IBM Business Perspective 2012

Transcription

1 IBM Business Perspective 2012 Patricia Murphy Vice President, Investor Relations 2009 IBM Corporation

2 Certain comments made in this presentation may be characterized as forward looking under the Private Securities Litigation Reform Act of Forward-looking statements are based on the Company's current assumptions regarding future business and financial performance. Those statements by their nature address matters that are uncertain to different degrees. Those statements involve a number of factors that could cause actual results to differ materially. Additional information concerning these factors is contained in the Company's filings with the SEC. Copies are available from the SEC, from the IBM web site, or from IBM Investor Relations. Any forward-looking statement made during this presentation speaks only as of the date on which it is made. The Company assumes no obligation to update or revise any forward-looking statements. These charts and the associated remarks and comments are integrally related, and they are intended to be presented and understood together. Information regarding the Company's financial roadmap including interim periods, which was previously communicated to investors, is being presented for purposes of historical information and is not being updated during this presentation. In an effort to provide additional and useful information regarding the Company s financial results and other financial information as determined by generally accepted accounting principles (GAAP), these materials contain certain non-gaap information including "operating earnings" and other "operating" financial measures. The rationale for management s use of this non-gaap information, the reconciliation of that information to GAAP, and other related information are included as Attachment II ( Non-GAAP Supplemental Materials ) to the Company s Form 8-K dated May 9, 2012, Form 8-K dated July 18, 2012, and in the information entitled Non-GAAP Supplemental Materials that is posted on the Company s investor relations web site at

3 Agenda Strategy and Historical Performance 2015 Roadmap Appendix: IBM Growth Initiatives 1

4 The industry economics have changed over time % Growth 35% Total IT Growth at Constant Currency 30% 25% 20% 15% 10% 5% Growth Markets Total Markets CAGR ~ 8% 3-4% 0% -5% Major Markets '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 ~ 2% -10% Source: IBM Market Insights analysis, using GMV1H12 (Jan 2012) 2

5 IBM has been moving to higher value areas, with more of our revenue and profit in annuity businesses % of Segment Profit* Annuity vs Transactional Revenue 44% 48% 52% 27% 38% 41% Annuity vs Transactional Profit*** 35% 16% 40% 60% 2000** 2011 Hardware/Financing Services Software Transactional Annuity * Sum of external segment pre-tax income not equal to IBM pre-tax income ** Stock-based compensation expense was not recorded at the segment level and excludes Enterprise Investments *** Certain expenses allocated 3

6 We have become a globally integrated enterprise, capitalizing on markets with high growth potential Growth Markets % of IBM Geographic Revenue* % % % % Major Markets Growth Markets % 16% % * Revenue mix percentages exclude divestitures (PCD, Printers) 4

7 Our shift to higher value, global integration and productivity has driven superior financial results Operating Pre-tax Income Margin and Free Cash Flow $B Primary Uses of Cash $B % Share Repurchase % Dividends Acquisitions Capital '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 Operating Pre-tax Income Margin Free Cash Flow 5

8 Agenda Strategy and Historical Performance 2015 Roadmap Appendix: IBM Growth Initiatives 6

9 IBM s 2015 Roadmap: at least $20 of Operating EPS Base revenue growth ~2% excluding divestitures Shift to faster growing business mix provides ~1% revenue growth ~$20B of acquisition spend provides ~2% revenue growth Enterprise Productivity yields margin expansion Shift to a higher value portfolio continues to provide leverage ~$50B returned through share repurchase Shares 11% CAGR Enterprise Productivity Margin Mix At Least $20 Acquisitions ~$2.80 Base Revenue Growth Revenue Mix $11.67 Revenue Growth ~$3.05 Operating Leverage ~$ Operating EPS* * Non-GAAP: Excludes acquisition-related charges and non-operating retirement-related expense Assumes current tax policy and Non-GAAP tax rate of 25% 2015 Operating EPS* 7

10 Key initiatives support the revenue and profit objectives Share Repurchase Operating Leverage Smarter Planet Contributes ~$7B of growth over roadmap 2011: ~50% yr/yr Revenue Growth ~$3.05 $11.67 Growth Markets Approaches 30% of IBM s geographic revenue by : 16% yr/yr Business Analytics Contributes ~$6B of growth over roadmap 2011: 16% yr/yr 2015 Operating EPS Cloud Contributes ~$7B of revenue, of which ~$3B is incremental growth 2011: 2.8x growth 8

11 and contribute $20B of revenue growth through 2015 $13.44 Share Repurchase ~$17B ~$7B ~$2B ~$6B ~$2B ~$3B ~$0.2B ~$50B Operating Leverage Revenue Growth ~$3B Double-digit yr/yr growth +$6B 2011 ~$3.05 ~$30B i $ Operating EPS 2010 Revenue from Key Initiatives Growth Markets Smarter Planet Business Analytics Incremental Cloud 2015 Revenue from Key Initiatives 9

