IBM Corporation
Company Profile
Reference Code: 2CCC78C4-8E77-4413-81BC-AE12C4655D2C
Publication Date: Jan 2005
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IBM Corporation
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IBM Corporation
Table of Contents
TABLE OF CONTENTS
Facts & Overview........................................................... 4
Business Description .................................................... 5
History ............................................................................ 7
Major Products & Services ........................................... 9
Revenue Analysis ........................................................ 12
Key Employees ............................................................ 13
Key Employee Biographies ........................................ 15
Locations & Subsidiaries............................................ 23
Company View ............................................................. 24
SWOT Analysis ............................................................ 32
Top Competitors .......................................................... 37
IBM Corporation
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IBM Corporation
Company Overview
COMPANY OVERVIEW
International Business Machines (IBM) is the world’s largest information technology
(IT) company. It offers a variety of services ranging from business transformation
consulting to software, hardware, fundamental research, financing and the component
technologies used to build larger systems. IBM has operations in over 160 countries
worldwide including the UK, Japan, Italy, Germany, France, China and Canada. The
company is headquartered in Armonk, New York and employs about 340,000 people.
The company recorded revenues of $89.1 billion during the fiscal year ended
December 2003, an increase of 9.8% over 2002. The increase was primarily
attributable to stronger demand associated with the improving US economy and
continued market share gains. The gross profit of the company during fiscal 2003 was
$33 billion, an increase of 9% over fiscal 2002. The net profit was $7.6 billion during
fiscal year 2003, an increase of 110.6% over 2002.
KEY FACTS
Head Office
New Orchard Road
Armonk
NY-10504
USA
Phone
1 914-499-1900
Fax
1 914-765-7382
Web Address
http://www.ibm.com
Ticker
New York: IBM
# Employees
337,462
Turnover (US$ Mn)
89,100
Financial Year End
December
IBM Corporation
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IBM Corporation
Business Description
BUSINESS DESCRIPTION
IBM is world’s largest IT company. IBM holds more than 22,000 patents and markets
more than 100 products and services.
IBM’s clients include sole proprietorships, large organizations, government
organizations and companies from sectors ranging from financial services, public,
industrial, distribution and communications industries. The company is organized into
five business divisions; global services segment; three hardware product segments systems group, personal systems group and technology group; software segment;
global financing segment, and enterprise investments segment.
The global services division manages the company’s IT services business and offers
a wide variety of business and IT services including consulting, software and system
implementation, and outsourcing. The unit is organized into business consulting,
infrastructure services and On Demand services. The business consulting group
comprises the PriceWaterhouseCoopers consulting unit, which IBM acquired in 2002.
The infrastructure services group includes implementation, hosting and strategic
outsourcing. The On Demand services draw from IBM’s consulting and infrastructure
capabilities to offer utility computing capabilities.
The IBM hardware segment includes servers, storage devices and intellectual
property licensing. IBM reports revenue from three sub segments in hardware:
systems, personal systems and technology. The systems group includes servers,
storage and technology. The main systems products are Z Series mainframes; X
Series Intel-based servers; I Series Servers, which run IBM’s OS 400; P Series UNIXbased servers; blade servers; and storage devices (mainly disk systems, SANs, and
tape and optical drives).
The personal systems group includes all notebooks, desktops and related peripheral
hardware such as monitors. IBM ThinkPad notebooks include the R, T, X and G
series. The IBM desktop line includes the A, M and S series. The technology group
generates revenue by licensing IBM’s more than 22,000 active patents. IBM is a
leading provider of PCs and servers. IBM has number three position in the PC market
and top share in the server market. IBM has increased its share of the server market
to 31% in 2003 from 27% in 1999.
The IBM software segment comprises five major brands: WebSphere, DB2, Lotus,
Tivoli and Rational. IBM also sells a wide variety of data management tools and other
middleware. IBM is the second-largest software company in the world in terms of
revenue.
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IBM Corporation
Business Description
IBM provides financing for customers and records the fees generated from these
activities as global financing revenue. IBM is the world’s largest vendor of IT financing
services, offering a wide variety of programs to 125,000 customers in 40 countries.
Global financing consists of three lines of business: customer financing, commercial
financing and remarketing. Customer financing provides lease and loan financing to
end users and internal customers for terms generally between two and five years.
Internal financing is predominantly in support of global services’ long-term customer
service contracts. Commercial financing provides primarily short-term inventory and
accounts receivable financing to dealers and remarketers of IT products.
The enterprise investments and other segment include all revenue from strategic
investments and other non-operating income. The enterprise investments segment
develops and provides industry-specific IT solutions supporting the hardware,
software and global services segments of the company.
Primary product lines include product life cycle management software and document
processing technologies. Product life cycle management software primarily serves the
industrial sector and helps clients manage the development and manufacturing of
their products. Document processor products service the financial services sector and
include products that enable electronic banking.
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IBM Corporation
History
HISTORY
IBM was incorporated as the Computing Tabulating Recording Company in 1911. The
company was formed as a result of the consolidation between the Computing Scale
Company of America, the Tabulating Machine Company, and The International Time
Recording Company of New York.
In 1924, the company changed its name to International Business Machines
Corporation.
In 1981, the company introduced the IBM Personal Computer or PC, allowing the use
of computers in schools, homes and businesses. Components for the computer were
sourced from outside the company. The processor chip came from Intel and the
operating system, called DOS (Disk Operating System), came from Microsoft.
The IBM token-ring local area network, introduced in 1985, permitted personal
computer users to exchange information and share printers and files within a building
or complex.
IBM introduced the ThinkPad in 1992, the first in a series of notebook computers to be
manufactured by the company. In 1995, IBM acquired Lotus Development and Tivoli
Systems. In 1997, IBM demonstrated computing’s potential with Deep Blue, a 32node IBM RS/6000 SP computer programmed to play chess on a world class level.
In 2002, IBM acquired PWC Consulting, the global management consulting and
technology services unit of PriceWaterhouseCoopers. IBM sold most of its hard disk
drive operations to Hitachi in 2002. The sale involved the creation of a joint venture
called Hitachi Global Storage Technologies, which was 70%-owned by Hitachi.
IBM acquired Rational Software in February 2003. Rational Software was a provider
of open, industry standard tools, best practices and services for developing business
applications and building software products and systems.
In November 2003, Microsoft announced that it would be using IBM chips in its next
generation Xbox game and consumer electronics devices. In the same month, IBM
bought Productivity Solutions, a maker of automated self-checkout software used in
retail and grocery stores. IBM acquired Green Pasture Software, a privately-held
provider of document management software in December 2003.
