide 1: 1Q 2008 Earnings Presentation
1Q 2008 Earnings Presentation April 16, 2008 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: 1Q 2008 Summary
1Q 2008 Summary 1Q EPS: $1.65 +36% ¾ Strength in offerings that provide: • Cost and capital conservation • Shorter payback • Solution to specific client needs, e.g., risk, security, energy efficiency ¾ Emerging markets build-out ¾ Results supported by: • Annuity businesses • Cost and expense managem
Slide 4: 1Q 2008 Financial Summary
1Q 2008 Financial Summary B/(W) $ in Billions, except EPS 1Q08 Yr/Yr Revenue $24.5 11% @ CC 4% GP % 41.5% 1.2 pts Expense $7.0 (11%) Pre-Tax Income $3.2 24% Tax Rate 27.5% 1.0 pts Net Income $2.3 26% Shares (Diluted) (M) 1,404.3 8% EPS $1.65 36% Strong operating leverage www.ibm.com/investor 4
Slide 5: Revenue by Key Industry Sales Unit
Revenue by Key Industry Sales Unit B/(W) Yr/Yr $ in Billions 1Q08 Rptd @CC Financial Services $6.9 14% 5% Public Industrial Public 3.7 13% 8% Rest of Industrial 3.1 14% 6% World Distribution Financial Distribution 2.4 9% 3% Comms Communications 2.4 16% 10% U.S. SMB Small / Medium Business 4.6 10% 3%
Slide 6: Revenue by Geography
Revenue by Geography $ in Billions B/(W) Yr/Yr Canada/ 1Q08 Rptd @CC LA Americas $9.9 8% 6% U.S. EMEA Europe/ME/A 8.8 16% 4% +6% Asia Pacific 5.1 14% 3% APac Japan +10% OEM 0.7 (16%) (16%) -3% @CC @CC IBM $24.5 11% 4% OEM New Growth Mkts. Org. 19% 11% BRIC Countries 26% 14% Growth led by emerging co
Slide 7: Revenue by Segment
Revenue by Segment B/(W) Yr/Yr $ in Billions 1Q08 Rptd @CC Global Technology Services $9.7 17% 9% Global Business Global Business Services 4.9 17% 9% Services Systems & Systems & Technology 4.2 (7%) (12%) Technology Global without Printers (2%) (7%) Technology Services Software Software 4.8 14% 6% G
Slide 8: Expense Summary
Expense Summary Yr/Yr Drivers B/(W) $ in Billions 1Q08 Yr/Yr Currency Acq.* Ops SG&A $5.6 (10%) (6 pts) (4 pts) (1 pts) RD&E 1.6 (4%) (3 pts) (3 pts) 2 pts IP and Development Income (0.3) 34% Other (Income)/Expense (0.1) (30%) Interest Expense 0.2 (144%) Total Expense & Other $7.0 (11%) (6 pts) (4 p
Slide 9: Margins by Segment
Margins by Segment External Total Gross Profit Margins Pre-Tax Margins B/(W) B/(W) $ in Billions 1Q08 Yr/Yr Pts 1Q08 Yr/Yr Pts Global Technology Services 31.3% 2.2 pts 9.8% 2.0 pts Global Business Services 25.0% 1.2 pts 11.2% 0.7 pts Systems & Technology 37.0% 2.2 pts 3.3% 1.3 pts Software 83.9% 0.3
Slide 10: Services Segments
Services Segments Global Technology Services (GTS) Global Business Services (GBS) $ in Billions B/(W) Yr/Yr $ in Billions B/(W) Yr/Yr 1Q08 Rptd @CC 1Q08 Rptd @CC Revenue (External) $9.7 17% 9% Revenue (External) $4.9 17% 9% Gross Margin (External) 31.3% 2.2 pts Gross Margin (External) 25.0% 1.2 pts
Slide 11: Systems & Technology Segment
Systems & Technology Segment $ in Billions B/(W) Yr/Yr 1Q08 Rptd @CC Revenue (External) $4.2 (7%) (12%) without Printers (2%) (7%) Gross Margin (External) 37.0% 2.2 pts PTI Margin 3.3% 1.3 pts 1Q08 Revenue 1Q08 Revenue Yr/Yr (% of Total S&TG) System z 10% Legacy System i (21%) Converged System p 2%
Slide 12: Software Segment
Software Segment B/(W) Yr/Yr $ in Billions 1Q08 Rptd @CC Revenue (External) $4.8 14% 6% Gross Margin (External) 83.9% 0.3 pts PTI Margin 23.0% 1.6 pts 1Q08 Revenue Yr/Yr 1Q08 Revenue (% of Total Software) Websphere Family 20% Information Management 27% Other Tivoli 9% Middleware Key Lotus 17% 24% Br
Slide 13: Cash Flow Analysis
Cash Flow Analysis B/(W) B/(W) $ in Billions 1Q08 Yr/Yr FY07 Yr/Yr Net Cash from Operations $4.2 $1.2 $16.1 $1.1 Less: Global Financing Receivables 2.4 0.3 (1.3) (1.0) Net Cash from Operations 1.8 0.9 17.4 2.1 (excluding GF Receivables) Net Capital Expenditures (1.2) (0.1) (5.0) (0.2) Free Cash Flow
Slide 14: Balance Sheet Summary
