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IBM · INTERNATIONAL BUSINESS MACHINES CORP

29 filings

10-K

IBM 10-K Annual Reports

INTERNATIONAL BUSINESS MACHINES CORP - 29 annual reports

Filing record · 2016–202610-K1110-Q338-K210

2025
INTERNATIONAL BUSINESS MACHINES CORP Annual Report, Year Ended Dec 31, 2025
IBM's 2025 10-K shows a strong year: revenue rose 7.6% as reported (6.1% adjusted for currency) to $67.5 billion, gross margin expanded 1.5 points to 58.2%, and continuing-operations net income nearly doubled to $10.6 billion (diluted EPS $11.14 vs. $6.42, though the 2024 base was depressed by a $3.1 billion non-cash pension settlement charge). On a non-GAAP operating basis, diluted EPS was $11.59, up 12.2%. Software (+10.6%, with Red Hat and Automation leading) and Infrastructure (+12.1%, driven by the z17 mainframe cycle, where IBM Z grew 51.7%) were the growth engines, while Consulting grew only 1.8% after a 13.3% decline in signings. The 2025 tax line was a benefit, driven by resolution of tax audit matters, which flatters reported EPS relative to operating earnings. Cash generation and balance sheet were solid but more leveraged. Operating cash flow was $13.2 billion and free cash flow $14.7 billion, which covered $6.3 billion in dividends. Total debt rose $6.3 billion to $61.3 billion following the $8.3 billion HashiCorp acquisition, and working capital turned negative (current ratio 0.96:1). IBM also disclosed a pending ~$11 billion acquisition of Confluent, expected to close around mid-2026, and issued another $7.4 billion of debt in early 2026 to fund corporate needs. Risk considerations include the company's dependence on Software and Consulting mix shifts, currency exposure (about 60% of revenue from outside the U.S.), the pace of AI and hybrid cloud adoption, and a large unrecognized tax benefit balance of $6.7 billion that could create volatility in future tax provisions. The company reported no material cybersecurity incidents to date, and share repurchases remained suspended, with no buybacks in Q4 2025.
Feb 24, 2026
2024
INTERNATIONAL BUSINESS MACHINES CORP Annual Report, Year Ended Dec 31, 2024
IBM's 2024 Form 10-K shows a company in transition toward higher-growth hybrid cloud and AI businesses, with reported results pressured by a one-time non-cash pension settlement charge. Reported revenue rose 1.4% to $62.8 billion (3% adjusted for currency), led by Software, which grew 8.3% to $27.1 billion. Gross margin expanded 1.2 points to 56.7%. However, reported pre-tax income fell 33% to $5.8 billion and diluted EPS from continuing operations fell 21% to $6.42, largely due to a $3.1 billion pension settlement charge ($2.57 per share). On a non-GAAP operating basis, which excludes that charge and acquisition-related items, diluted EPS rose 7.4% to $10.33 and operating pre-tax income grew 8.7% to $11.2 billion. Cash generation was strong, with operating cash flow of $13.4 billion and free cash flow of $12.7 billion, up $1.5 billion year over year. IBM returned $6.1 billion via dividends and invested $3.3 billion in acquisitions, including StreamSets, webMethods and Neural Magic, with HashiCorp (about $6.4 billion enterprise value) pending. Total debt declined $1.6 billion to $55.0 billion, and the company keeps A-/A3/A- ratings. Weak spots include Infrastructure revenue down 3.9% on IBM Z product-cycle dynamics and Consulting revenue down 0.9% as reported amid cautious client spending. Management expects 2025 non-operating retirement costs to fall by about $3.3 billion. Risk factors emphasize AI competition and regulation, cybersecurity exposure, currency effects (about 60% of revenue from outside the U.S.), and dependence on a few suppliers for certain semiconductor components. The filing reports no material cybersecurity incident to date, a $2.0 billion remaining buyback authorization that has been suspended since 2019, and no pending litigation with material expected exposure.
Feb 25, 2025
2023
INTERNATIONAL BUSINESS MACHINES CORP Annual Report, Year Ended Dec 31, 2023
International Business Machines (IBM) closed 2023 with revenue of $61.9 billion, up 2.2% as reported and 2.9% adjusted for currency. Gross profit margin rose 1.4 points to 55.4%, and income from continuing operations was $7.5 billion, versus $1.8 billion in 2022. The prior year was depressed by a one-time, non-cash $5.9 billion pension settlement charge, so the comparison flatters the headline improvement. On a non-GAAP basis, which management uses to strip out acquisition charges, retirement costs and similar items, operating earnings grew 6.5% to $8.9 billion, and diluted operating EPS rose 5.4% to $9.62. Free cash flow was $11.2 billion, up $1.9 billion, and the company returned $6.0 billion through dividends. Growth was led by Software (up 5.1%, with Red Hat up 9.1%) and Consulting (up 4.6%, or 6% at constant currency). Infrastructure fell 4.5%, reflecting the z16 product cycle and weaker support revenue. Management expects the zSystems cycle to recover. The company is pursuing a hybrid cloud and AI strategy centered on Red Hat OpenShift and watsonx, and it completed nine acquisitions for $5.1 billion, including Apptio. Total debt rose $5.6 billion to $56.5 billion, though cash and marketable securities also increased to $13.5 billion and the company holds A-/A3/A- credit ratings. Investors should weigh the strategic progress against the slowing hardware base, rising debt, and the sensitivity of results to currency and pension assumptions.
Feb 26, 2024
2022
INTERNATIONAL BUSINESS MACHINES CORP Annual Report, Year Ended Dec 31, 2022
International Business Machines Corporation (IBM) filed its 2022 Form 10-K on February 28, 2023, reporting a year defined by a one-time, non-cash $5.9 billion pre-tax pension settlement charge tied to the transfer of roughly $16 billion of U.S. Qualified PPP pension obligations to insurers. Revenue grew 5.5% as reported (12% adjusted for currency) to $60.5 billion, with the growth heavily aided by roughly 4 points of incremental sales to Kyndryl, the managed infrastructure spin-off completed in November 2021. Reported net income fell 71.5% to $1.6 billion and diluted EPS from continuing operations fell to $1.95, but operating (non-GAAP) diluted EPS rose 15.1% to $9.13 and free cash flow reached $9.3 billion, which management views as the more representative measure of performance. Management frames the company as a hybrid cloud and AI business, with Software (about 41% of revenue) and Consulting (about 32%) as its growth engines, Red Hat as a key driver, and hybrid cloud revenue of $22.4 billion (37% of revenue). Margins were mixed: gross margin declined 0.9 points to 54.0%, and Consulting's gross margin fell 2.5 points to 25.5% on labor-cost inflation, though management reports improvement in the second half. The balance sheet remains substantial but levered, with total debt of $50.9 billion, $8.8 billion of cash and marketable securities, and a dividend of $5.9 billion paid, while share repurchases remain suspended since the Red Hat acquisition. Key risks flagged in the filing include currency headwinds (about $3.5 billion revenue impact in 2022), the loss of roughly $650 million in hedging gains that will not repeat in 2023, a pending IRS dispute over roughly $4.5 billion of additional taxable income, a $718 million BMC punitive and direct damages judgment under appeal, and ongoing litigation with GlobalFoundries. Management guided to a roughly $300 million restructuring charge in Q1 2023 and a benefit of over $200 million to 2023 pre-tax profit from extending server useful lives.
