IBM

International Business Machines Corporation Profile 1 New Orchard Rd. Armonk, NY 10504-1722 United States (Map) Phone: 914-499-1900 Fax: 800-314-1092 Toll Free: 800-426-4968 http://www.ibm.com   Table of Contents call: 1-866-541-3770 | visit: www.hoovers.com December 2010 | i THE BASICS ................................................................................................ 1 Key Information .................................................................................. 1 Key Numbers ...................................................................................... 1 Rankings/Stock Indexes .................................................................... 1 OVERVIEW ................................................................................................. 2 HISTORY ..................................................................................................... 4 INDUSTRY INFORMATION ...................................................................... 6 OFFICERS AND EMPLOYEES ................................................................. 7 Corporate Officers ............................................................................ 7 Board ................................................................................................... 9 BIOGRAPHIES ........................................................................................... 11 Mark Loughridge ............................................................................... 11 Harriet P. Pearson ............................................................................ 11 Samuel J. Palmisano ....................................................................... 12 Steven A. (Steve) Mills ................................................................... 12 Robert C. (Bob) Weber ................................................................... 13 John E. Kelly III ............................................................................... 14 Jon C. Iwata ...................................................................................... 15 Linda S. Sanford .............................................................................. 15 J. Randall (Randy) MacDonald ...................................................... 16 COMPETITORS ......................................................................................... 18 Top Competitors .............................................................................. 18 All Competitors ................................................................................ 18 PRODUCTS AND OPERATIONS ............................................................ 19 COMPANY FINANCIALS ........................................................................ 21 Financial Overview .......................................................................... 21 Annual Income Statement ............................................................. 21 Quarterly Income Statement ........................................................ 21 Annual Balance Sheet ................................................................... 22 Quarterly Balance Sheet .............................................................. 23 Annual Cash Flow ........................................................................... 24 Quarterly Cash Flow ...................................................................... 24 Historical Financials ...................................................................... 24 Market Data ..................................................................................... 25 Comparison Data ............................................................................ 26 Competitve Landscape .................................................................. 27 WELCOME Hoover's is the business information resource that delivers a unique combination of up-to-date data, broad coverage, and comprehensive information about companies, decision makers, and industries - along with powerful tools to put this information to work for your business. Hoover's offers everything you need to successfully: * Identify and evaluate potential sales leads, markets, and business partners * Deepen relationships with current customers * Assess competitive risks and eliminate threats * Build presentation-ready reports and customized lists of companies, industries, and decision makers Unlike other business information providers, only Hoover's has a full-time, in-house editorial and research team dedicated wholly to investigating, pinpointing, authenticating, and analyzing data to provide the most comprehensive, up-to-date information available on companies, industries, and executives.   call: 1-866-541-3770 | visit: www.hoovers.com December 2010 | ii OTHER RESOURCES AVAILABLE ON HOOVERS ONLINE ............... 31   The Basics call: 1-866-541-3770 | visit: www.hoovers.com December 2010 | 1 1 New Orchard Rd. Armonk, NY 10504-1722 United States (Map) Phone: 914-499-1900 Fax: 800-314-1092 Toll Free: 800-426-4968 http://www.ibm.com Big Blue? Try Huge Blue. International Business Machines (IBM) is the world's top provider of computer products and services. Among the leaders in almost every market in which it competes, the company focuses primarily on its growing services business, which accounts for well over half of sales. Though perhaps still best known for its hardware, its IT and business services units are among the largest in the world and serve customers across most industries. IBM is also one of the largest providers of both business software and semiconductors. The company's computing hardware legacy lives on in the form of its industry-leading enterprise server and data storage products lines. KEY INFORMATION DUNS Number 001368083 Doing Business As Ibm Company Type Public - NYSE:  IBM Location Type Headquarters Year of Founding or Change In Control 1911 State of Incorporation NY KEY NUMBERS Fiscal Year-End December Sales (mil.) $95,758.0 1-Year Sales Growth (7.6%) Net Income $13,425.0 1-Year Net Income Growth 8.8% Total Employees 399,409 1-Year Employee Growth 0.2% Employees At This Location 850 RANKINGS/STOCK INDEXES #20 in FORTUNE 500 #21 in FT Global 500 S&P 500 Dow Jones Industrials Dow Jones Global Titans KEY PEOPLE Samuel J. Palmisano Chairman, President, and CEO Mark Loughridge SVP and CFO Pat Toole VP and CIO Jesse J. Greene Jr. VP Financial Management and Chief Risk Officer Jeff Jonas Chief Scientist, Entity Analytic Solutions, Software Group and Distinguished Engineer   Overview call: 1-866-541-3770 | visit: www.hoovers.com December 2010 | 2 Big