In March 2004, IBM acquired the Australian and New Zealand operations of network
services integrator Logicalis Group. This was followed by the announcement of plans
to acquire Daksh, India’s third largest business outsourcing company.
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IBM Corporation
History
In April 2004, IBM completed the acquisition of Trigo Technologies. Trigo’s product
information management capabilities and technology were integrated into the IBM
software group. Later in the same month, IBM acquired the business continuity
services unit of Schlumberger.
In June 2004 the company acquired Candle Corporation, a service provider. The
company was integrated into IBM’s software group. In July 2004 the company
acquired Alphablox.
During December 2004, IBM sold its PC hardware division to Lenovo of China and
acquired KeyMRO, a French Internet-based procurement service firm, for an
undisclosed sum.
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IBM Corporation
Major Products & Services
MAJOR PRODUCTS & SERVICES
IBM is world’s largest information technology (IT) company. It offers a variety of
services ranging from business transformation consulting to software, hardware,
fundamental research, financing and the component technologies used to build larger
systems.
The company’s products and services are categorized under the following different
segment divisions:
Products:
Personal computing:
Monitors
Handhelds
Servers:
Blades
Mainframe
Intel processor-based
Midrange
UNIX
Clusters
Storage:
Disk systems
Hard disk drives
Microdrives
Tape systems
SAN, NAS and iSCSI
Storage software
Software:
Application and web development tools
Applications - desktop and enterprise
Application servers
Business integration
Collaboration and knowledge
Database and data management
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IBM Corporation
Major Products & Services
e-learning software
Enterprise messaging
Host transaction processing
Networking
Operating systems
Portals - commerce - personalization
Security
Storage management
Systems management
Wireless - voice - pervasive
Other:
Upgrades, accessories and parts
IBM certified used equipment
Microelectronics
Networking
Printing systems
Point-of-sale systems and kiosks
Services:
Business Consulting Services:
Application management
Business intelligence
Customer relationship management
e-business integration
Financial management
Portals, knowledge and content management
Procurement
Product lifecycle management
Security and privacy
Strategic change
Supply chain and operations
Wireless e-business
Infrastructure Services:
Application management
e-business hosting
Technical support
Continuity and recovery
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IBM Corporation
Major Products & Services
Maintenance
Networking
Security and privacy
Storage
Strategic outsourcing
Wireless
On-Demand Services:
Applications and infrastructure
Business processes
Organization and culture
Other Services:
PC services
Financing
Technology design services
Technical training
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IBM Corporation
Revenue Analysis
REVENUE ANALYSIS
IBM recorded revenues of $89.1 billion during the fiscal year ended December 2003,
an increase of 9.8% over 2002. The increase was primarily attributable to stronger
demand associated with the improving US economy and continued market share
gains. For the fiscal year 2003, revenues from the US, the company’s largest
geographical market, were $38.1 billion, an increase of 4.5% over fiscal 2002.
ABC generates revenues through its five business divisions: global services (47.8% of
total revenues during fiscal 2003), hardware group (31.8%), software (16%), global
financing (3.2%) and enterprise investment/others (1.2%).
Revenues by Division
During the fiscal year 2003, global services recorded revenues of $42.6 billion, an
increase of 17.3% over fiscal 2002. The increase was driven by strategic outsourcing
revenues and the business consulting group revenues as a result of the acquisition of
Pricewaterhouse Coopers.
The software group recorded revenues of $14.3 billion, an increase of 9.2% over fiscal
2002.
The hardware group recorded revenues of $28.3 billion, an increase of 2.9% over
fiscal 2002. The increase was driven by increase in sales of pSeries, xSeries and
zSeries servers and Storage Systems.
The global financing division recorded revenues of $2.8 billion, a decrease of 12.6%
over fiscal 2002. The decline in revenues was due to lower interest rates and decline
in the average asset balance.
The enterprise investment division recorded revenues of $1.1 billion, an increase of
5.3% over fiscal 2002.
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IBM Corporation
Key Employees
KEY EMPLOYEES
Name
Job Title
Board
Total Annual Comp.
Samuel Palmisano
Chairman of the Board and Chief
Executive Board
-
Executive Officer
(Since: 1997)
Cathleen Black
Director
Non Executive Board
-
Kenneth Chenault
Director
Non Executive Board
-
Carlos Ghosn
Director
Non Executive Board
-
Nannerl Keohane
Director
Non Executive Board
-
Charles Knight
Director
Non Executive Board
-
Lucio Noto
Director
Non Executive Board
John Slaughter
Director
Non Executive Board
-
Joan Spero
Director
Non Executive Board
-
Sidney Taurel
Director
Non Executive Board
-
Alex Trotman
Director
Non Executive Board
-
Charles Vest
Director
Non Executive Board
-
Lorenzo Zambrano
Director
Non Executive Board
-
Nicholas Donofrio
Senior Vice President, Technology &
Senior Management
1,820,000 (USD)
Senior Management
2,390,000 (USD)
Senior Management
-
Senior Management
-
Senior Management
-
Senior Management
-
Senior Management
-
Senior Management
-
Senior Management
-
Senior Management
-
Senior Management
-
Manufacturing
(Since: 1995)
Douglas Elix
Senior Vice President, Sales and Distribution
(Since: 2004)
Bruce Harreld
Senior Vice President, Strategy
(Since: 1995)
Jesse Greene
Vice President and Treasurer
(Since: 2002)
Paul Horn
Senior Vice President, Research
(Since: 1996)
Jon Iwata
Senior Vice President, Communications
(Since: 2002)
John Joyce
Senior Vice President, Global Services
(Since: 2004)
John Kelly
Senior Vice President and Group
Executive, Technology Systems and
Technology Group
(Since: 2000)
Abby Kohnstamm
Senior Vice President
(Since: 1998)
Michael Lawrie
Senior Vice President and Group
Executive, IBM Global Sales and Distribution
(Since: 2002)
Edward Lineen
Senior Vice President and General
Counsel
(Since: 2002)
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IBM Corporation
Key Employees
Mark Loughridge
Senior Vice President and Chief
Senior Management
-
Senior Management
-
Senior Management
-
Senior Vice President, Integrated Sup- Senior Management
-
Financial Officer
(Since: 2004)
Randall MacDonald
Senior Vice President, Human
Resources
(Since: 2000)
Steven Mills
Senior Vice President and Group
Executive, Software Group
(Since: 2000)
Robert Moffat
ply Chain
(Since: 2002)
Daniel Donnell
Vice President Assistant General
Senior Management
-
Senior Management
-
Senior Management
-
Senior Management
-
Counsel and Secretary
(Since: 1998)
Linda Sanford
Senior Vice President, Enterprise On
Demand Transformation and Information Technology
(Since: 2000)
Stephen Ward
Senior Vice President and General
Manager, Personal Systems Group
(Since: 2003)
William Zeitler
Senior Vice President and Group
Executive, Systems and Technology
Group
(Since: 2000)
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IBM Corporation
Key Employee Biographies
KEY EMPLOYEE BIOGRAPHIES
Samuel Palmisano
Board: Executive Board
Job Title: Chairman of the Board and Chief Executive Officer
Since: 1997
Age: 52
Mr Palmisano was elected chairman in 2002, and has served as chief executive
officer since 2002. Prior to the current appointment, he was president and chief
operating officer. Mr Palmisano has held a number of positions during his IBM career,
including senior vice president and group executive for IBM’s Enterprise Systems
Group. Prior to that, he was senior vice president and group executive for IBM Global
Services. Mr Palmisano has served as senior vice president and group executive for
IBM’s Personal Systems Group; led IBM’s strategic outsourcing business; and was
president of the Integrated Systems Solutions Corporation (ISSC), an IBM wholly
owned subsidiary, and now part of IBM Global Services. Before joining ISSC, he was
IBM senior managing director of operations for IBM Japan.