Feb 28, 2023
2021
INTERNATIONAL BUSINESS MACHINES CORP Annual Report, Year Ended Dec 31, 2021
IBM's 2021 Form 10-K (filed February 22, 2022) reports a year defined by its strategic pivot to hybrid cloud and AI, most visibly the November 3, 2021 spin-off of its managed infrastructure services unit, Kyndryl. Kyndryl is now reported as discontinued operations, so continuing-operations results reflect Software, Consulting, Infrastructure and Financing only. On that basis, revenue rose 3.9% to $57.35 billion (about 3% adjusted for currency), with roughly 1 point of growth coming from the new commercial relationship with Kyndryl. Software revenue grew 5.3%, led by Red Hat, which grew 30.6%, and hybrid cloud revenue reached $20.2 billion, up 20%. Consulting grew 9.8% and Infrastructure declined 2.4%, reflecting hardware product-cycle timing. Profitability was mixed. Reported income from continuing operations was $4.7 billion ($5.21 diluted EPS), up about 19.8%, but gross margin fell 1.0 point to 54.9% as the company invested in hybrid cloud and AI and absorbed labor-cost pressure. Non-GAAP operating earnings were $7.2 billion ($7.93 per share), up 16.3%, benefiting from a much smaller workforce-rebalancing charge than the prior year's $1.5 billion structural action. Net income was $5.7 billion, and free cash flow was $6.5 billion, down from $10.8 billion in 2020, partly because of Kyndryl-related separation cash costs and a $3.9 billion decline in receivables cash flow. On the balance sheet, IBM cut total debt by $9.6 billion to $51.7 billion and reduced it by $21.3 billion since the Red Hat acquisition closed in mid-2019. Dividends of $5.9 billion were paid, and the share repurchase program remained suspended with about $2.0 billion of authorization left. Investors will want to watch whether revenue growth can accelerate outside Red Hat, whether margins recover as pricing catches up to labor costs, and how cash generation holds up once separation-related outflows end.
Feb 22, 2022
2020
INTERNATIONAL BUSINESS MACHINES CORP Annual Report, Year Ended Dec 31, 2020
International Business Machines Corporation (IBM) closed 2020 with revenue of $73.6 billion, down 4.6% as reported (4.7% adjusted for currency), while GAAP income from continuing operations fell 41.7% to $5.5 billion and diluted EPS from continuing operations was $6.13. Results absorbed a $2.0 billion pre-tax charge for structural actions (primarily workforce rebalancing) in Q4 2020. Excluding that charge, operating (non-GAAP) diluted EPS was $8.67, down 32.3% year over year. Weakness was concentrated in Transaction Processing Platforms (down 16.8%), Systems (down 8.2%) and Global Technology Services (down 5.7%), partly offset by Red Hat-driven growth in Cloud & Data Platforms (up 20.9%). Total cloud revenue reached $25.1 billion, up 19%. Cash generation remained solid. Operating cash flow was $18.2 billion and free cash flow was $10.8 billion, covering $5.8 billion of dividends. Total debt declined $1.4 billion to $61.5 billion, and roughly $11.5 billion has been repaid since the Red Hat acquisition closed in mid-2019. The share repurchase program remains suspended, with about $2.0 billion of authorization left. Working capital turned negative (current ratio 0.98:1), largely due to the workforce charge accrual and current debt maturities. Strategically, IBM is repositioning as a hybrid cloud and AI company. It plans to spin off its Managed Infrastructure Services unit (to be called NewCo) into a standalone public company by the end of 2021. Management also flagged risks around the spin-off's execution, the pandemic-driven shift to shorter-duration contracts, an unresolved IRS dispute over roughly $4.5 billion of proposed adjustments, and $8.6 billion of gross unrecognized tax benefits.
Feb 23, 2021
2019
INTERNATIONAL BUSINESS MACHINES CORP Annual Report, Year Ended Dec 31, 2019
IBM's 2019 Form 10-K (filed February 25, 2020) reports a year dominated by the $34.8 billion cash acquisition of Red Hat, which closed July 9, 2019. Consolidated revenue fell 3.1% as reported (1% adjusted for currency) to $77.1 billion, but rose 0.2% excluding divested businesses and currency. Gross margin improved 0.9 points to 47.3%, driven by higher-value mix and portfolio optimization. GAAP diluted EPS from continuing operations rose 11.1% to $10.57, while operating (non-GAAP) EPS fell 7.2% to $12.81 because of Red Hat purchase accounting, acquisition-related charges, and higher interest expense. The 2018 comparison was also distorted by a $2.0 billion U.S. tax reform charge, which explains much of the reported EPS increase and the sharp swing in the effective tax rate to 7.2%. The balance sheet and capital allocation were reshaped by the deal. Total debt rose $17.1 billion to $62.9 billion, goodwill and intangibles increased about $34 billion, and total equity rose to $21.0 billion. Management suspended share repurchases at the Red Hat close to prioritize deleveraging, reduced debt by $10.1 billion in the second half of 2019, and targeted a mid-to-high single-A credit rating within a couple of years. Moody's downgraded IBM's long-term rating from A1 to A2 following the deal. Free cash flow was $11.9 billion, flat year over year, while dividends of $5.7 billion were maintained. Segment performance was mixed. Cloud & Cognitive Software grew 4.5% (6% at constant currency), with cloud revenue of $21.2 billion across IBM (27% of revenue), and Red Hat contributed to Cloud & Data Platforms growth of 10.4%. Global Technology Services declined 6.1%, reflecting lower client volumes in traditional labor-based managed services. Systems fell 5.3% due to the z14-to-z15 product cycle and Power Systems weakness, though z15 drove strong fourth-quarter growth. Services backlog declined to $112.4 billion and total signings fell 8.9%. Management guided to 2020 GAAP EPS of at least $10.57, operating EPS of at least $13.35, and free cash flow of about $12.5 billion, with a GTS restructuring toward an asset-based model.