12 We have allocated $20B for acquisitions Share Repurchase Operating Leverage Revenue Growth ~$3.05 $11.67 PTI Margin Revenue Yr/Yr% 45% 30% 15% 0% 30% 20% 10% 0% Forward Looking Revenue Growth Estimates 30% 20% 10% 10% 10% Yr1 Yr2 Yr3 Yr4 Yr5 Forward Looking PTI Margin Estimates 27% 23% 18% 11% 20% 15% 2% 10% 2% Scalable intellectual property Key to solutions offerings Drive synergies through global distribution -10% -20% -20% Yr1 Yr2 Yr3 Yr4 Yr Operating EPS PTI Margin Margin excl. amortization of intangibles and acquisition-related charges 10

13 with investments aligned to key themes Share Repurchase Operating Leverage Revenue Growth ~$3.05 Servers, Networking & Storage Optimization Cloud Acquisitions since 2010 Smarter Commerce Smarter Cities Complements Organic Assets IBM Hardware Portfolio IBM Hardware Portfolio GTS Service Delivery Industry Solutions Frameworks $11.67 Smarter Planet GBS Offerings Business Intelligence & Data Analytics 2015 Operating EPS Governance, Risk, Compliance & Security GBS BAO Service Line 8 Analytics Solution Centers 11

14 IBM expands margins through a shift to higher value Share Repurchase % of Operating Segments Profit* Operating Leverage ~$2.50 Revenue Growth ~$ % = $10B ~50% $ % = $2.6B 41% ~36% 38% 35% 16% ~13% 2000** e H ardware/financing Services Software 2015 Operating EPS * Sum of operating segment pre-tax income not equal to IBM operating pre-tax income ** Stock-based compensation expense was not recorded at the segment level and excludes Enterprise Investments 12

15 and enterprise productivity savings of $8 billion Share Repurchase Enterprise Productivity Savings Operating Leverage ~$8B ~$2.50 Revenue Growth ~$6B Integrated Operations Continuous improvement leveraging analytics ~$3.05 $11.67 ~$85B Spend Base End-to-End Process Transformation Locate work to where it best can be performed Focus integrated operations on high value advisory activities Shared Services 2011: $1.9B gross savings Operating EPS Balance savings between reinvesting and driving margin performance Model assumes 40% of gross savings to the bottom line 13

16 We are leveraging our strong cash generation to invest in the business and return value to shareholders Share Repurchase ~$2.80 Free Cash Flow $B Primary Uses of Cash $B Operating Leverage ~$2.50 Revenue Growth ~$ Roadmap $11.67 ~$10B Approaches $100B Free Cash Flow Operating EPS '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12e'13e'14e'15e Supports ~$40B of Financial Flexibility in

17 Our 2011 performance puts us on track to our 2015 objective Operating EPS* $ % Yr/Yr $13.44 Revenue Double-digit performance across growth initiatives Growth Markets +11% Smarter Planet nearly 50% Yr/Yr Business Analytics +16% Yr/Yr Cloud 2.8x growth Strong performance of 22 acquisitions closed through 2011 At Least $ % CAGR Operating Leverage Margin performance in line with model Delivered $1.9 billion of Enterprise Productivity savings Cash & Shareholder Return Generated $16.6 billion in free cash flow Returned over 100% to shareholders through share repurchase and dividends * Non-GAAP: Excludes acquisition-related charges and non-operating retirement-related expense 15

18 The IBM transformation continues in the 2015 Roadmap Operating PTI / EPS * At Least $ Objectives Segment Operating PTI Operating EPS $13.44 At Least $15.10 Software contributes about half of our segment profit Growth initiatives deliver $20B in revenue growth Growth markets revenue approaches 30% of IBM s geographic total $3.32 $1.81 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12e '13e '14e '15e Hardware / Financing Services Software Enterprise productivity delivers $8B in gross savings IBM returns $70B to shareholders over the roadmap * Non-GAAP: Excludes acquisition-related charges and non-operating retirement-related charges 2000 & 2001 segments not restated for stock based compensation Sum of external segment pre-tax income not equal to IBM pre-tax income 16

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20 Agenda Strategy and Historical Performance 2015 Roadmap Appendix: IBM Growth Initiatives 18

21 Over the 2015 Roadmap our growth initiatives deliver ~$20B of revenue growth Become the premier Globally Integrated Enterprise Focus on open technologies and high-value solutions Deliver integration and innovation to clients Smarter Planet Contributes ~$7B of growth over roadmap Growth Markets Approaches 30% of IBM s geographic revenue by 2015 Business Analytics Contributes ~$6B of growth over roadmap Cloud Grows to ~$7B business by 2015, of which ~$3B is incremental 19

