How is IBM addressing innovation and intellectual property?

IBM invests approximately $5-6 billion annually in Research & Development, a strategy that has resulted in IBM being awarded more U.S. patents than any other company for 12 consecutive years. In a notable shift, IBM announced in January 2005 its intent to pledge 500 patents for use by the open computing community to foster further innovation.

What significant changes are occurring within IBM's business structure?

IBM is divesting non-core businesses and concentrating on the enterprise market. A key development is the announced sale of its Personal Computing Division to Lenovo, expected to close in the second quarter of 2005. This move, along with continued investment in strategic acquisitions, underscores IBM's focus on software, services, and advanced technology solutions for businesses.

What is the status of IBM's services business?

IBM's Global Services segment remains a critical component of its strategy. The company reported a significant services backlog of $111 billion at the end of 2004, up from $120 billion in 2003, indicating sustained demand for its outsourcing and consulting services.

IBM 10-K FY2004 Annual Report — Revenue, Net Income, EPS

Q: What is IBM's core strategy for growth and market positioning?

IBM's core strategy centers on becoming the world's largest information technology company by focusing on an 'on demand' business model. This model leverages open standards and innovation to deliver differentiating capabilities to clients, particularly within the enterprise market. The company is strategically emphasizing higher-value segments like business consulting services and integrated infrastructure solutions, moving away from component value.

Summary

This 10-K filing for International Business Machines Corp. (IBM) for the year ended December 31, 2004, highlights IBM's strategic focus on becoming the world's largest information technology company, emphasizing its transition towards an "on demand" business model powered by open standards and innovation. The company's strategy revolves around delivering differentiating capabilities to clients, particularly in the enterprise market, by leveraging its expertise in business consulting, software, systems, and financing. Investors can take note of IBM's significant investment in research and development, evidenced by a consistent lead in U.S. patent awards, and its commitment to open standards like Linux. The filing also details the company's business segments, including Global Services, Systems and Technology, Personal Systems (with the pending sale of the PC division to Lenovo), Software, and Global Financing. The strategic divestiture of non-core businesses and focus on high-value enterprise segments are key themes. Furthermore, IBM's robust share repurchase program indicates a commitment to returning value to shareholders.

Key Highlights

1IBM is positioning itself as the largest global IT company, emphasizing an "on demand" business model driven by innovation and open standards.

2The company is strategically shifting focus from component value to higher-value areas like business consulting services and infrastructure solutions.

3IBM continues to invest heavily in Research & Development, holding the distinction of being awarded more U.S. patents than any other company for the 12th consecutive year.

4The divestiture of its Personal Computing Division to Lenovo was announced in December 2004, with closing expected in Q2 2005, signaling a further focus on enterprise solutions.

5A significant services backlog of $111 billion at year-end 2004 demonstrates strong demand for IBM's Global Services segment.

6IBM maintained a strong share repurchase program, buying back 30.7 million shares in the fourth quarter of 2004.

INTERNATIONAL BUSINESS MACHINES CORP Annual Report, Year Ended Dec 31, 2004

Summary

Key Highlights

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