Feb 25, 2020
2018
INTERNATIONAL BUSINESS MACHINES CORP Annual Report, Year Ended Dec 31, 2018
International Business Machines Corporation (IBM) reported 2018 revenue of $79.6 billion, up 0.6% as reported and flat at constant currency, with GAAP net income of $8.7 billion and diluted EPS from continuing operations of $9.51. Results were distorted by a $2.0 billion U.S. tax reform charge (versus $5.5 billion in 2017). On an operating (non-GAAP) basis, which excludes acquisition-related charges, non-operating retirement costs and tax reform, diluted EPS was $13.81, up 1.1%, and operating pre-tax margin was 17.3%. Growth was concentrated in strategic imperatives, which generated $39.8 billion (up 9%), with cloud revenue of $19.2 billion (up 12%) and an as-a-Service exit run rate of $12.2 billion. Core legacy areas were weaker: IBM Z declined on product-cycle dynamics, Storage Systems faced pricing pressure, and Transaction Processing Software and Technical Support Services declined. Cash generation remained strong, with $15.2 billion in operating cash flow and $11.9 billion in free cash flow, and $10.1 billion returned to shareholders through $5.7 billion in dividends and $4.4 billion in buybacks. Total debt was $45.8 billion, and the company stated its commitment to a strong investment-grade rating. The most important forward-looking item is the pending $34 billion Red Hat acquisition, expected to close in the second half of 2019, which the company plans to fund with cash and debt. Management guided 2019 GAAP EPS of at least $12.45 and operating EPS of at least $13.90, with free cash flow of about $12 billion, but these figures exclude Red Hat. The company also flagged a 2020–2021 suspension of buybacks to reduce debt and rating pressure after S&P and Fitch lowered IBM's long-term rating to A.
Feb 26, 2019
2017
INTERNATIONAL BUSINESS MACHINES CORP Annual Report, Year Ended Dec 31, 2017
IBM's 2017 Form 10-K reports total revenue of $79.1 billion, down 1.0% as reported (1.3% adjusted for currency), with the decline concentrated in Global Business Services (-2.1%) and Technology Services & Cloud Platforms (-3.0%), while Systems (+6.2%) and Cognitive Solutions (+1.5%) grew. Strategic imperatives (cloud, analytics, mobile, security) grew 11% to $36.5 billion, and Total Cloud revenue reached $17.0 billion (+24%), with the as-a-Service exit run rate rising to $10.3 billion. Growth in the strategic areas did not fully offset traditional declines, and the company returned to revenue growth only in Q4 2017 (+3.6% as reported). Profitability was dominated by a one-time $5.5 billion charge tied to U.S. tax reform. GAAP income from continuing operations fell 51.5% to $5.8 billion, and diluted GAAP EPS was $6.14 versus $12.39 in 2016. Excluding the charge and non-operating items, operating (non-GAAP) EPS was $13.80, up 1.5%, while gross margin declined to 45.8% (47.4% operating) amid investment, mix, and higher retirement-related costs. Free cash flow was $13.0 billion, and the company returned $9.8 billion to shareholders through dividends and buybacks. Balance sheet leverage increased: total debt rose $4.7 billion to $46.8 billion, largely to support Global Financing (now housed in IBM Credit LLC, which made its first public bond issuance). Management guided to GAAP EPS of at least $11.70 and operating EPS of at least $13.80 for 2018, with free cash flow of about $12 billion. Key risks flagged include competitive pressure in traditional services, currency exposure (over 60% of revenue from outside the U.S.), cybersecurity, pension funding, and open tax examinations.
Feb 27, 2018
2016
INTERNATIONAL BUSINESS MACHINES CORP Annual Report, Year Ended Dec 31, 2016
IBM's 2016 Form 10-K shows a company in transition: revenue fell 2.2% to $79.9 billion (1.6% decline adjusted for currency), while strategic imperatives (cloud, analytics, engagement) grew 13% to $32.8 billion, or 41% of revenue. Gross profit margin contracted 1.9 points to 47.9%, and GAAP income from continuing operations declined 11.1% to $11.9 billion, with diluted EPS from continuing operations of $12.39 (down 8.9%). Operating (non-GAAP) EPS was $13.59. Results were supported by a $1.0 billion Japanese tax refund that drove the effective tax rate to 3.6%, so underlying profitability was weaker than the headline GAAP figures alone suggest. Cash generation remained strong, with $17.0 billion in operating cash flow and $11.6 billion in free cash flow (97% realization of GAAP income from continuing operations). IBM returned $8.8 billion to shareholders through $5.3 billion in dividends and $3.5 billion in buybacks, and spent $5.7 billion on 15 acquisitions, including The Weather Company, Truven, and Promontory. Total debt rose to $42.2 billion, though $27.9 billion of it supports the Global Financing segment, which operates at a 7.3:1 leverage ratio. Core debt-to-capitalization fell to 49.5%. Looking ahead, management guided 2017 GAAP EPS from continuing operations to at least $11.95 and operating EPS to at least $13.80, with flat free cash flow. The company expects GAAP pre-tax income to decline due to roughly $900 million higher non-operating pension cost, while operating pre-tax income is expected to grow. Key risks flagged include Systems hardware weakness (revenue down 19.2%, with z Systems and Power Systems each down 27.1%), declining traditional consulting and ERP work in GBS, ongoing legal matters such as the SCO litigation and an SEC revenue-recognition investigation, and foreign-currency exposure, since more than 60% of revenue comes from outside the U.S.
Feb 28, 2017
2015
INTERNATIONAL BUSINESS MACHINES CORP Annual Report, Year Ended Dec 31, 2015
International Business Machines Corporation (IBM) reported a challenging 2015 on a reported basis, with revenue falling 11.9% to $81.7 billion as currency (8 points) and divestitures of System x and customer care (3 points) weighed heavily; adjusted for currency and divestitures, revenue was roughly flat (down 1%). Diluted EPS from continuing operations declined 12.8% to $13.60 (operating non-GAAP EPS of $14.92, down 9.7%), while consolidated net income rose 9.7% to $13.2 billion thanks to a much smaller loss from discontinued operations (the Microelectronics divestiture). Cash generation remained strong, with $17.0 billion in operating cash flow and $13.1 billion in free cash flow, and IBM returned $9.5 billion to shareholders through $4.9 billion in dividends and $4.6 billion in buybacks. Management is steering the company toward its 'strategic imperatives' (cloud, big data and analytics, mobile, social and security), which generated $28.9 billion, or about 35% of revenue, and grew 17% as reported (26% adjusted for currency and divestitures). Cloud revenue reached $10.2 billion, and the company highlighted acquisitions such as Cleversafe and Merge Healthcare, plus the January 2016 Weather Company deal. Traditional segments are under pressure: Global Services revenue fell 10.5%, Software fell 9.8%, and Systems Hardware fell 24.2% (up 8% adjusted), with mainframe (z Systems) strength offsetting weak storage. Global Services backlog ended at $121 billion, up 1% adjusted for currency. For 2016, IBM guided to GAAP EPS of at least $12.45 and operating EPS of at least $13.50, with currency expected to weigh more heavily on profit (about $1.3 billion pre-tax impact at January spot rates) and free cash flow expected at $11–12 billion. Balance sheet leverage is significant: total debt was $39.9 billion, of which $27.2 billion supports the Global Financing segment, and the filing discloses ongoing legal and regulatory matters including SEC and DOJ FCPA inquiries, an SEC revenue recognition investigation, and the Spanish and UK pension litigation.