22 Growth Markets provide an opportunity to capture growth and drive productivity Growth Markets In 2012, growth markets economies will become the world s largest importers and consumers Asia and Africa will add 874 million urban residents and expand their gross regional domestic product by $20.7 trillion from 2010 to 2025 Economic Rebalancing Urbanization Demographic Shift The world s 10 fastest growing economies are all from the growth markets countries Growth markets citizens are more mobile than ever - 90% of phones in Africa are cell phones and ~2.4 billion mobile phone users are in BRIC countries Over the next 5 years, China and India will each spend $1 trillion on infrastructure By 2030, 93% of the world s middle class will be from emerging markets 8% growth in the growth markets IT opportunity through 2015* > 3x major market growth rate * IBM Market Insights analysis, using GMV1H12, Jan

23 IBM s business mix is shifting to the growth markets Growth Markets Market Expansion IT Infrastructure Development Industry Leadership ~ $17B incremental revenue Grow faster than market Outpace Major Markets growth > 8 points Drive margin expansion Approach 30% of IBM geographic revenue Revenue CC Geographic Gross Profit Bridge* 10% 11% 11% $2.2B ~$51B +8 pts 2% 1% +8 pts +10 pts +10 pts 1% 2% ~$47B $1.9B Growth Markets Major Markets -6% Geographic Gross Profit 2011 Growth Markets Major Markets * Sum of geographic gross profit not equal to IBM gross profit 21

24 Smarter Planet describes the emerging era of computing By 2015, Instrumented In 5 years, 1 Trillion 5.6 Billion connected devices personal devices sold Interconnected Unstructured data growing 90% 800% in the next 5 years of the world s data was created in the past 2 years Intelligent By 2020, business transactions over the internet = 450 Billion per day Smarter Planet 10,000 messages/second from 100 million active users per source 22

25 IBM s Smarter Planet is a collection of markets we re making by driving new value for clients Smarter Planet Focus Industries Smarter Cities Expanded from 9 18 industries 52 industry solutions areas 2,400 Smarter Cities engagements 8 key portfolio areas Business Functions Smarter Commerce portfolio 17 solution areas, 5 software acquisitions Reaching new buyers Chief Procurement Officer Buy Market Chief Marketing Officer 2011 Progress ~50% revenue growth 90% growth in software content 8,000 engagements VP of Customer Loyalty Service Sell VP of Commerce Stores & Operations Smarter Planet contributes $7B in revenue growth over the roadmap 23

26 Analytics has evolved from business initiative to business imperative Business Analytics Enabling our clients to turn oceans of data into predictive models and actionable decisions Why analytics matters... 33% more Revenue Growth 12.5% 9.4% > 12x more Profit Growth 7.3% 0.6% 32% more Return on Invested Capital 11.9% 9.0% $234 billion in total IT opportunity by 2015 $76 billion in software opportunity by 2015 Finance organizations with business insight All other enterprises Source: IBM Global Business Services, The Global CFO Study 2010, 1H12 IBM Market Insights 24

27 IBM has built a broad portfolio of business analytics capabilities Business Analytics A broad, deep set of analytics offerings integrated by design $16 billion More than $16B in acquisitions to build the industry's most comprehensive analytics portfolio 20,000 Unmatched experience gained from 20,000 client engagements 9,000 Supported by nearly 9,000 consultants, 10,000 technical professionals and 500+ patents An enterprise-class big data platform that supports an end-to-end information management foundation 27,000 Working with 27,000 partners and 5,000 universities to develop skills Integrated decision management capabilities that embed predictive analytics directly into organizational processes IBM s analytics business grows $6B to more than $16B by

28 Cloud is transforming IT and opening new opportunities for IBM Cloud Computing Cloud delivers real value to clients... Natural evolution of services delivery Enables self-service, sourcing options, and economies of scale Helps reduce growing server management and admin costs through automation and integration $130 B $217 B... and 25% growth in the cloud opportunity through 2015* 2001 New server spending Power and cooling costs 2011 Server management & administration costs Source: IDC Directions 2011: Game Changing Virtual Technology: Major Shifts and Innovations that will Forever Change your IT Business, March, 2011 * IBM Market Insights analysis, using GMV1H12, Jan

29 IBM is leading the enterprise cloud market IBM brings unique capabilities Expertise across Services, Software, Hardware and Research Unified cloud platform with seamless integration across Private, Public and Hybrid Cloud expands both IBM s addressable market opportunity and margin opportunity Both born on the cloud and traditional IT to cloud transformations Cloud Computing Driving infrastructure and labor savings with standardization and automation of delivery, combined with a deep collection of value add offerings ~4,000 successful cloud engagements in FY M daily client transactions through IBM s public cloud 2.8X cloud revenue growth in 2011 $100B in commerce transactions analyzed per year in the cloud 1M enterprise application users working on the IBM cloud Foundation Services Solutions Private & Hybrid Clouds Managed Cloud Services Cloud Business Solutions Cloud Enablement Technologies Infrastructure and Platform as a Service Software and Business Process as a Service Commitment to open standards and a broad ecosystem Cloud contributes ~$7B revenue ($3B incremental) to IBM in

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