IBM Reports 2007 Fourth-Quarter and Full-Year R...
-- Diluted earnings of $2.80 per share, up 24 percent as reported;
-- Total revenues of $28.9 billion, up 10 percent;
-- Global Technology Services revenues up 16 percent; pre-tax income up 26
percent;
-- Global Business Services revenues up 17 percent; pre-tax income up 9
percent;
-- Services signings of $15.4 billion; short-term signings up 8 percent;
-- Software revenues up 12 percent; pre-tax income up 21 percent;
-- 65 percent of revenues from outside the U.S.; E/ME/A revenues up 16
percent; Asia Pacific up 15 percent.
IBM
IBM (NYSE: IBM) today announced fourth-quarter 2007 diluted earnings of $2.80
per share from continuing operations compared with diluted earnings of $2.26 per
share in the fourth quarter of 2006, an increase of 24 percent as reported.
Fourth-quarter income from continuing operations was $4.0 billion compared with
$3.5 billion in the fourth quarter of 2006, an increase of 14 percent. Total
revenues for the fourth quarter of 2007 of $28.9 billion increased 10 percent (4
percent, adjusting for currency) from the fourth quarter of 2006.
'IBM had a terrific fourth quarter and full year with record revenue, profit and
cash. The broad scope of our global business --- led by strong operational
performance in Asia, Europe and emerging countries --- as well as continued
growth in services and software drove these outstanding results,' said Samuel J.
Palmisano, IBM chairman, president and chief executive officer. 'As we begin
2008, IBM is well-positioned as a result of our global business reach, solid
recurring revenue and profit streams, and strong financial position. We are on
track to achieve our long-term earnings-per-share roadmap objective in 2010.'
From a geographic perspective, the Americas' fourth-quarter revenues were $11.7
billion, an increase of 5 percent as reported (2 percent, adjusting for
currency) from the 2006 period. Revenues from Europe/Middle East/Africa were
$10.8 billion, up 16 percent (6 percent, adjusting for currency). Asia-Pacific
revenues increased 15 percent (9 percent, adjusting for currency) to $5.5
billion. OEM revenues were $894 million, down 13 percent compared with the 2006
fourth quarter.
Total Global Services revenues grew 17 percent (10 percent, adjusting for
currency) and pre-tax income increased 19 percent. Global Technology Services
segment revenues increased 16 percent (10 percent, adjusting for currency) to
$10.0 billion, with strong performance in all geographic regions and business
sectors. Global Business Services segment revenues, marked by significant growth
in core consulting and application management services, increased 17 percent (10
percent, adjusting for currency) to $4.9 billion. IBM signed services contracts
totaling $15.4 billion, down 13 percent year over year versus a strong
fourth-quarter 2006; short-term signings increased 8 percent. The full-year
estimated services backlog, including Strategic Outsourcing, Business
Transformation Outsourcing, Integrated Technology Services, Global Business
Services and Maintenance, was $118 billion, an increase of $2 billion from the
prior-year period.
Revenues from the Systems and Technology segment totaled $6.8 billion for the
quarter, down 4 percent (8 percent, adjusting for currency). Revenues were flat
excluding the year-to-year impact of the Printing Systems Division divestiture
in June 2007. Pre-tax income increased 18 percent. Systems and Technology
revenues from the System p UNIX server products increased 9 percent compared
with the 2006 period and revenues from System x servers increased 6 percent.
Revenues from System z server products decreased 15 percent versus the year-ago
period. Total delivery of System z computing power, which is measured in MIPS
(millions of instructions per second), decreased 4 percent. Revenues from System
i servers increased 2 percent. Revenues from System Storage increased 11 percent
and revenues from Microelectronics decreased 15 percent.
Revenues from the Software segment were $6.3 billion, an increase of 12 percent
(6 percent, adjusting for currency) compared with the fourth quarter of 2006;
pre-tax income increased 21 percent. Revenues from IBM's middleware products,
which primarily include WebSphere, Information Management, Tivoli, Lotus and
Rational products, were $5.0 billion, up 13 percent versus the fourth quarter of
2006. Operating systems revenues of $664 million increased 3 percent compared
with the prior-year quarter.