Feb 23, 2016
2014
INTERNATIONAL BUSINESS MACHINES CORP Annual Report, Year Ended Dec 31, 2014
International Business Machines (IBM) reported a challenging 2014 for reported results, with revenue of $92.8 billion, down 5.7% as reported (1.5% adjusted for currency and divestitures). The decline reflected the divestiture of the industry standard server (System x) and customer care businesses, weakness in Systems and Technology (revenue down 23%, driven by the System z product cycle and Power Systems/Storage declines), and currency headwinds. Diluted EPS from continuing operations was $15.59 as reported and $16.53 on an operating (non-GAAP) basis, while consolidated net income fell 27% to $12.0 billion because of a $3.7 billion after-tax loss from discontinued operations tied to the pending Microelectronics divestiture to GLOBALFOUNDRIES. Operating (non-GAAP) earnings declined 9% to $16.7 billion. The filing emphasizes a strategic repositioning toward higher-value areas it calls the strategic imperatives (cloud, analytics, mobile, social and security), which generated about $25 billion, or roughly 27% of revenue, and grew 16% in 2014. Offsetting this, the recurring core franchises declined about 3% and high-value transactional businesses declined, and Global Services backlog fell 10.1% as reported to $128.4 billion. Capital allocation remained shareholder-focused: the company returned $17.9 billion through dividends and gross buybacks, repurchasing about 71.5 million shares, while free cash flow fell to $12.4 billion from $15.0 billion. Looking to 2015, management guided GAAP EPS from continuing operations to $14.35 to $15.10 and operating EPS to $15.75 to $16.50, and expects total revenue as reported to be flat to down given currency (a 5-6 point revenue headwind at January spot rates). Free cash flow is expected to be roughly flat. Key risks highlighted include the growth markets slowdown (BRIC revenue down about 11% as reported), China weakness, pension funding and cost pressures, currency translation, cybersecurity, and ongoing legal matters such as the SCO litigation and UK and Spanish pension disputes.
Feb 24, 2015
2013
INTERNATIONAL BUSINESS MACHINES CORP Annual Report, Year Ended Dec 31, 2013
IBM's 2013 Form 10-K (filed February 25, 2014) reports revenue of $99.8 billion, down 4.6% as reported (2.5% adjusted for currency), with diluted EPS up 4.0% to $14.94 and operating (non-GAAP) diluted EPS up 6.8% to $16.28. Net income fell 0.7% to $16.5 billion, and the reported decline in pre-tax income of 10.9% was partly offset by a 15.6% effective tax rate, which benefited from the completed 2008-2010 IRS audit. Growth came from the strategic imperatives: business analytics revenue reached $15.7 billion (up 9%), cloud-based solutions revenue reached $4.4 billion (up 69%), and Software grew 1.9% with a 38.1% pre-tax margin. The weakness was concentrated in Systems and Technology, where revenue fell 18.7% and pre-tax income swung to a $507 million loss, driven by the late mainframe product cycle and business model pressures in Power Systems, Storage and x86. Growth-market revenue also declined 4.9% as reported, with China and Australia weak in the second half. Cash generation and capital returns remained strong. Operating cash flow was $17.5 billion and free cash flow was $15.0 billion (down $3.2 billion), while IBM returned $17.9 billion to shareholders through $13.9 billion of gross buybacks and $4.1 billion of dividends. Total debt rose $6.4 billion to $39.7 billion, with $27.5 billion supporting Global Financing, and the core debt-to-capitalization ratio rose to 39.0%. The company also signaled portfolio transformation, including the pending sale of its x86 server business to Lenovo (about $2.3 billion, with a roughly $1 billion pre-tax gain expected) and the customer care sale to SYNNEX. Its 2014 guidance calls for GAAP EPS of at least $17.00 and operating EPS of at least $18.00. Key risks flagged in the filing include the SEC investigation into cloud revenue reporting, a securities class action filed in December 2013, FCPA-related DOJ and SEC inquiries, the SCO litigation, and ongoing Indiana and UK pension disputes. Over 60% of revenue comes from outside the U.S., and currency, particularly the weaker yen, continues to weigh on profit.
Feb 25, 2014
2012
INTERNATIONAL BUSINESS MACHINES CORP Annual Report, Year Ended Dec 31, 2012
IBM's 10-K for fiscal 2012 (filed February 26, 2013) reports revenue of $104.5 billion, down 2.3% as reported but flat at constant currency, with the decline driven by divestitures (notably Retail Store Solutions), currency, and weakness in the major markets, especially Europe. Profitability improved meaningfully: gross margin rose 1.2 points to 48.1%, pre-tax margin expanded to 21.0%, and GAAP diluted EPS grew 10.0% to $14.37. Management's non-GAAP operating EPS of $15.25 rose 13.5%, marking the 10th consecutive year of double-digit EPS growth. Growth came from higher-value areas (Software, cloud, business analytics, Smarter Planet) and growth markets, which now make up 24% of geographic revenue. Cash generation and shareholder returns were strong. Operating cash flow was $19.6 billion and free cash flow (as management defines it) was $18.2 billion. IBM returned $15.8 billion to shareholders through $12.0 billion of buybacks and $3.8 billion of dividends, and spent about $3.7 billion on 11 acquisitions. Total debt rose to $33.3 billion, with most of it supporting the leveraged Global Financing unit. The consolidated debt-to-capitalization ratio rose to 63.7%, partly because of a $5.2 billion pension remeasurement hit to equity, and the underfunded retirement obligation grew to about $20.2 billion. For investors, the key watch items are the pension burden (2013 retirement-related cost expected to rise about $700 million to roughly $3.1 billion), Global Services revenue pressure from low-margin contract restructuring, the Systems and Technology decline outside the new System z mainframe, and 2013 guidance of at least $16.70 operating EPS (about 10% growth). Management also flagged ongoing legal matters, including the UK pension litigation and the Indiana contract dispute.