Cathleen Black
Board: Non Executive Board
Job Title: Director
Ms Black is president of Hearst Magazines.
Kenneth Chenault
Board: Non Executive Board
Job Title: Director
Mr Chennault is chairman and chief executive officer of American Express Company.
Carlos Ghosn
Board: Non Executive Board
Job Title: Director
Mr Ghosn is co-chairman, president and chief executive officer of Nissan Motor
Company.
Nannerl Keohane
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IBM Corporation
Key Employee Biographies
Board: Non Executive Board
Job Title: Director
Mr Keohane is president of Duke University.
Charles Knight
Board: Non Executive Board
Job Title: Director
Mr Knight is chairman of Emerson Electric Company.
Lucio Noto
Board: Non Executive Board
Job Title: Director
Mr Noto is managing partner of Midstream Partners.
John Slaughter
Board: Non Executive Board
Job Title: Director
Mr Slaughter is president and chief executive officer of National Action Council for
Minorities in Engineering.
Joan Spero
Board: Non Executive Board
Job Title: Director
Mr Spero is president of Doris Duke Charitable Foundation.
Sidney Taurel
Board: Non Executive Board
Job Title: Director
Mr Taurel is chairman, president and chief executive officer of Eli Lilly and Company.
Alex Trotman
Board: Non Executive Board
Job Title: Director
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IBM Corporation
Key Employee Biographies
Mr Trotman is retired chairman of Imperial Chemical Industries.
Charles Vest
Board: Non Executive Board
Job Title: Director
Mr Vest is president of Massachusetts Institute of Technology.
Lorenzo Zambrano
Board: Non Executive Board
Job Title: Director
Mr Zambrano is chairman and chief executive officer of CEMEX, S.A. de C.V.
Nicholas Donofrio
Board: Senior Management
Job Title: Senior Vice President, Technology & Manufacturing
Since: 1995
Age: 58
Mr Donofrio leads the strategy for developing and commercializing advanced
technology across IBM’s global operations. He also heads the IBM Technology Team,
is a member of the IBM Strategy Team, and is chairman of the board of governors for
the IBM Academy of Technology. Mr Donofrio joined IBM in 1967 and spent the early
part of his career in integrated circuit and chip development as a designer of logic and
memory chips. He held numerous technical management positions and, later,
executive positions in several of IBM’s product divisions.
Bruce Harreld
Board: Senior Management
Job Title: Senior Vice President, Strategy
Since: 1995
Age: 53
Mr Harreld leads IBM’s Strategy Team and is a member of the Technology Team. Prior
to joining IBM in 1995, Mr Harreld was President of Boston Chicken and an adjunct
professor at Northwestern University’s Kellogg Graduate School of Business
Administration. He held senior positions at Kraft General Foods, and began his career
at The Boston Consulting Group.
Jesse Greene
IBM Corporation
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IBM Corporation
Key Employee Biographies
Board: Senior Management
Job Title: Vice President and Treasurer
Since: 2002
Age: 58
Mr Greene was previously with Compaq Computer Corporation (now a part of
Hewlett-Packard Company), as senior vice president and chief financial officer until
joining IBM in 2002. Before joining Compaq, he served as corporate senior vice
president and director of business strategy and information technology at Eastman
Kodak Company. Before joining Kodak, Mr Greene spent 23 years at IBM in a variety
of financial positions including assistant treasurer.
Paul Horn
Board: Senior Management
Job Title: Senior Vice President, Research
Since: 1996
Age: 57
Dr Horn was named senior vice president of the IBM Corporation and director of
research, in 1996. He has held key management positions in science,
semiconductors, and storage. Prior to his present appointment, Dr Horn was vice
president and lab director of the Research Division’s Almaden Research Center in
California. Prior to joining IBM in 1979, he was a professor of physics in the James
Franck Institute and the Physics Department and at the University of Chicago.
Jon Iwata
Board: Senior Management
Job Title: Senior Vice President, Communications
Since: 2002
Age: 41
Mr Iwata is a member of the IBM Worldwide Management Council and the IBM
Strategy Team. He is also a member of IBM’s Global Marketing Board and its Privacy
Executive Council. He joined the communications function of IBM in 1984 at the
company’s Almaden Research Center. He was named director of corporate public
relations in 1994 and was appointed a vice president the following year.
John Kelly
Board: Senior Management
Job Title: Senior Vice President and Group Executive, Technology Systems and
Technology Group
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IBM Corporation
Key Employee Biographies
Since: 2000
Age: 50
Dr Kelly was general manager of IBM’s Microelectronics Division prior to assuming
the current role. In 1990, he was named director of IBM’s Semiconductor Research
and Development Center. In 1994, he was appointed vice president of business
process reengineering for the Microelectronics Division. In 1995, he was named vice
president of systems, technology and science for the IBM Research Division. The
following year, he was named vice president of strategy, technology and operations
for the Microelectronics Division. In 1997, he was appointed vice president of server
development (from work stations to supercomputers) for IBM. In 1999, Dr Kelly
became general manager of the Microelectronics Division. Dr Kelly is a board
member and former chairman of the Semiconductor Industry Association, a Fellow of
the Institute of Electrical and Electronics Engineers, and member of the Union College
Board of Trustees.
Abby Kohnstamm
Board: Senior Management
Job Title: Senior Vice President
Since: 1998
Age: 50
Ms Kohnstamm is a member of the Strategy Team and the Executive Committee.