For the WebSphere family of software products, which facilitate customers'
ability to manage a wide variety of business processes using open standards to
interconnect applications, data and operating systems, revenues increased 23
percent. Revenues from Information Management software, which enables clients to
leverage information on demand, increased 11 percent. Revenues from Tivoli
software, infrastructure software that enables clients to centrally manage
networks including security and storage capability, increased 19 percent, and
revenues from Lotus software, which allows collaborating and messaging by
clients in real- time communication and knowledge management, increased 7
percent year over year. Revenues from Rational software, integrated tools to
improve the processes of software development, increased 22 percent compared
with the year-ago quarter.
Global Financing segment revenues increased 8 percent (2 percent, adjusting for
currency) in the fourth quarter to $668 million.
The company's total gross profit margin was 44.9 percent in the 2007 fourth
quarter compared with 44.6 percent in the 2006 period.
Total expense and other income increased 9 percent to $7.5 billion compared to
$6.9 billion in the prior-year period. Total SG&A expense increased 7 percent to
$6.0 billion. RD&E expense was $1.6 billion, flat compared with the year-ago
period. Intellectual property and custom development income decreased to $236
million compared with $241 million a year ago. Other (income) and expense
contributed income of $98 million in the fourth quarter of 2007 versus income of
$150 million in the fourth quarter of 2006. Interest expense increased to $214
million compared with $71 million in the prior-year period, primarily due to the
increase in debt to finance the company's accelerated share repurchase
agreements executed in the second quarter.
IBM's effective tax rate in the fourth-quarter 2007 was 28.0 percent, flat
compared with the fourth quarter of 2006.
The weighted-average number of diluted common shares outstanding in the
fourth-quarter 2007 was 1.41 billion compared with 1.53 billion shares in the
same period of 2006.
Full-Year 2007 Results
-- Diluted earnings of $7.18 per share, up 18 percent as reported;
-- Total revenues of $98.8 billion, up 8 percent;
-- Global Technology Services revenues up 12 percent; pre-tax income up 8
percent;
-- Global Business Services revenues up 13 percent; pre-tax income up 21
percent;
-- Software revenues up 10 percent; pre-tax income up 9 percent.
Income from continuing operations for the year ended December 31, 2007 was $10.4
billion compared with $9.4 billion in the year-ago period, an increase of 11
percent. Diluted earnings per share from continuing operations were $7.18,
including a gain from the sale of the Printing Systems Division in the second
quarter, an increase of 18 percent, compared with $6.06 per diluted share in
2006. Revenues from continuing operations for 2007 totaled $98.8 billion, an
increase of 8 percent (4 percent, adjusting for currency), compared with $91.4
billion in 2006.
From a geographic perspective, the Americas' full-year revenues were $41.1
billion, an increase of 4 percent as reported (3 percent, adjusting for
currency) from the 2006 period. Revenues from Europe/Middle East/Africa were
$34.7 billion, an increase of 14 percent (5 percent, adjusting for currency).
Asia-Pacific revenues increased 11 percent (8 percent, adjusting for currency)
to $19.5 billion. OEM revenues were $3.5 billion, down 10 percent compared with
2006.
Revenues from the Global Technology Services segment totaled $36.1 billion, an
increase of 12 percent (7 percent, adjusting for currency) compared with 2006.
Revenues from the Global Business Services segment were $18.0 billion, up 13
percent (9 percent, adjusting for currency). Systems and Technology segment
revenues were $21.3 billion, a decrease of 3 percent (6 percent, adjusting for
currency). Software segment revenues in 2007 totaled $20.0 billion, an increase
of 10 percent (6 percent, adjusting for currency). Global Financing segment
revenues totaled $2.5 billion, an increase of 6 percent (2 percent, adjusting
for currency).
For total operations, net income for 2007 was $10.4 billion, or $7.18 per
diluted share, compared with the 2006 net income of $9.5 billion, or $6.11 per
diluted share, which included a gain from discontinued operations related to
country tax settlements of $76 million.
IBM ended 2007 with $16.1 billion of cash on hand and free cash flow of $12.4
billion, up 1.9 billion year over year. The balance sheet remains strong, and
the company is well positioned to take advantage of opportunities.
Share repurchases totaled approximately $18.8 billion in 2007, including $12.5
billion executed through accelerated share repurchase agreements in May. The
repurchases are part of the $15 billion authorization for the company's stock
repurchase program approved by the IBM board of directors on April 24.
The weighted-average number of diluted common shares outstanding in 2007 was
1.45 billion compared with 1.55 billion shares in 2006. As of December 31, 2007,
there were 1.39 billion basic common shares outstanding.