Feb 26, 2013
2011
INTERNATIONAL BUSINESS MACHINES CORP Annual Report, Year Ended Dec 31, 2011
International Business Machines (IBM) closed 2011 with record revenue of $106.9 billion (up 7.1%, or 3.4% adjusted for currency), net income of $15.9 billion (up 6.9%), and diluted EPS of $13.06 (up 13.4%). Operating (non-GAAP) diluted EPS was $13.44, up 15.2%, and management reiterated its 2015 Road Map objective of at least $20 of operating EPS. Growth was led by Software (revenue up 10.9%, with key branded middleware up 15.6%), Systems and Technology (up 5.6%, driven by Power Systems), and the growth markets (up 16.0%, or 11% at constant currency, now 22% of geographic revenue). Gross margin improved 0.8 points to 46.9%, the eighth consecutive year of improvement, supported by a richer mix toward Software. Cash generation remained strong: operating cash flow was $19.8 billion and free cash flow was $16.6 billion, with $18.5 billion returned to shareholders through $15.0 billion of buybacks and $3.5 billion of dividends. The Global Services backlog was $141 billion, roughly flat at constant currency. Balance sheet leverage rose, however: total debt increased $2.7 billion to $31.3 billion, the core (ex-Global Financing) debt-to-capitalization ratio rose to 32.0% from 22.6%, and total equity fell $2.9 billion to $20.2 billion because of share repurchases and a $2.4 billion pension-related charge to equity. The underfunded retirement plan position increased to $16.4 billion, and management guided 2012 GAAP EPS to at least $14.16 and operating EPS to at least $14.85. Risks flagged in the filing include European credit exposure (about $2.6 billion of receivables in Portugal, Italy, Ireland, Greece and Spain, with a higher allowance taken in Q4 2011), a tough System z mainframe comparison in the first half of 2012, pension funding and discount-rate sensitivity, a rising tax liability (unrecognized tax benefits of $5.6 billion), and ongoing litigation including the Indiana contract dispute and the Endicott groundwater cases.
Feb 28, 2012
2010
INTERNATIONAL BUSINESS MACHINES CORP Annual Report, Year Ended Dec 31, 2010
International Business Machines Corporation's 2010 Form 10-K, filed February 22, 2011, shows a strong year. Revenue rose 4.3% to $99.9 billion (3.3% adjusted for currency), gross profit margin improved 0.3 points to 46.1%, and pre-tax income grew 8.7% to $19.7 billion. Net income reached a record $14.8 billion, up 10.5%, and diluted EPS was $11.52, up 15.1%, marking the eighth consecutive year of double-digit EPS growth. Growth was led by Software (up 5.1%, with 44% of segment pre-tax profit) and Systems and Technology (up 11.0%), while Global Services grew 2.6% and remained annuity-heavy, with a $142 billion backlog. Growth markets revenue rose 16% and now account for 21% of geographic revenue. Capital allocation was shareholder-focused. IBM repurchased about 118 million shares, returned roughly $19 billion to shareholders in 2010 through buybacks and dividends, and raised the quarterly dividend to $0.65. Operating cash flow was $19.5 billion and free cash flow was $16.3 billion. Total debt rose $2.5 billion to $28.6 billion, mostly to fund acquisitions, which totaled $5.9 billion in cash across 17 companies including Netezza and Sterling Commerce. Moody's upgraded IBM's senior debt to Aa3 in November 2010. Looking ahead, management set a 2015 road map targeting at least $20 of operating (non-GAAP) EPS, starting from a 2010 base of $11.67. For 2011 it guided to GAAP EPS of at least $12.56 and operating EPS of at least $13.00. The company is also introducing an operating versus non-operating earnings split that excludes acquisition charges and non-service pension costs. Investors should note the reliance on buybacks and acquisitions for EPS growth, the large pension underfunding of about $16.8 billion, the $5.3 billion of unrecognized tax benefits under IRS dispute, and ongoing litigation, including antitrust exposure and the Endicott environmental cases.
Feb 22, 2011
2009
INTERNATIONAL BUSINESS MACHINES CORP Annual Report, Year Ended Dec 31, 2009
IBM's 2009 Form 10-K shows a company that grew earnings while revenue fell. Revenue declined 7.6% to $95.8 billion (5.3% adjusted for currency), yet pre-tax income rose 8.5% to $18.1 billion, net income rose 8.8% to $13.4 billion, and diluted EPS rose 12.6% to $10.01. Gross margin expanded 1.7 points to 45.7%, and total expense and other income fell 11.4%, driven by about $3.7 billion in cost and expense savings. Management attributes the results to a mix shift toward software and services, global integration and productivity. The company also reached its 2010 EPS road map target of $10 to $11 one year early. Balance sheet and cash generation were strong. Operating cash flow was a record $20.8 billion, and free cash flow, as management defines it, was $15.1 billion. Total debt fell $7.8 billion to $26.1 billion, and the core (non-Global Financing) debt-to-capitalization ratio dropped to 16.0% from 48.7%. Shareholder equity rose to $22.8 billion. IBM repurchased roughly 69 million shares in 2009 and raised its quarterly dividend to $0.55 in mid-2009. Management guided to at least $11.00 in 2010 diluted EPS. Risks remain. Revenue fell in the major markets, with Systems and Technology down 16.1% and Global Business Services down 10.1%. Pension underfunding was $13.8 billion net, mandated non-U.S. pension contributions are rising, and the company faces an open IRS dispute over a 2004-2005 intellectual property transfer, with a proposed adjustment above $2 billion. Global Financing carries about $22.4 billion of debt at a roughly 7:1 debt-to-equity target, and more than 60% of revenue comes from outside the U.S.
Feb 23, 2010
2008
INTERNATIONAL BUSINESS MACHINES CORP Annual Report, Year Ended Dec 31, 2008
International Business Machines Corporation (IBM) closed 2008 with record revenue of $103.6 billion (up 4.9%, or 2.3% adjusted for currency), record pre-tax income from continuing operations of $16.7 billion (up 15.4%), and diluted EPS of $8.93 (up 24.4%). Growth was driven by Global Services (Global Technology Services and Global Business Services, combined revenue of $58.9 billion, up 8.8%) and Software ($22.1 billion, up 10.5%), which together generated roughly 82% of segment pre-tax profit. Gross margin improved 1.8 points to 44.1%, reflecting a mix shift toward higher-value offerings, pricing discipline and productivity. Net income rose 18.4% to $12.3 billion, helped partly by a lower effective tax rate of 26.2%. Operating cash flow was a record $18.8 billion, and free cash flow was $14.3 billion, which funded $10.6 billion of share repurchases and $2.6 billion of dividends. The balance sheet absorbed a major non-operating hit. Stockholders' equity fell 52.7% to $13.5 billion, almost entirely because of pension remeasurements after 2008 asset-market losses. The net funded position of retirement plans swung to an under-funded $18.5 billion, and the debt-to-capital ratio rose to 49.0%. Management characterizes the equity decline as non-cash and says it does not affect access to capital markets. Total debt declined $1.3 billion to $33.9 billion, and the company acquired Cognos and Telelogic in 2008 for a combined cost of roughly $5.9 billion, which lifted goodwill by about $3.9 billion. Systems and Technology was the weak spot, with revenue down 9.5% and gross margin down 1.7 points amid a slowdown in x86 servers and the decline of legacy System i. Management guided to 2009 pre-tax retirement-related plan costs of about $1.5 billion, an expected effective tax rate of roughly 26.5%, and a continued focus on emerging markets. It also reaffirmed the long-term 2010 EPS roadmap of $9 to $10 per share. The company cites a $117 billion Global Services backlog and about 65% of revenue generated outside the United States as sources of resilience. Investors should weigh the strong operating momentum against the pension-driven equity erosion, the exposure to a sharp slowdown in corporate IT spending, and the open IRS dispute over a proposed adjustment exceeding $2 billion.