Blue? Try Huge Blue. International Business Machines (IBM) is the world's top provider of computer products and services. Among the leaders in almost every market in which it competes, the company focuses primarily on its growing services business, which accounts for well over half of sales. Though perhaps still best known for its hardware, its IT and business services units are among the largest in the world and serve customers across most industries. IBM is also one of the largest providers of both business software and semiconductors. The company's computing hardware legacy lives on in the form of its industry-leading enterprise server and data storage products lines. IBM continues to use acquisitions to augment its own R&D into better business software and services, while shrinking its lower margin hardware operations with divestitures and organizational changes. The company steadily buys small firms with technology or expertise that complement or expand its product lines and service selection. It made more than 100 acquisitions in the first decade of the 2000s. In May 2010, the company announced plans to spend about $20 billion on acquisitions over the next five years. Among the 15 purchases made by the company in 2008 (up from 12 the previous year) was software developer Cognos. IBM paid about $5 billion for Cognos in a bid to increase its portfolio of so-called business process optimization applications. The deal was intended to help the company gain ground against enterprise software industry leaders Oracle and SAP, specifically in the areas of business intelligence and performance management. IBM did far less shopping during 2009, making only six acquisitions. The key purchase for the year was of analytics provider SPSS for about $1.2 billion in cash. IBM integrated the SPSS software into its Business Analytics and Optimization consulting organization. In 2010 IBM resumed its shopping spree. The company bought Texas-based business process management software maker Lombardi, Web analytics software maker Coremetrics, data compression tool developer Storwize, and document digitization and data management application maker Datacap. In late 2010, IBM bought OpenPages, a developer of financial risk and compliance management software that has partnered with IBM for several years. The acquisition is part of IBM's push to expand its business analytics offerings to support risk and compliance management. Since the financial crisis, risk management has become a key priority for businesses that need to be able to identify financial and operational risks across all parts of the enterprise. It followed that deal up with two more purchases in 2010. In November IBM bought Netezza, which makes data analytics appliances used in data warehouses, for about $1.7 billion. A month earlier, it acquired blade server and Ethernet switch maker BLADE Network Technologies. BLADE, which becomes part of IBM's Systems and Technology group, also makes virtualization software used to integrate and simplify networks in cloud computing environments. Both acquisitions are part of IBM's efforts to better compete with Cisco, HP, and Oracle in the market for corporate data center network management. IBM acquired the Sterling Commerce subsidiary of AT&T in mid-2010 for about $1.4 billion in cash. Sterling Commerce makes software that helps businesses create and integrate networks of customers, partners, and suppliers. The Sterling Commerce deal expands IBM's portfolio of software that lets customers automate and manage business processes across functions such as marketing, selling, ordering, and fulfillment. It also provides IBM with a more complete platform for business process automation by adding to IBM's portfolio of middleware, the code that connects software components and applications. IBM bought security software developer BigFix to expand its corporate security products lineup. In October 2010 the company purchased Unica for about $480 million; the deal expanded IBM's tools for managing targeted marketing and advertising efforts. Also that month it bought PSS Systems, a developer of software used to analyze and automate information governance policies for large volumes of business data, while also automating the disposal of unneeded information; and it acquired Toronto-based Clarity Systems, a developer of software used to collect and prepare financial statements for electronic filing with the SEC and other regulatory agencies.   call: 1-866-541-3770 | visit: www.hoovers.com December 2010 | 3 The SPSS, Cognos, Netezza, and Sterling Commerce deals especially serve to further IBM's "Information Agenda" initiative that is geared toward providing customers with better data analysis technology. The company is positioning itself to offer a wide array of enterprise software tools and processes to better harness and analyze the rapidly expanding volumes of data generated by the global growth in digital communications and commerce. Another area of focus is the development of applications and services to support cloud computing. In other words, IBM is designing tools for managing and optimizing access to corporate information stored at data center facilities by the growing number of businesses looking to outsource or enhance their network and data management efforts. All of these efforts support the company's global sales strategy of providing complete backend data communications and processing systems (made up of its software and computing equipment) to large corporate, public sector, and education clients. Its systems are used for such purposes as automating health care records and facilities management at hospitals in Spain, managing high-volume payment processing for large banks and other financial services providers in Russia, automating service delivery and billing for telecommunications providers in India, and analyzing consumer shopping patterns to improve the flow of merchandise through the global supply chain. Meanwhile the company in 2010 sold its declining product lifecycle management software business to Dassault Systèmes for $600 million in order to put more resources into its core product lines. IBM's international business has become increasingly important to the bottom line. With clients in about 170 countries, overseas sales account for a growing portion of total revenues. The company's businesses in Brazil, China, India, and Russia have been particularly active. IBM continues to seek opportunities outside of the mature markets of North America, Europe, and Japan. Efforts to reposition itself as a full-service technology services company with a global focus have paid off for IBM both in terms sales growth and profits. The company's forward-looking approach to corporate planning is also evident in its research and development programs which consistently lead the tech industry in patent awards; it received 4,900 in 2009 alone, mostly for software and services. The company is at the forefront of such diverse fields as nanotechnology and quantum computing.   