Prior to joining IBM, she held a number of senior marketing positions at American
Express, beginning in 1979. She also served as executive assistant to the president of
American Express in 1986 and 1987. Her last position at American Express was
senior vice president, Cardmember marketing. Abby Kohnstamm is a member of the
following boards: Tiffany & Company, The Association of National Advertisers, the
Board of Trustees and the Board of Overseers for Arts and Sciences at Tufts
University, and the Board of Overseers at New York University’s Stern School of
Business.
Michael Lawrie
Board: Senior Management
Job Title: Senior Vice President and Group Executive, IBM Global Sales and
Distribution
Since: 2002
Age: 50
Mr Lawrie was serving as General Manager, Europe Middle East Africa (EMEA)
beginning in 1998, prior to assuming his current role. Mr Lawrie began his IBM career
in 1977. Since then, he has held a number of sales, marketing, development and
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IBM Corporation
Key Employee Biographies
financial management positions, with experience in the Asia Pacific area as well as
EMEA. In 1995 he was named vice president, software, for Asia Pacific; then served
as vice president, industries. In 1997, he was appointed general manager, Personal
Software Products, and later headed the Network Computing Software Division.
Edward Lineen
Board: Senior Management
Job Title: Senior Vice President and General Counsel
Since: 2002
Age: 63
Mr Lineen joined IBM in 1970 as an attorney on its litigation staff. He subsequently
held a variety of legal positions, including counsel for IBM’s Sales and Distribution
Division in 1983, group counsel for IBM Communications and Technology Group in
1985, and general counsel of IBM’s Personal Computer Group in 1989. He was
named senior vice president and general counsel in 2002, after serving as vice
president and assistant general counsel for products and intellectual property. He is
executive leader for IBM’s People with Disabilities Executive Task Force and also
supports Jawonio, an organization which advances the independence and well-being
of the disabled.
Randall MacDonald
Board: Senior Management
Job Title: Senior Vice President, Human Resources
Since: 2000
Age: 55
Mr MacDonald joined IBM in 2000 as senior vice president, human resources. Prior to
joining IBM, he was the executive vice president of human resources and
administration for GTE (now Verizon Communications). Mr MacDonald was with GTE
for 17 years holding positions of increasing responsibility. Before joining GTE, he held
human resources positions at Ingersoll-Rand Company and Sterling Drug. He serves
on the board of directors of Covance. He is a member of Cornell University’s Center
for Advanced Human Resources Study and is chair of its executive board; the
Cowdrick Group; the Personnel Roundtable; the HR Policy Association and serves on
its board of directors as vice chairman.
Steven Mills
Board: Senior Management
Job Title: Senior Vice President and Group Executive, Software Group
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IBM Corporation
Key Employee Biographies
Since: 2000
Age: 52
Mr Mills was appointed senior vice president and group executive, IBM Software, in
2000. He was general manager of IBM Software Group Strategy and Solutions. He
joined IBM in 1974 as a sales trainee in New York City and was a marketing
representative until 1980. In 1981, he joined the business planning staff of the Data
Processing Division and became manager of that function a year later. In 1984, he
was named administrative assistant to the IBM vice president and assistant group
executive of plans and controls in the information systems group. He became director
of planning in the Information Systems and Communications Group in 1985. He
became director of financial planning at corporate headquarters in 1988.
Robert Moffat
Board: Senior Management
Job Title: Senior Vice President, Integrated Supply Chain
Since: 2002
Age: 47
Mr Moffat was senior vice president and group executive of IBM’s Personal and
Printing Systems Group, prior to his current appointment. Before that, he was vice
president, finance and planning for the Enterprise Systems Group. Mr Moffat joined
IBM in 1978, and has spent the majority of his career in the PC business. Positions
held at IBM include assistant general manager, finance, planning, and business
support for the IBM PC Company in Europe, controller of customer fulfillment, and
vice president of finance and planning. He currently serves as IBM’s partnership
executive for Aetna, Bell South, Carolina Power & Light, Ingram Micro, Progress
Energy and information technology product distributors CDW and Insight Direct.
Linda Sanford
Board: Senior Management
Job Title: Senior Vice President, Enterprise On Demand Transformation and
Information Technology
Since: 2000
Age: 51
Ms Sanford was senior vice president & group executive, IBM Storage Systems
Group, prior to assuming her current role. Prior to assuming that position, Ms Sanford
headed Global Industries. Before that, she was general manager of IBM’s S/390
Division, which develops, manufactures and markets large-enterprise systems. She
has held a number of executive positions at IBM, including executive assistant to the
chairman of the board and director of IBM Networking Systems. Ms Sanford serves on
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Key Employee Biographies
the board of directors of ITT Industries, St. John’s University, and Rensselaer
Polytechnic Institute. She also serves on the board of directors of the Partnership for
New York City, The Business Council of New York State, and the Westchester Arts
Council.
Stephen Ward
Board: Senior Management
Job Title: Senior Vice President and General Manager, Personal Systems Group
Since: 2003
Age: 48
Mr Ward returned to PSG in 2003. Before assuming his current position, Mr Ward also
served as IBM’s chief information officer and vice president, Business Transformation.
Immediately prior to rejoining the Personal Systems Group, he was general manager
of IBM’s Global Industrial Sector. In the mid-1990s, he served as vice president,
information technology, and was later named general manager, IBM ThinkPad, in the
IBM Personal Computer Company. Mr Ward has held a series of product
development, manufacturing management, and senior management positions at IBM.
He first joined the company in Tucson, Arizona, as an engineer in the Storage
Products Division. He held various management positions in manufacturing,
production control, and project development for disk drive, tape, and optical storage
projects and software development, and was also an assistant to the IBM chairman.
Mr Ward is a member of the boards of e2open and Carpenter Technology
Corporation.
William Zeitler
Board: Senior Management
Job Title: Senior Vice President and Group Executive, Systems and Technology
Group
Since: 2000
Age: 56
Mr Zeitler was senior vice president and group executive for IBM’s Server Group, prior
to his current appointment. He joined IBM in 1969 as a programmer in White Plains.
Mr Zeitler held several executive positions in the marketing and services division
before being named vice president, marketing AS/400. In 1996, Mr Zeitler was named
general manager, AS/400. During the next three years he was appointed as general
manager, Server Brand Management, and general manager of Worldwide Software
Sales and Marketing. In 2000 he became general manager of IBM Enterprise Servers
where he remained until he assumed the role of senior vice president, and group
executive IBM Server Group in 2000.