Feb 24, 2009
2007
INTERNATIONAL BUSINESS MACHINES CORP Annual Report, Year Ended Dec 31, 2007
IBM's 2007 Form 10-K shows a company that grew revenue 8.1% to $98.8 billion (4.2% adjusted for currency) and expanded diluted EPS from continuing operations 18.5% to $7.18, helped by a $18.8 billion share repurchase program (including a $12.5 billion accelerated share repurchase) and higher margins. Gross profit margin improved 0.4 points to 42.2%, led by Systems and Technology (up 2.0 points) and the Global Services segments, while Software (about 85% margin, 54% of software revenue from Key Branded Middleware) remained the largest profit contributor at roughly 40% of segment pre-tax income. The balance sheet became more leveraged. Total company debt rose to $35.3 billion from $22.7 billion, and the debt-to-capital ratio for non-Global Financing debt reached 30.0%. Stockholders' equity was essentially flat at $28.5 billion because treasury stock purchases offset retained earnings growth. Operating cash flow was $16.1 billion, and free cash flow was $12.4 billion, up $1.9 billion. Management reaffirmed a 2010 EPS road map of $10 to $11 and projected a 2008 effective tax rate of about 27.5%. Key risks include weakness in System z revenue (down 11.2%) as the mainframe cycle matured, a 3% decline in overall Systems and Technology revenue, exposure to currency and emerging-market execution (BRIC revenue up 26%), pending legal matters such as the SCO litigation and a Brazilian non-income tax dispute of about $2.1 billion, and the higher interest expense tied to the buyback financing. The filing also discloses a $15 billion repurchase authorization approved on February 26, 2008, and the January 2008 Cognos acquisition for about $5.0 billion.
Feb 26, 2008
2006
INTERNATIONAL BUSINESS MACHINES CORP Annual Report, Year Ended Dec 31, 2006
IBM's 2006 Form 10-K (filed February 27, 2007) shows a company that is shifting its mix toward higher-value software and services while divesting commoditizing businesses. Reported revenue was essentially flat at $91.4 billion (+0.3%, flat adjusted for currency), but excluding the Personal Computing business divested to Lenovo in April 2005, revenue grew 3.6% (3.2% adjusted for currency). Pre-tax income from continuing operations rose 8.9% to $13.3 billion, diluted EPS from continuing operations increased 23.4% to $6.06, and net income reached $9.5 billion. Gross profit margin improved 1.8 points to 41.9%, driven by Global Services productivity gains and the absence of lower-margin PC sales. The effective tax rate fell to 29.3% from 34.6%, which contributed meaningfully to the earnings growth. Software was the standout performer, growing 8.2% to $18.2 billion, with Key Branded Middleware up 17.1% (WebSphere +23.3%, Tivoli +26.3%). Software is now the largest contributor to pre-tax profit, at roughly $5.5 billion, and the segment's acquisitions (Micromuse, FileNet, Internet Security Systems, MRO Software) totaled about $4.8 billion across 13 deals in 2006. Hardware revenue declined 7.6% as reported, though it grew 4.8% excluding PCs, with System z and storage strength offset by weakness in System i, System p and Printing. Global Services revenue rose 1.8% to $48.2 billion, and services signings reached $49.2 billion with a backlog of about $116 billion. Cash generation and capital returns remained strong: operating cash flow was $15.0 billion, and the company returned over 100% of net income to shareholders through dividends ($1.7 billion) and share repurchases ($8.0 billion). Total debt was flat at $22.7 billion, though much of it sits within Global Financing, whose debt-to-equity target is about 7:1. Stockholders' equity fell 13.9% to $28.5 billion, mainly because of a $9.5 billion non-cash charge from adopting SFAS No. 158 on pension accounting. Management's long-term model targets 10–12% EPS growth. Key risks include Japan's 10.1% revenue decline, the pending Ricoh printing joint venture, pending litigation (including SEC investigations and the Platform Solutions and Amazon patent cases), and the expectation that IP income will continue to decline.
Feb 27, 2007
2005
INTERNATIONAL BUSINESS MACHINES CORP Annual Report, Year Ended Dec 31, 2005
International Business Machines' FY2005 Form 10-K (filed February 28, 2006) shows a company that reshaped its portfolio while growing earnings. Reported revenue fell 5.4% to $91.1 billion, but that decline was driven by the April 2005 sale of the Personal Computing business to Lenovo. Excluding PC revenue from both years, revenue rose 3.2% (2.8% in constant currency). Gross profit margin expanded 3.2 points to 40.1%, pre-tax income from continuing operations grew 14.6% to $12.2 billion, and diluted EPS from continuing operations rose 11.8% to $4.91. Results were helped by a $1.1 billion Lenovo divestiture gain and a $775 million Microsoft antitrust settlement, partly offset by $1.7 billion of second-quarter restructuring charges. Cash generation was solid. Operating cash flow was $14.9 billion, and the company returned more than 100% of net income to shareholders through dividends ($1.25 billion) and buybacks ($7.7 billion gross). Management repatriated $9.5 billion of foreign earnings under the American Jobs Creation Act, which raised the effective tax rate to 34.6% from 29.7%. Total debt was roughly flat at $22.6 billion, and the company's credit ratings were unchanged (S&P A+, Moody's A1). Global Services signings rose to $47.1 billion and backlog held at about $111 billion, while the Business Performance Transformation Services business grew 28%. Risks flagged in the filing include a pending pension-related age discrimination case (up to $1.4 billion additional liability if IBM loses its appeal), an SEC investigation tied to a 2005 earnings disclosure and equity compensation expensing, and ongoing revenue weakness in Japan (down 13% as reported) and Hardware margin pressure in Storage. The company also said it expects double-digit EPS growth over the longer term, with Global Services and Software as its priority growth areas.