History call: 1-866-541-3770 | visit: www.hoovers.com December 2010 | 4 In 1914 National Cash Register's star salesman, Thomas Watson, left to rescue the flagging Computing-Tabulating- Recording (C-T-R) Company, the pioneer in US punch card processing that had been incorporated in 1911. Watson aggressively marketed C-T-R's tabulators, supplying them to the US government during WWI and tripling company revenues to almost $15 million by 1920. The company became International Business Machines (IBM) in 1924 and soon dominated the global market for tabulators, time clocks, and electric typewriters. It was the US's largest office machine maker by 1940. IBM perfected electromechanical calculation (the Harvard Mark I, 1944) but initially dismissed the potential of computers. When Remington Rand's UNIVAC computer (1951) began replacing IBM machines, IBM quickly responded. The company unveiled its first computer in 1952. With its superior research and development and marketing, IBM built a market share near 80% in the 1960s and 1970s. Its innovations included the STRETCH systems, which eliminated vacuum tubes (1960), and the first compatible family of computers, the System/360 (1964). IBM also developed floppy disks (1971) and the first laser printer for computers (1975). The introduction of the IBM PC in 1981 ignited the personal computer industry, sparking a barrage of PC clones. Through it all IBM was the subject of a 12-year government antitrust investigation that ended in 1982. The shift to smaller, open systems, along with greater competition in all of IBM's segments, caused wrenching change. Instead of responding to the market need for cheap PCs and practical business applications, IBM stubbornly stuck with mainframes, and rivals began capitalizing on Big Blue's technology. After posting profits of $6.6 billion in 1984, the company began a slow slide. It sold many noncomputer businesses, including its copier division to Kodak in 1988 and its Lexmark typewriter business in 1991. Closing the book on its heritage, IBM shuttered the last of its punch card plants that year. In 1993 CEO John Akers was replaced by Louis Gerstner, the first outsider to run IBM. He began to turn the ailing, antiquated company around by slashing costs and nonstrategic divisions, cutting the workforce, shaking up entrenched management, and pushing services. His $1 billion R&D budget cut caused an exodus of IBM scientists and created an operation geared more toward quick turnaround than lengthy research (however, the company still leads the business world in patents each year). In 1994 Big Blue reported its first profit in four years. It also began making computer chips that year. A pioneer in server operating system software, IBM made an early move into messaging and network management software with its acquisitions of spreadsheet pioneer Lotus Development in 1995 and network management specialist Tivoli the next year. Expanding its Web focus to include small businesses, IBM in 1999 bought Internet communications server maker Sequent. That year IBM exited the networking hardware market, selling related intellectual property to Cisco Systems. Hoping to turn around its ailing PC business, IBM in 1999 axed manufacturing staff and halted sales of its PCs through US retailers. The following year the head of its server business, Samuel Palmisano, was named president and COO; the change fueled speculation that IBM's emperor had found his heir. In a move intended to bolster its data management division, IBM in 2001 purchased the database software unit of Informix for $1 billion. It also bought longtime partner CrossWorlds Software, a maker of application integration products, the next year.   call: 1-866-541-3770 | visit: www.hoovers.com December 2010 | 5 Streamlining efforts in 2002 included increased outsourcing of manufacturing and refurbishing activities to Sanmina- SCI and Solectron (acquired by Flextronics in 2007); each had acquired manufacturing facilities from IBM. Also that year, the company formed a joint venture with Hitachi to combine the companies' disk drive operations. After an initial investment of about $2 billion from Hitachi, combined with further payments to IBM over the next three years, Hitachi eventually took on full ownership of the business. Additionally, IBM combined its Technology (microchips) and Systems (servers, storage) groups. Looking to extend its lead in technology and business services, IBM also acquired PricewaterhouseCoopers' consulting and IT services unit, PwC Consulting, for an estimated $3.5 billion in 2002. While presenting IBM with a significant integration challenge, the transaction served the dual purpose of augmenting IBM's standard array of outsourcing, maintenance, and integration services, while moving the company into high-end management consulting. Palmisano succeeded Gerstner as CEO that year. In 2003 IBM acquired development tool maker Rational Software for $2.1 billion, and it acquired supply chain software developer Trigo Technologies early in 2004. Also that year, the company purchased Daksh eServices, one of India's largest call center businesses, and the Business Continuity Services unit of Schlumberger. The company in 2005 sold its PC business -- a segment that had begun to yield little profit for the company -- to Chinese manufacturing partner Lenovo. IBM received a minority ownership stake in the expanded Lenovo as part of the deal, but it subsequently sold its shares. Also in 2005, it expanded the presence of its service arm in the health-care market when it acquired Healthlink, as well as software partner Candle. In 2005 it acquired Ascential Software for about $1.1 billion. The next year the company bought FileNet, a maker of content management software, for $1.6 billion. In 2007 IBM spent about $1 billion on 12 acquisitions; half of those were software companies including Vallent Corporation, Softek Storage Solutions, Watchfire, and DataMirror (for which it paid $161 million). Continuing the trend of divesting its hardware operations, IBM in 2007 sold its digital business-printer operations -- through a 49% stake in a new printing joint