Balance Sheet Summary $ in Billions Mar. 07 Dec. 07 Mar. 08 Cash & Marketable Securities $10.8 $16.1 $12.0 Non-GF Assets* 59.7 67.5 74.6 Global Financing Assets* 31.1 36.8 35.2 Total Assets 101.6 120.4 121.8 Other Liabilities 49.9 56.7 57.9 Non-GF Debt 0.7 10.7 8.9 Global Financing Debt 23.2 24.5 26
Slide 15: 1Q 2008 EPS Bridge
1Q 2008 EPS Bridge 36% Yr/Yr $0.02 $1.65 $0.13 $0.04 ($0.05) $0.03 $0.05 $0.09 $0.14 $1.21 Q1’07 EPS Revenue Gross Expense Interest Share Tax Rate Q1’08 EPS Growth Margin Productivity Expense on Repurchases Yr/Yr 11% Expansion Debt to fund Pension as rptd. ’07 ASR Savings www.ibm.com/investor 15
Slide 16: 1Q 2008 Wrap-Up
1Q 2008 Wrap-Up $10-$11 14% -16% 2010 (’06 –’10) ¾ Services momentum continued with strong revenue and profit performance 2008 $8.50 + 18%* ¾ Systems & Technology had successful z10 Yr/Yr launch 2007 $7.18 18% Yr/Yr ¾ Software continued to enhance capabilities 2006 $6.06 with Cognos acquisition ¾ Gr
Slide 17: www.ibm.com/investor
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Slide 18: Supplemental Materials
Supplemental Materials Some columns and rows in these materials, including the supplemental exhibits, may not add due to rounding ¾ Supplemental Segment Information – Global Services ¾ Supplemental Segment Information – Systems & Technology, Software ¾ Currency – Year/Year Comparison ¾ Cash Flow (FA
Slide 19: Supplemental Segment Information – 1Q 2008
Supplemental Segment Information – 1Q 2008 Revenue Growth Signings ($B) Global Services Yr/Yr @CC Global Services 1Q08 Yr/Yr Strategic Outsourcing 16% 7% Global Services Signings @CC Business Transformation 34% 28% GBS Short-Term $3.6 7% Outsourcing GTS Short-Term 2.0 4% Integrated Tech Services 15%
Slide 20: Supplemental Segment Information – 1Q 2008
Supplemental Segment Information – 1Q 2008 Revenue Revenue Growth Systems & Technology Group Yr/Yr @CC GP% Share Software Yr/Yr @CC System z 10% 2% Websphere Family 20% 12% Legacy System i (21%) (27%) Information Management 27% 19% Converged System p 2% (3%) Tivoli 9% 3% System x Servers Flat (6%) L
Slide 21: Currency – Year/Year Comparison
Currency – Year/Year Comparison Quarterly Averages per US $ 4/15 Yr/Yr @ 4/15 Spot 1Q08 Yr/Yr Spot 2Q08 3Q08 4Q08 Euro 0.67 13% 0.63 15% 13% 8% Pound 0.51 1% 0.51 (1%) (3%) (4%) Yen 105 12% 102 16% 14% 10% IBM Revenue Impact 7 pts ~7-8 pts ~6-7 pts ~3-4 pts (US$B) Yr/Yr Negative Yr/Yr growth signifi
Slide 22: Cash Flow (FAS 95)
Cash Flow (FAS 95) $ in Billions 1Q08 1Q07 Net Income from Operations $2.3 $1.8 Depreciation / Amortization of Intangibles 1.3 1.2 Stock-based Compensation 0.2 0.2 Working Capital / Other (2.0) (2.3) Global Financing A/R 2.4 2.1 Net Cash provided by Operating Activities 4.2 3.0 Capital Expenditures,
Slide 23: 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 earnings presentation materials, the followin
Slide 24: Non-GAAP Supplementary Materials
Non-GAAP Supplementary Materials Constant Currency Management refers to growth rates at constant currency or adjusting for currency so that the business results can be viewed without the impact of fluctuations in foreign currency exchange rates, thereby facilitating period-to- period comparisons of
Slide 25: Non-GAAP Supplementary Materials
Non-GAAP Supplementary Materials Interest Expense Management presents certain financial results excluding the effects of a higher level of interest expense as a result of the company’s Accelerated Share Repurchase executed in the second quarter of 2007. Given its unique nature, management believes t
Slide 26: Non-GAAP Supplementary Materials
Non-GAAP Supplementary Materials Reconciliation of Asia Pacific Revenue Growth 1Q08 Yr/Yr As Rptd @ CC Asia Pacific Revenue, other than Japan 18% 10% Japan Revenue 11% (3%) The above serves to reconcile the Non-GAAP financial information contained in the “Geographic Revenue” discussion regarding rev
Slide 27: www.ibm.com/investor
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