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Locations & Subsidiaries
LOCATIONS & SUBSIDIARIES
IBM Canada Limited
Tivoli Software
3600 Steeles Avenue, East
11400 Burnet Road
EastMarkham
Austin
Ontario
TX 78758
L3R 9Z7
USA
CAN
T: 512-436-8000
T: 905-316-5000
F: 512-794-0623
F: 905-316-2535
IBM Hardware
International Business Machines Corporation
Rte. 100
Microelectronics
Somers
2070 Rte, 52
NY 10589
Hopewell Junction
USA
NY 12533
T: 1 914 499 1900
USA
F: 1 914 765 7382
T: 800-426-4968
Hitachi Global Storage Technologies
IBM Global Services
5600 Cottle Road
New Orchard Rd.
San Jose
Armonk
San Jose
NY 10504
USA
USA
T: 800-801-4618
T: 1 914 499 1900
F: 408-256-6770
F: 1 914 765 7382
IBM Software
Lotus Development Corporation
1133 Westchester Ave.
1 Rogers Street
White Plains
Cambridge
NY 10604
MA 02142
USA
USA
T: 1 914 499 1900
T: 617-577-8500
F: 1 914 765 7382
F: 617-693-1299
Rational Software Corporation
IBM United Kingdom Limited
18880 Homestead Road
76 Upper Ground
Cupertino
London
CA 95014-0721
SE1 9PZ
USA
GBR
T: 408-863-9900
T: +44-020-7202-3000
F: 408-863-4120
F: +44-020-7927-4464
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Company View
COMPANY VIEW
The following statement was made by Samuel J. Palmisano, Chairman, President and
Chief Executive Officer of IBM Corp. The statement was taken from the company’s
2003 annual report.
Last year, I told you that we were repositioning IBM for leadership, in all the ways that
a business can lead. I described how IBM defines leadership, along with our plans to
achieve it. And I said that I believed the results of this repositioning would roll out in
meaningful ways in the years and decades to come.
Twelve months later, it’s clear that the future we envisioned is arriving, and more
rapidly than we expected. This is in part because of the hopeful signs we’re seeing of
economic recovery, with the promise of renewed business investment in information
technology. It’s partly because of the rapid adoption of our on demand strategy by
clients, partners and the overall IT industry. But it’s also something more - something
specific to this company and its people, and something longer lasting than a particular
economic cycle. IBM today is a very different enterprise than it was just a few years
ago. Our business model has been quietly but substantially reshaped to capitalize on
the most promising growth and profit opportunities in the market. Even more important
for the long term, our operations and culture are being transformed as well. We are
now focused with an intensity and unity I haven’t seen since the heyday of the
mainframe. As a result, we are poised to take IBM to the next level, and to redraw and
extend the boundaries of the IT industry.
A very good year, for a very different company
IBM’s 2003 is the kind of year on which it’s gratifying to look back - both for our overall
achievements and for the strong momentum with which we ended the year. Our
revenue from continuing operations, at $89.1 billion (a company record), increased by
10 percent. Earnings from continuing operations were $7.6 billion compared to $5.3
billion in 2002, which included $1.6 billion of after-tax charges for second and fourth
quarter 2002 actions. We continued to gain market share across all our core
businesses. IBM today is the market leader in servers, middleware, business
transformation services and strategic outsourcing.
Highlights for the year included revenue growth in every server segment, a
WebSphere middleware platform that grew 12 percent and gained market share, and
14 percent growth in strategic outsourcing.
Our success with clients was evident in faster-thanmarket growth for five of IBM’s six
industry sectors. For example, in the public sector, which includes our relationships
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Company View
with governments and health care providers, we grew by 15 percent; in
communications by 8 percent; in industrial by 14 percent; and in financial services by
13 percent. We again generated excellent cash flows. After investing $5.1 billion in
R&D, we had $12.7 billion in cash available for investment and distribution to
shareholders. We invested $3.9 billion of that in net capital expenditures and $1.8
billion in acquisitions to strengthen our portfolio. And we were able to return $5.4
billion to investors-$4.3 billion through share repurchase and $1.1 billion through
dividends-ending the year in a strong cash position, with $7.6 billion, including
marketable securities.
Overall, despite facing serious challenges, the IBM team executed with discipline. And
indications for the year ahead are encouraging, including a strong demand pipeline
(enlarged by more than $17 billion of services signings in the fourth quarter) and a
growing number of alliances with business partners and software companies
committed to leading with IBM’s open, standards-based platforms.
All in all, a very good performance. But is it sustainable? Can we, in fact, improve
upon it and keep growing for the foreseeable future? I believe so, and let me tell you
why.
Recommitting to high value
For the past couple of decades, if you were to look at IBM’s performance in any given
year or over several years, what would you see? You’d see a very large global
company in which some businesses are growing rapidly, some are flat and some are
declining. Add it up, and it would average out to steady profitability - but perhaps
uninspiring growth. For people with comparatively short memories, this might be the
only IBM they’d ever known. And it would be legitimate to ask if the company is
capable of more.
The answer is: We certainly are. In fact, over most of our nearly 100-year history, IBM
was consistently a company that outperformed others in our markets and generated
superior returns. And that was because we were singularly focused on leading, and
most often creating and defining, the high-value spaces in our industry.
Of course, with a company of IBM’s breadth and global presence, there are always
ups and downs that result from economic cycles, product and technology transitions,
and sometimes issues of execution. But it’s also apparent that, somewhere along the
line, we became more focused on defending our existing leadership position than on
creating the next one. We weren’t particularly bold or imaginative in getting into new
markets or developing new businesses, products and services, even when our
strategic analyses indicated that something new was coming. And, just as important,
we hesitated to reinvent or get out of businesses that no longer represented high
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IBM Corporation
Company View
value for either clients or shareholders. In a word, we lost sight of IBM’s mission, of
what had always set us apart. Well, we’ve regained our focus now. IBM is an
innovator - in every dimension of that word. We know that IBM and IBMers are at their
best when they create value that our clients cannot get from anyone else.
That means we will provide leading-edge technology, services, expertise and
intellectual capital, and will integrate these capabilities for each client to provide them
with competitive advantage. We commit to that. We commit to innovating to deliver
client success. And that is something for which clients are willing to pay a premium.
This may seem like a truism, but it actually commits us to a very focused strategy,
based on a choice between the two primary sources of growth and profit in IT today:
the high-volume, undifferentiated product play; and the high-value, innovation and
integration play, focused on the enterprise. It is this high-value space we have chosen
to lead.
We believe this is the right choice for IBM and our investors. By focusing on this
space, we believe we can, on a sustainable, long-term basis, generate superior
returns compared to the overall IT industry, command leading share position in our
selected businesses, outperform the average of the S&P 500 on return on invested
capital, and produce strong cash flows.