Feb 28, 2006
2004
INTERNATIONAL BUSINESS MACHINES CORP Annual Report, Year Ended Dec 31, 2004
International Business Machines (IBM) closed 2004 with revenue of $96.3 billion, up 8.0% (3.4% at constant currency), and diluted EPS from continuing operations of $4.94, up 13.8%. Growth was led by Global Services (revenue up 8.4% to $46.2 billion, about 48% of total), with broad gains in Hardware (up 10.3%, driven by zSeries, xSeries, pSeries and BladeCenter) and Software (up 5.5%, led by WebSphere, Tivoli and Rational). Gross margin edged up 0.4 points to 37.4%, while total expense rose 8.4% to 24.9% of revenue, pressured by a $1.08 billion increase in retirement-related plan costs, including a $320 million one-time pension settlement charge. Net income was $8.43 billion, and operating cash flow was $15.4 billion. Capital deployment was shareholder-focused. IBM repurchased roughly $7.3 billion of stock in 2004, returned about $8.3 billion to shareholders in total, and had $3.7 billion of Board authorization remaining at year-end. Non-Global Financing debt remained low at 2.2% of capitalization, and ratings stayed at A+/A1/AA-. Services backlog declined to $111 billion from $120 billion, and Global Services signings fell to $43 billion from $55 billion, a leading indicator investors will watch closely. Key forward-looking items include the pending sale of the Personal Computing Division to Lenovo (expected to close in Q2 2005), a roughly $1 billion year-over-year increase in pre-tax retirement-related costs projected for 2005, a Q4 subsequent-event revenue reduction of $260 million tied to Japan third-party hardware sales, and legal exposure including the Compuware and SCO litigation, SEC inquiries, and an up-to-$1.4 billion pension claim contingency.
Feb 24, 2005
2003
INTERNATIONAL BUSINESS MACHINES CORP Annual Report, Year Ended Dec 31, 2003
International Business Machines' 2003 Form 10-K shows a year of recovery and margin discipline. Revenue rose 9.8% to $89.1 billion (2.8% at constant currency), led by Global Services, which grew 17.3% to $42.6 billion on strategic outsourcing and the PwC Consulting acquisition. Diluted earnings per share from continuing operations rose 41.4% to $4.34, and income from continuing operations rose 42.7% to $7.6 billion. The total expense-to-revenue ratio improved 3.2 points to 24.8%, reflecting productivity initiatives and the absence of large 2002 restructuring charges, while gross margin was roughly flat at 37.0%. Balance sheet and cash generation were strong. Operating cash flow reached $14.6 billion, and non-Global Financing debt was cut to $368 million from $2.2 billion, leaving a debt-to-capitalization ratio of 1.5%. Stockholders' equity rose 22% to $27.9 billion. Management expects long-term revenue growth in the mid-to-high single digits and EPS growth at low double digits, and it signaled that IT spending may be entering a new growth cycle. Key risks flagged include a services backlog of $120 billion, pension exposure (including the Cooper ERISA case, where IBM estimates remedies could reach $6.5 billion), an SEC investigation into 2000-2001 revenue recognition, a Wells Notice tied to Dollar General, a Korean bid-rigging probe, and the SCO litigation over Linux. Currency movements and the ETI tax benefit repeal are additional headwinds.
Mar 8, 2004
2002
INTERNATIONAL BUSINESS MACHINES CORP Annual Report, Year Ended Dec 31, 2002
IBM's 2002 10-K shows a year of declining top-line revenue, offset by a major strategic reshaping of the business. Total revenue fell 2.3% to $81.2 billion (3% at constant currency), driven mainly by weak corporate IT spending. Global Services and Software grew, but this was more than offset by lower Hardware and Global Financing revenue. Services is becoming the center of gravity: Global Services reached 44.8% of revenue, and services contract signings totaled $53 billion against a backlog of $112 billion, up from $102 billion. Profitability weakened. Gross margin slipped to 37.3% from 38.4%, and income from continuing operations dropped 35% to $5.3 billion, or $3.07 per diluted share, compared with $4.59 a year earlier. Net income fell to $3.6 billion, reduced by a $1.8 billion loss from discontinued operations, mainly the disk drive business sold to Hitachi. Management took significant restructuring charges and acquisitions in 2002. The company acquired PricewaterhouseCoopers Consulting for $3.5 billion, bought Rational Software for about $2.1 billion in February 2003, and recorded roughly $1.5 billion of second- and fourth-quarter 2002 actions, including workforce and facility reductions. It also made a $3.96 billion contribution to fund the U.S. pension plan, mostly in stock and cash, and a $2.77 billion reduction in equity from a minimum pension liability for certain non-U.S. plans. Cash generation remained solid: operating cash flow from continuing operations was $13.8 billion, and the company repurchased $4.2 billion of its own shares. Share repurchases and dividends together returned substantial capital, while debt-to-capital remained low at 10.2% on non-Global Financing debt. Looking ahead, IBM frames its strategy around "e-business on demand," open standards such as Linux, and cost reductions it expects to yield roughly $900 million of incremental savings in 2003. Management also flagged risks: a higher provision for bad debts in Global Financing tied to the Communications sector, lower pension income (about $500 million less in 2003), and a possible loss of the ETI tax benefit that could raise the effective tax rate from about 30%. Overall, the filing presents a company in transition, with stable cash flow and a larger services base, but with pressure on margins and earnings that depends on whether services growth and cost savings can offset hardware weakness.
Mar 10, 2003
2000
INTERNATIONAL BUSINESS MACHINES CORP Annual Report, Year Ended Dec 31, 2000
International Business Machines Corporation (IBM) reported record results for fiscal 2000, with revenue of $88.4 billion (up about 1% as reported, roughly 4% at constant currency), net income of $8.1 billion, and diluted EPS of $4.44 (up from $4.12 in 1999). Gross profit margin improved slightly to 36.7%, and SG&A fell as a share of revenue to 17.7% from 19.2% when excluding one-time items. Currency movements were a notable headwind, reducing reported growth by roughly three points. Growth was driven by services and software, with Global Services revenue rising 3% and its contract backlog nearly doubling? No, growing to $85 billion from $60 billion, reflecting $55 billion in new contracts signed during the year. Hardware revenue was essentially flat, with server revenue mixed: pSeries UNIX and storage grew while zSeries and iSeries declined. Cash flow remained strong, with operating cash flow of $9.3 billion, and capital returns were substantial, including $6.7 billion of share repurchases and $0.9 billion of dividends. Total debt rose slightly to $28.6 billion, but nearly all of it sits in the Global Financing segment; non-global-financing debt fell to about $1.1 billion. The company ended the year with $3.7 billion of cash and current marketable securities and a current ratio of 1.21:1. Management flagged risks for 2001, including a possible deterioration of U.S. economic softness spreading abroad, aggressive price competition, and continued adverse currency movements. The company also announced a $5 billion multi-year chip-manufacturing investment and roughly $1 billion of planned Linux investment in 2001. For investors, the filing shows a company whose mix is shifting toward services and software, supported by disciplined cost management and aggressive buybacks. Important watch items include the pace of services backlog conversion, hardware margin sustainability in a softening economy, and the financing-heavy balance sheet within Global Financing.