Debt, including Global Financing, totaled $35.3 billion, compared with $22.7
billion at year-end 2006. From a management segment view, Global Financing debt
increased $2.2 billion from year-end 2006 to a total of $24.5 billion, resulting
in a debt-to-equity ratio of 7.1 to 1. The non- global financing
debt-to-capitalization ratio was 30.0 percent at the end of 2007, which reflects
increased financial leverage associated with the accelerated share repurchase
agreements.
Forward-Looking and Cautionary Statements
Except for the historical information and discussions contained herein,
statements contained in this release may constitute forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
These statements involve a number of risks, uncertainties and other factors that
could cause actual results to differ materially, including the company's failure
to continue to develop and market new and innovative products and services and
to keep pace with technological change; competitive pressures; failure to obtain
or protect intellectual property rights; fluctuations in revenues and purchases,
and volatility of stock prices; the company's ability to attract and retain key
personnel; adverse affects from tax matters; environmental matters; currency
fluctuations and customer financing risks; customer credit risk on trade
receivables; risks from investing in growth opportunities; the company's failure
to maintain the adequacy of its internal controls; the company's use of certain
estimates and assumptions; dependence on certain suppliers; changes in the
financial or business condition of the company's distributors or resellers; the
company's ability to successfully manage acquisitions and alliances; failure to
have sufficient insurance; legal, political, health and economic conditions;
risk factors related to IBM securities; and other risks, uncertainties and
factors discussed in the company's Form 10-Q, Form 10-K and in the company's
other filings with the U.S. Securities and Exchange Commission (SEC) or in
materials incorporated therein by reference. The company assumes no obligation
to update or revise any forward-looking statements.
Presentation of Information in this Press Release
In an effort to provide investors with additional information regarding the
company's results as determined by generally accepted accounting principles
(GAAP), the company has also disclosed in this press release the following
non-GAAP information which management believes provides useful information to
investors:
IBM Results -
-- adjusting for revenues relating to the sale of the Printing System
Division;
-- adjusting for free cash flow;
-- adjusting for currency (i.e., at constant currency).
The rationale for management's use of non-GAAP measures is included as part of
the supplementary materials presented within the fourth-quarter earnings
materials. These materials are available on the IBM investor relations Web site
at www.ibm.com/investor and are being included in Attachment II ('Non-GAAP
Supplementary Materials') to the Form 8-K that includes this press release and
is being submitted today to the SEC.
Conference Call and Webcast
IBM's regular quarterly earnings conference call is scheduled to begin at 4:30
p.m. EST, today. Investors may participate by viewing the Webcast at
www.ibm.com/investor/4q07. Presentation charts will be available on the Web site
prior to the Webcast.
Financial Results Below (certain amounts may not add due to use of rounded
numbers; percentages presented are calculated from the underlying whole- dollar
amounts).
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INTERNATIONAL BUSINESS MACHINES CORPORATION