In recent years, we’ve taken many steps to seize this position. Before I talk about
those steps, I want to spend a minute on what constitutes "high value" for clients
today, and what will do so for the foreseeable future. It’s embodied in what we call the
on demand enterprise. And that, in turn, is all about a new kind of integration.
The next wave of integration
After two decades of disaggregation, the IT industry is re-integrating. This is being
driven simultaneously by a major shift in client demand, and a major shift in
technology.
Companies have come to realize that if they’re going to respond rapidly and
effectively to today’s volatile marketplace, they need to do more than Web-enable
discrete systems, processes or business units. They need to pull together all of the
systems they’ve already got and integrate them securely with their core business
activities-horizontally, across not just their whole company but their entire value chain,
from customers to suppliers. This is an on demand enterprise.
Becoming one is dauntingly hard to pull off. It requires both the end-to-end integration
of the technology- which niche product vendors simply cannot do - and the integration
of technology with business processes. This in turn requires deep business
knowledge and industry expertise that few traditional technology companies have,
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Company View
and significant technical knowledge and research strengths that few consulting firms
possess.
Integration is also an emerging force in core technology and computing architectures.
To cite one example, advances in semiconductor devices have been largely propelled
by increasing the clock speed of the microprocessor chip; this is like revving up the
RPM of a car engine. But while advances in raw speed are continuing apace, they are
no longer enough to increase chip and overall system performance. For one thing,
chips have become so densely packed with transistors that they produce more heat
than can be cost-effectively dissipated.
The solution is integration - putting multiple, often less-than-top-speed processors on
the same chip, along with additional functions like fast memory and high performance
input/output. This is the approach IBM engineers have taken in developing our Blue
Gene supercomputer. Integration of this sophistication is beyond the reach of most
chip and systems companies.
It requires expertise not just in semiconductors but in advanced systems architecture,
custom logic design, operating systems and software tools. This is the kind of
expertise that IBM has built up over decades, and it is not easily replicated. And that’s
why technology leaders like Sony, Cisco, Apple and QUALCOMM have partnered with
IBM for advanced technology - and why last year Microsoft licensed IBM’s
microprocessor technology for use in its next-generation Xbox game console.
Bulking up in on demand
Many IT companies will struggle with this world that is dawning - with the need to
choose between open and proprietary, between serving consumers and enterprises,
between redistributing other people’s intellectual capital and innovating. This is not
about making pronouncements or promises. A company cannot be all things to every
client, every partner and every investor.
For our part, we’ve decided. The two parallel trajectories of integration - in client
demand and in what the technology requires - play directly to IBM’s historic strengths.
However, even with everything IBM brought to this table, we needed more. That’s why
we’ve made acquisitions such as PricewaterhouseCoopers Consulting (PwCC),
Rational software and 19 other companies in the past two years. And it’s why we reset
our priorities in R&D to develop more technologies and services specifically for client
needs in the on demand era.
On demand integration is also why we’ve placed a huge bet on standards, from the
Internet protocols and Linux to grid computing and Web services. Without open
technical interfaces and agreed-upon standards, even integration within a single
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Company View
enterprise would remain a gargantuan task. And forget about integration with the
other companies, business processes, applications, pervasive computing devices,
laws, regulations, customs and cultures that make up the ever-more-global
marketplace of the 21st century.
An IT company’s position on open standards - not just its rhetoric, but its actions - is a
clear indicator of whether it faces forward or backward, is serving the needs of clients
or protecting its market position.
In addition to the opportunities I’ve described, our move into on demand has opened
up some very large businesses beyond the frontiers of the traditional IT industry opportunities that remain out of reach for most of our competitors.
One promising example is Business Transformation Outsourcing (BTO), which was
not even part of the industry lexicon 18 months ago. In BTO engagements, IBM
becomes responsible for transforming - and actually providing - a client’s business
process in areas such as human resources, procurement, customer care, and finance
and administration. Thanks to the acquisition of PwCC and the formation of IBM
Business Consulting Services, we generated nearly $3 billion in BTO signings during
the fourth quarter of 2003 alone. To give a rough idea of the potential here, the current
size of businesses’ outsourced spending on sales, marketing, logistics, finance, HR
and all other administrative processes is about $1 trillion a year. Of that, there is an
opportunity in excess of $1oo billion in the BTO areas we are pursuing. We are
committed to extend our leadership position in BTO in 2004.
Remaking IBM
To some people, it may seem bold to have made all these moves during the worst
market ever seen in the IT industry. But I don’t believe it was particularly risky,
because it was driven by client demand and the realities of the technology. What’s
really important for you to understand is that our commitment to leadership in the highvalue spaces and in innovation isn’t a mission statement. It’s a business model. And it
commits us to continual reinvention of IBM itself.
Over the past several years, we’ve taken aggressive steps to remix our business so
that we are positioned for long-term leadership and new opportunities in the highvalue enterprise space, however that changes.
We have, since 1997:
-exited or reduced our presence in such areas as application software, hard-disk
drives, networking hardware, low-end printers and retail PCs - which we estimate
have declined from 31 percent to 25 percent of IT industry revenue;
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Company View
-entered or increased our presence in distributed middleware, non-hardware
maintenance services, Intel-based servers and mobile PCs - which have grown from
40 percent of industry revenue to 46 percent, and are expected to continue
outperforming the overall IT market;
-increased our revenue in business and technology consulting services, infrastructure
services and infrastructure software - which generate superior long-term revenue
growth, profit, cash and return on invested capital - from 48 percent to 64 percent of
our total, with expectations of increasing that going forward;
-grown aggressively in emerging markets; in China, India, Russia and Brazil we
generated revenue of $3 billion last year and saw double-digit growth;
-upped our rate of new account growth, giving us a total of 730,000 large, medium and
small enterprise clients - with IBM’s small-and-medium business segment alone
growing 14 percent to outperform the market in 2003, adding $2.4 billion in revenue;
and
-incubated successful new high-growth businesses such as life sciences, digital
media, application management services, e-business hosting services, Linux and
pervasive computing - each of which has already become a $1 billion-plus revenue
stream. In the areas we’re targeting within life sciences and digital media alone, thirdparty analysts see more than $60 billion of market opportunity by 2006.
While we do all this, we’re continuing relentlessly to improve execution. By becoming
an on demand business ourselves, we’ve made big strides in product cycle time, new
product introduction, sales productivity and simplification of our processes. Our
inventories are at their lowest level in more than 20 years, and our continuing
progress in integrating our supply chain took $7 billion of cost out of the business in
2003, surpassing what we achieved in 2002.
Business value, and a company’s values
As I mentioned last year, we’ve been spending a great deal of time thinking, debating
and determining the fundamentals of this company. It has been important to do so.