Mar 13, 2001
1998
INTERNATIONAL BUSINESS MACHINES CORP Annual Report, Year Ended Dec 31, 1998
International Business Machines Corporation (IBM) reported record 1998 revenue of $81.7 billion, up 4.0% as reported (6.2% excluding currency effects), marking the fourth consecutive year of record revenue. Net income rose 3.8% to $6.3 billion, and diluted EPS reached a record $6.57, up from $6.01 in 1997. Growth was driven by the Global Services segment (revenue up 14.9% to $28.9 billion, with a backlog of $51 billion) and the Software segment (up 6.3%), while the Hardware segments declined 3.3%, with Personal Systems down 10.9% amid severe price pressure. Gross margin fell to 37.8% from 39.0% as revenue mix shifted toward lower-margin services and hardware, though SG&A was held flat and the expense-to-revenue ratio improved. Balance sheet and capital allocation were central to the year. IBM spent $6.9 billion repurchasing shares, roughly offsetting net income, so stockholders' equity fell slightly to $19.4 billion, and debt/capitalization rose to 60.2% from 57.6%, largely reflecting growth in global financing debt. Cash and marketable securities totaled $5.8 billion, and the company held $8.8 billion of unused committed credit. Credit ratings were strong, with senior debt rated A1 by Moody's and A+ by S&P. Looking ahead, management flagged weak economies in Asia and Latin America, continued price pressure in PCs and microelectronics, and Year 2000 uncertainty as 1999 risks. Notable events include a planned two-for-one stock split subject to shareholder approval, the pending sale of the IBM Global Network to AT&T for $5 billion alongside reciprocal outsourcing contracts, and a $600 million notes offering in February 1999.
Mar 29, 1999
1996
INTERNATIONAL BUSINESS MACHINES CORP Annual Report, Year Ended Dec 31, 1996
IBM's 1996 Form 10-K reports record revenue of $75.9 billion, up 5.6% as reported and 8.6% excluding currency effects, with net earnings of $5.4 billion ($10.24 per share), up 30% from $4.2 billion in 1995. Earnings were depressed by a $435 million charge for purchased in-process R&D tied to the Tivoli and Object Technology acquisitions; excluding that charge, adjusted net earnings were $5.9 billion ($11.06 per share), versus $6.0 billion ($10.46) in 1995, which itself included an $1.84 billion in-process R&D charge from the Lotus acquisition. Growth came from services (up 24.8% to $15.9 billion), personal systems, and distributed software, while System/390 hardware revenue fell on pricing pressure. Gross margin contracted to 40.2% from 42.2% as the mix shifted toward lower-margin services and PCs. Balance sheet and cash flow were solid. Operating cash flow was $10.3 billion, the third consecutive year above $10 billion, and year-end cash was $7.7 billion. IBM repurchased about $5.8 billion of its own stock in 1996 and paid $686 million in common dividends. Stockholders' equity fell 3.5% to $21.6 billion because buybacks, dividends, and currency translation losses outweighed earnings. Core debt to capitalization was a conservative 10.7%, while total debt to capitalization reached 51.4% because customer financing debt is largely matched to financing assets. Credit ratings were upgraded or outlooks improved during the year, and $9.4 billion of the $10 billion global credit facility was unused at year-end. Looking ahead, the board declared a two-for-one common stock split, pending shareholder approval to raise authorized shares from 750 million to 1.875 billion, with distribution expected on or after May 27, 1997. Management's stated priorities are revenue growth, stable net income margins, and a strong balance sheet. Investors should weigh the strong top-line momentum in services and software against persistent margin pressure in hardware and PCs, and the dependence of reported earnings on one-time acquisition charges.
Mar 27, 1997
1994
INTERNATIONAL BUSINESS MACHINES CORP Annual Report, Year Ended Dec 31, 1994
International Business Machines Corporation's 10-K for fiscal 1994 shows a company that returned to profitability after two years of heavy restructuring. Revenue was $64.05 billion, roughly flat-to-up 2.1% from $62.72 billion in 1993, and net earnings were $3.02 billion ($5.02 per share), compared with a net loss of $8.10 billion in 1993. No restructuring charges were recorded in 1994, versus $8.9 billion in 1993 and $11.6 billion in 1992. The turnaround was helped by the $248 million after-tax gain on the sale of Federal Systems Company to Loral, and by a $192 million after-tax drag from shortening software amortization periods. Excluding the FSC gain and the amortization change, IBM reported adjusted earnings of about $2.97 billion, or $4.92 per share. The balance sheet improved meaningfully. Total debt fell from $27.3 billion to $22.1 billion, the long-term debt-to-equity ratio dropped from 77.2% to 53.6%, working capital rose to $12.1 billion, and stockholders' equity grew to $23.4 billion. Operating cash flow increased to $11.8 billion from $8.3 billion. Management is still under pressure: hardware gross margins are being squeezed by pricing competition, especially in mainframes and personal computers, and services revenue growth is coming at lower margins than hardware. Management also set a goal of cutting annual expenses by $8.0 billion from 1992 levels by mid-1996, and it authorized up to $2.5 billion in open-market share repurchases and a tender offer for preferred stock. The filing's principal risks are continued hardware price erosion, the shift toward lower-margin services, weakness in personal computers and storage, and currency volatility, particularly in Mexico and Brazil. Other disclosed items include a securities class action over 1992 disclosures, which management does not expect to be material, and a reduced reliance on receivables securitization, with $1.8 billion in assets under management, down from $3.1 billion a year earlier.
Mar 28, 1995
1993
INTERNATIONAL BUSINESS MACHINES CORP Annual Report, Year Ended Dec 31, 1993
IBM's 1993 Form 10-K shows a year of deep losses and restructuring. Revenue fell 2.8% to $62.7 billion from $64.5 billion, and the company posted a net loss of $8.1 billion, or $14.22 per share, after $8.9 billion in pre-tax restructuring charges. Excluding restructuring, IBM was roughly break-even: pre-restructuring earnings before taxes were about $148 million, and the net loss before restructuring and accounting changes was $.07 per share after preferred dividends. Gross profit margin compressed from 45.6% to 38.5%, driven by hardware price pressure and a mix shift toward lower-margin services and personal computers. Hardware sales fell 9.4%, with mainframe processor revenue down 27.6%, while services grew 32.1% but at a 30.5% gross margin. The balance sheet weakened significantly. Stockholders' equity dropped from $27.6 billion to $19.7 billion, and long-term debt rose to 77.2% of equity from 46.5%. IBM issued $1.8 billion of notes and debentures and $1.1 billion of Series A preferred stock in June 1993, and it arranged a $10.0 billion committed global credit facility in December 1993. Rating agencies downgraded the company during 1993: Standard & Poor's moved senior debt from AA- to A, and Moody's moved it from A1 to A3. Operating cash flow was $8.3 billion, and management expects roughly $7.0 billion in annual expense savings by 1996 from restructuring actions. Management also said further restructuring may be required if industry demand does not recover as assumed, and it noted that the Federal Systems Company sale to Loral for $1.503 billion closed March 1, 1994. For investors, the key questions are whether the cost program can restore margins as revenue shifts toward services, whether the company can stabilize its credit profile, and whether the restructuring reserves (about $10.2 billion still unutilized) will translate into cash outflows that weigh on future earnings.
Mar 28, 1994