COMPARATIVE FINANCIAL RESULTS
(Dollars in millions except per share amounts)
Three Months Twelve Months
Ended December 31, Ended December 31,
Percent Percent
2007 2006 Change 2007 2006 Change
------- ------- ------- ------- ------- -------
REVENUE
Global Technology
Services $9,997 $8,590 16.4% $36,103 $32,322 11.7%
Gross margin 30.1% 29.9% 29.9% 29.8%
Global Business
Services 4,933 4,223 16.8% 18,041 15,969 13.0%
Gross margin 23.1% 24.7% 23.5% 23.1%
Systems and
Technology 6,796 7,070 -3.9% 21,317 21,970 -3.0%
Gross margin 45.7% 41.8% 39.7% 37.7%
Software 6,259 5,607 11.6% 19,982 18,161 10.0%
Gross margin 87.1% 86.5% 85.2% 85.2%
Global Financing 668 620 7.7% 2,502 2,365 5.8%
Gross margin 45.5% 48.6% 46.7% 50.3%
Other 212 147 44.8% 842 637 32.1%
Gross margin -15.8% -6.9% 4.4% 5.7%
TOTAL REVENUE 28,866 26,257 9.9% 98,786 91,424 8.1%
GROSS PROFIT 12,970 11,701 10.8% 41,729 38,295 9.0%
Gross margin 44.9% 44.6% 42.2% 41.9%
EXPENSE AND OTHER
INCOME
S,G&A 6,016 5,620 7.0% 22,060 20,259 8.9%
% of revenue 20.8% 21.4% 22.3% 22.2%
R,D&E 1,586 1,587 -0.1% 6,153 6,107 0.8%
% of revenue 5.5% 6.0% 6.2% 6.7%
Intellectual
property
and custom
development
income (236) (241) -1.7% (958) (900) 6.4%
Other (income)
and expense (98) (150) -34.5% (626) (766) -18.3%
Interest expense 214 71 203.6% 611 278 119.6%
TOTAL EXPENSE AND
OTHER INCOME 7,481 6,887 8.6% 27,240 24,978 9.1%
% of revenue 25.9% 26.2% 27.6% 27.3%
INCOME FROM
CONTINUING
OPERATIONS BEFORE
INCOME TAXES 5,489 4,814 14.0% 14,489 13,317 8.8%
Pre-tax margin 19.0% 18.3% 14.7% 14.6%
Provision for
income taxes 1,537 1,350 13.9% 4,071 3,901 4.4%
Effective tax
rate 28.0% 28.0% 28.1% 29.3%
INCOME FROM
CONTINUING
OPERATIONS 3,951 3,464 14.1% 10,418 9,416 10.6%
Net margin 13.7% 13.2% 10.5% 10.3%
DISCONTINUED
OPERATIONS
Income/(loss) from
discontinued opera-
tions 1 76 (0) 76
NET INCOME $3,952 $3,541 11.6% $10,418 $9,492 9.7%
======= ======= ======= =======
EARNINGS/(LOSS)PER
SHARE OF
COMMON STOCK:
ASSUMING DILUTION
CONTINUING
OPERATIONS $2.80 $2.26 23.9% $7.18 $6.06 18.5%
DISCONTINUED
OPERATIONS 0.00 0.05 (0.00) 0.05
------- ------- ------- -------
TOTAL $2.80 $2.31 21.2% $7.18 $6.11 17.5%
======= ======= ======= =======
BASIC
CONTINUING
OPERATIONS $2.85 $2.30 23.9% $7.32 $6.15 19.0%
DISCONTINUED
OPERATIONS 0.00 0.05 (0.00) 0.05
------- ------- ------- -------
TOTAL $2.86 $2.35 21.7% $7.32 $6.20 18.1%
======= ======= ======= =======
WEIGHTED-AVERAGE
NUMBER COMMON
SHARES OUT-
STANDING (M's)
ASSUMING DILUTION 1,412.9 1,532.5 1,450.6 1,553.5
BASIC 1,384.1 1,507.3 1,423.0 1,530.8
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INTERNATIONAL BUSINESS MACHINES CORPORATION
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At At
(Dollars in millions) December 31, December 31, Percent
2007 2006 Change
------------ ------------ --------
ASSETS
Cash, cash equivalents,
and marketable securities $16,146 $10,657 51.5%
Receivables - net, inventories,
prepaid expenses 37,031 34,003 8.9%
Plant, rental machines,
and other property - net 15,081 14,440 4.4%
Investments and other assets 52,172 44,134 18.2%
------------ ------------
TOTAL ASSETS $120,431 $103,234 16.7%
============ ============
LIABILITIES AND STOCKHOLDERS'
EQUITY
Short-term debt $15,735 $8,902 76.8%
Long-term debt 19,539 13,780 41.8%
------------ ------------
Total debt 35,274 22,682 55.5%
Accounts payable, taxes,
and accruals 32,076 31,189 2.8%
Other liabilities 24,612 20,857 18.0%
------------ ------------
TOTAL LIABILITIES 91,962 74,728 23.1%
STOCKHOLDERS' EQUITY 28,470 28,506 -0.1%
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $120,431 $103,234 16.7%