When IBMers have been crystal clear and united about our strategies and purpose,
it’s amazing what we’ve been able to create and accomplish. When we’ve been
uncertain, conflicted or hesitant, we’ve squandered opportunities and even made
blunders that would have sunk smaller companies. It may not surprise you, then, that
last year we examined IBM’s core values for the first time since the company’s
founding. In this time of great change, we needed to affirm IBM’s reason for being,
what sets the company apart and what should drive our actions as individual IBMers.
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Company View
Importantly, we needed to find a way to engage everyone in the company and get
them to speak up on these important issues. Given the realities of a smart, global,
independent-minded, 21st-century workforce like ours, I don’t believe something as
vital and personal as values could be dictated from the top. So, for 72 hours last
summer, we invited all 319,000 IBMers around the world to engage in an open "values
jam" on our global intranet. IBMers by the tens of thousands weighed in. They were
thoughtful and passionate about the company they want to be a part of. They were
also brutally honest. Some of what they wrote was painful to read, because they
pointed out all the bureaucratic and dysfunctional things that get in the way of serving
clients, working as a team or implementing new ideas. But we were resolute in
keeping the dialog free-flowing and candid. And I don’t think what resulted - broad,
enthusiastic, grass-roots consensus - could have been obtained in any other way.
In the end, IBMers determined that our actions will be driven by these values:
-Dedication to every client’s success-Innovation that matters, for our company and for
the world
-Trust and personal responsibility in all relationships I must tell you, this process has
been very meaningful to me. We are getting back in touch with what IBM has always
been about - and always will be about - in a very concrete way. And I feel that I’ve
been handed something every CEO craves: a mandate, for exactly the right kinds of
transformation, from an entire workforce.
Where will this lead? It is a work in progress, and many of the implications remain to
be discovered. What I can tell you is that we are rolling up our sleeves to bring IBM’s
values to life in our policies, procedures and daily operations.
I’ve already touched on a number of things relating to clients and innovation, but our
values of trust and personal responsibility are being managed just as seriously - from
changes in how we measure and reward performance, to how we equip and support
IBMers’ community volunteerism.
Our values underpin our relationships with investors, as well. In late February, the
board of directors approved sweeping changes in executive compensation. They
include innovative programs that ensure investors first receive meaningful returns - a
10 percent increase in the stock price - before IBM’s top 300 executives can realize a
penny of profit from their stock option grants. Putting that into perspective, IBM’s
market value would have to increase by $17 billion before executives saw any benefit
from this year’s option awards. In addition, these executives will be able to acquire
market- priced stock options only if they first invest their own money in IBM stock. We
believe these programs are unprecedented, certainly in our industry and perhaps in
business.
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Company View
Clearly, leading by values is very different from some kinds of leadership
demonstrated in the past by business. It is empowering, and I think that’s much
healthier. Rather than burden our people with excessive controls, we are trusting them
to make decisions and to act based on values - values they themselves shaped. To
me, it’s also just common sense. In today’s world, where everyone is so
interconnected and interdependent, it is simply essential that we work for each other’s
success. If we’re going to solve the biggest, thorniest and most widespread problems
in business and society, we have to innovate in ways that truly matter. And we have to
do all this by taking personal responsibility for all of our relationships - with clients,
colleagues, partners, investors and the public at large. This is IBM’s mission as an
enterprise, and a goal toward which we hope to work with many others, in our industry
and beyond.
Playing offense
Put it all together - a more focused business model, an industry shift that plays to our
strengths, bets that are paying off in the near term, and a workforce that is united and
impatient to become the great company we all aspire to be - and I feel good about IBM
and our prospects.
Without the prod of fear or of a "burning platform," we’ve begun a substantial
transformation of our company. For the first time in a very long time - probably since
my early days with IBM 30 years ago - I’m seeing a company ready to focus more on
opportunities than on threats, more intent on setting the agenda than on reacting to
the moves of others. Our deep-seated optimism - a fundamental belief that IBMers
have always possessed in progress, science and the improvability of the human
condition - is reasserting itself. IBMers are ready to reclaim a position of leadership in our industry and in the larger world of business. Which is a very exciting place to be.
For me and my colleagues, it’s just terrific to be part of an energized IBM company
that is once again ready to play some offense.
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IBM Corporation
SWOT Analysis
SWOT ANALYSIS
IBM is an information technology (IT) company. It is organized into five business
divisions; global services, hardware segment, software segment, global financing and
enterprise investments. IBM has operations in over 160 countries worldwide including
the UK, Japan, Italy, Germany, France, China and Canada. The company maintains a
clear market leadership in its key market segments but the low cost proposition of
offshore consulting companies can adversely affect the company’s market share.
Strengths
Weaknesses
Market leadership
Impact of pension and benefit costs
Large number of patents
Legal proceedings
Focused business model
Loss of a major customer
Opportunities
Threats
Growth drivers in hardware, software and global services
Offshore consulting companies
Increased financial flexibility
Low growth in hardware segment and professional services
Market opportunity in government sector
Investigation by SEC
Strengths
Market leadership
IBM is the world’s largest IT company and the largest business and technology
services provider. The company is also the world’s largest IT financier. IBM benefits
from cost reductions and has the ability and power to attract specialized staff, thanks
to its leading position in the market. IBM is a globally recognized brand with well
diversified operations across product categories and geographical segments. In the
software market, IBM is second only to Microsoft and is the leader in the server
segment. The company is also the third largest vendor in the worldwide PC market. It
clearly towers over all other IT companies in the markets in which it operates.
Technology base
IBM’s technical capabilities differentiate it from its competitors. IBM annually spends
approximately $5 billion for R&D, including capitalized software costs, focusing its
investments in high-growth opportunities. The company’s technology innovations
include eBusiness, initiatives to support Linux, middleware software products,
autonomic computing, advanced semiconductor technology, and other technologies
supporting On Demand. As a result of innovations, IBM was once again awarded
more US patents in 2003 than any other company. This marks the 11th year in a row
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SWOT Analysis
that IBM achieved this distinction. The company’s strong technology base enhances
the product portfolio and service capabilities of IBM besides adding to the intellectual
capital of the company.
Focused business model
Over the past decade, IBM has exited or greatly de-emphasized its involvement in
consumer markets and divested itself of other non-core businesses to concentrate on
the enterprise market. The enterprise market represents approximately two-thirds of
the IT industry’s revenue, as well as twice the growth and three times the profits
compared to consumer areas of the industry. As a result, IBM has made acquisitions
and invested in emerging business opportunities important to its enterprise clients.