============ ============
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INTERNATIONAL BUSINESS MACHINES CORPORATION
SEGMENT DATA
FOURTH QUARTER 2007
-----------------------------------------------
Pre-tax
Income
(Loss)
From
(Dollars in millions) --------- Revenue -------- Continuing Pre-tax
External Internal Total Operations Margin
--------- -------- -------- ---------- --------
SEGMENTS
Global Technology
Services $9,997 $393 $10,390 $1,061 10.2%
Y-T-Y Change 16.4% -9.6% 15.1% 25.8%
Global Business
Services 4,933 287 5,220 588 11.3%
Y-T-Y Change 16.8% -17.8% 14.2% 9.2%
Systems and Technology 6,796 240 7,036 1,364 19.4%
Y-T-Y Change -3.9% -33.6% -5.3% 17.8%
Software 6,259 712 6,971 2,433 34.9%
Y-T-Y Change 11.6% 12.7% 11.7% 20.8%
Global Financing 668 445 1,113 341 30.7%
Y-T-Y Change 7.7% -8.8% 0.4% -11.8%
TOTAL REPORTABLE
SEGMENTS 28,654 2,077 30,731 5,787 18.8%
Y-T-Y Change 9.7% -8.3% 8.3% 17.1%
Eliminations / Other 212 (2,077) (1,865) (298)
TOTAL IBM CONSOLIDATED $28,866 $0 $28,866 $5,489 19.0%
Y-T-Y Change 9.9% 9.9% 14.0%
FOURTH QUARTER 2006
-----------------------------------------------
Pre-tax
Income
(Loss)
From
(Dollars in millions) --------- Revenue -------- Continuing Pre-tax
External Internal Total Operations Margin
--------- -------- -------- ---------- --------
SEGMENTS
Global Technology
Services $8,590 $435 $9,025 $843 9.3%
Global Business
Services 4,223 349 4,572 538 11.8%
Systems and Technology 7,070 362 7,432 1,158 15.6%
Software 5,607 632 6,239 2,015 32.3%
Global Financing 620 488 1,108 387 34.9%
TOTAL REPORTABLE
SEGMENTS 26,111 2,266 28,377 4,940 17.4%
Eliminations / Other 147 (2,266) (2,120) (126)
TOTAL IBM CONSOLIDATED $26,257 $0 $26,257 $4,814 18.3%
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INTERNATIONAL BUSINESS MACHINES CORPORATION
SEGMENT DATA
TWELVE MONTHS 2007
-----------------------------------------------
Pre-tax
Income
(Loss)
From
(Dollars in millions) --------- Revenue -------- Continuing Pre-tax
External Internal Total Operations Margin
--------- -------- -------- ---------- --------
SEGMENTS
Global Technology
Services $36,103 $1,636 $37,739 $3,557 9.4%
Y-T-Y Change 11.7% -7.2% 10.7% 8.2%
Global Business
Services 18,041 1,193 19,234 2,064 10.7%
Y-T-Y Change 13.0% -13.1% 10.9% 21.0%
Systems and Technology 21,317 998 22,315 2,153 9.6%
Y-T-Y Change -3.0% -14.5% -3.6% 23.8%
Software 19,982 2,416 22,398 6,002 26.8%
Y-T-Y Change 10.0% 7.5% 9.7% 9.3%
Global Financing 2,502 1,482 3,984 1,386 34.8%
Y-T-Y Change 5.8% -3.0% 2.4% -4.7%
TOTAL REPORTABLE
SEGMENTS 97,944 7,726 105,670 15,163 14.3%
Y-T-Y Change 7.9% -4.4% 6.9% 10.8%
Eliminations / Other 842 (7,726) (6,884) (674)
TOTAL IBM CONSOLIDATED $98,786 $0 $98,786 $14,489 14.7%
Y-T-Y Change 8.1% 8.1% 8.8%
TWELVE MONTHS 2006
-----------------------------------------------
Pre-tax
Income
(Loss)
From
(Dollars in millions) --------- Revenue -------- Continuing Pre-tax
External Internal Total Operations Margin
--------- -------- -------- ---------- --------
SEGMENTS
Global Technology
Services $32,322 $1,763 $34,086 $3,288 9.6%
Global Business
Services 15,969 1,373 17,341 1,706 9.8%
Systems and Technology 21,970 1,168 23,138 1,739 7.5%
Software 18,161 2,249 20,409 5,493 26.9%
Global Financing 2,365 1,527 3,892 1,455 37.4%
TOTAL REPORTABLE
SEGMENTS 90,787 8,080 98,867 13,682 13.8%
Eliminations / Other 637 (8,080) (7,443) (365)
TOTAL IBM CONSOLIDATED $91,424 $0 $91,424 $13,317 14.6%
*T
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*T
IBM
Edward Barbini, 914-499-6565
barbini@us.ibm.com
or
John Bukovinsky, 732-618-3531
jbuko@us.ibm.com
*T
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