The company acquired Lotus Development and Tivoli Systems to enhance its
capabilities in the software sector.
Acquisition of PWC Consulting, established the company in the global management
consulting and technology business. IBM sold most of its hard disk drive operations to
Hitachi, thus exiting a low margin business. In December 2004, IBM sold its PC
hardware division to Lenovo. The PC division was making losses and was
characterized with lower margins than the rest of the IT business. The company has
consistently focused its business model towards high margin business opportunities
in IT, withdrawing from low margin or non-performing sectors of the business.
Weaknesses
Impact of pension and benefit costs
IBM has a variety of pension and benefit programs for its employees, including
defined benefit plans for its US employees such as the Personal Pension Plan (PPP)
and the Supplemental Executive Retention Plan (SERP); and defined contribution
plans such as the IBM Savings Plan. In addition to pensions and retirement plans,
IBM maintains non-pension post-retirement benefits such as the Future Health
Account (FHA), mainly for its US employees.
At more than $70 billion, the benefit obligations for these plans are enormous, and
small changes in investment performance or the accounting assumptions used to
calculate the cost of these plans on an accrual basis can have significant effects on
cash flow and reported earnings. For instance, in the fourth quarter of 2002, IBM fully
funded the qualified portion of its PPP, as measured by its Accumulated Benefit
Obligation (ABO), requiring a contribution of $4.0 billion. Operating cash flow in 2002
from changes in pension assets was a negative $2.5 billion. Due to the high pension
and benefit costs, small fluctuations have a large impact on income.
Legal proceedings
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IBM Corporation
SWOT Analysis
The company faces litigation from competitors, mainly over disputes concerning
intellectual property rights. Lawsuits in this area include patent and copyright
infringement suits against and from Compuware and the SCO Group. IBM is also
defending numerous class-action suits, mainly workers compensation and healthrelated suits, and the company is being sued in a class-action lawsuit over alleged
health violations at its Fishkill manufacturing site. The company is not only incurring
significant legal expenses as a result of these lawsuits but also runs the risk of
potentially damaging judgments in the pending cases
Loss of a major customer
Financial services firm JP Morgan Chase cancelled a groundbreaking £2.8 billion
outsourcing deal with IBM which was intended to run for seven years. JP Morgan
Chase’s merger with Bank One, announced earlier in 2004, would give it greater
capacity to manage its IT infrastructure, and it would bring its support staff in-house.
JP Morgan Chase will wind down its existing contract with IBM in early 2005 and will
bring back 4000 employees and contractors who transferred to IBM when the deal
was signed in 2002.
At the time the deal was signed, the seven-year outsourcing contract was described
as the largest computer services deal in the financial services sector ever. The loss of
a large financial services client like JP Morgan Chase would adversely affect the
company’s revenues and earnings. This also indicates a yet to be established, but
probable, trend to move IT support services in-house.
Opportunities
Growth drivers in hardware, software and global services
The market for hardware, software and IT services is estimated to reach $1 trillion by
2006, up from $867 billion in 2003. The projected annual growth rate for the combined
market opportunity averages 6%. The company is well positioned to benefit from
drivers in each of its business segments: in hardware, investment in new data centers
and PC replacements; in software, Linux and the On Demand strategy; and in global
services, outsourcing and managed services. In hardware, IBM is expected to
continue to increase its market share growth in the server market through On Demand
data-center projects. Server segment is currently estimated to contribute 32% to total
revenues. Growing corporate demand and new products are expected to increase
server revenues. High-end hardware sales would also help drive services, software
and financing sales.
Increased financial flexibility
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IBM Corporation
SWOT Analysis
The company sold its PC business to Lenovo in December 2004. The company sold
its PC business due to the low margins of this segment and the company’s inability to
compete with Dell and HP in the business. The sale of the PC business has also
enhanced the company’s focus on consulting and enterprise services and supports
the company’s mission to alienate itself from consumer businesses. The company can
use the cash consideration for investments in its core business segments and to
enhance its service capabilities. The acquisition has also led to IBM acquiring an
18.9% stake in the new entity (IBM-Lenovo) which is the third largest PC
manufacturer in the world. With the divestment of the PC business IBM can now focus
on its high margin businesses.
Market opportunity in government sector
An aging government work force will spur a huge market for software and applications
that help people with disabilities use computers and other information technologies.
Due to an aging baby boomer population, as well as a dearth of younger
replacements, agencies will come to rely on aging workers who may suffer from
fading eyesight, encroaching deafness and thought capacities diminished by strokes.
IBM predicts that by 2005 the worldwide government market for accessibility tools and
services will reach $109 billion. Although Section 508 of the Rehabilitation Act of 1973
is already generating some business for IBM, the company would be able to have
access to a far greater potential market in equipping agencies for their aging work
forces.
Threats
Offshore consulting companies
There has been a surge of India based tech consulting companies that are entering
US with a stronger and more consolidated base in India. Home grown, Indian
companies like Wipro, Infosys and TCS are benefiting from their unique cost
proposition. Infosys launched a US subsidiary in early 2004 and clocked global
revenues in excess of $1 billion in 2004, a growth of 40% over 2003. Wipro and TCS
have also been acquiring IBM’s market share in the consulting business on account of
their low cost India based operations. Expansion of their business and their ability to
win over IBM consulting division’s customers, can adversely affect the company’s
business.
Low growth in hardware segment and professional services
Approximately two-thirds of IBM’s revenue comes from markets forecasted to grow
less than 5% over the next five years. The professional services subsegment of global
services was 36% of IBM’s total revenue in 2003. This business segment is forecast
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IBM Corporation
SWOT Analysis
to grow at 4% over the next five years. The hardware market, which comprised 29% of
IBM’s 2003 revenue, is forecasted to grow at 3.6% over the next five years. The low
growth in the company’s business segments can adversely affect the company’s
future market.
Investigation by SEC
IBM continues to be the subject of an SEC investigation, disclosed in February 2003.
The investigation relates to revenue recognition in 2000 and 2001. The SEC issued a
Wells Notice to the company on a related investigation, alleging it aided Dollar
General in misstating its 2000 results; consequently, the company may face civil
action for violating securities laws. A finding of wrongdoing could cause re-statements
impacting the market price of its stock.
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IBM Corporation
Top Competitors
TOP COMPETITORS
Apple Computer, Inc.
BMC Software, Inc.
Cisco Systems, Inc.
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Dell Inc.
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Novell
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STMicroelectronics N.V.
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Toshiba Corporation
Unisys Corporation
Wipro Corporation
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Borland Software Corporation
Open Text Corporation
Accenture
Celestica Inc.
Acer Inc.
IBM Corporation
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