Quarterly earnings
IBM ANNOUNCES FOURTH-QUARTER 2001 RESULTS
ARMONK, N.Y., January 17, 2002 . . . IBM today announced fourth-
quarter 2001 diluted earnings per common share of $1.33, a 10 percent
decrease compared with diluted earnings per common share of $1.48 in
the fourth quarter of 2000. Fourth-quarter 2001 net income was $2.3
billion, a 13 percent decrease from $2.7 billion in the year-earlier
period. IBM's fourth-quarter 2001 revenues totaled $22.8 billion, down
11 percent (8 percent at constant currency) compared with the fourth
quarter of 2000.
Louis V. Gerstner, Jr., IBM chairman and chief executive officer,
said: "This was a solid finish to a demanding year. We achieved
strong profitability and we continued to gain market share in high-
priority segments of our software, storage and server businesses. For
example, our new 'Regatta' UNIX servers, which didn't begin shipping
until late in the quarter, are sold out. On a full-year basis, our
mainframe revenues grew for the first time since 1989. Our services
business also had over $15 billion in new signings, although many of
these signings also came very late in the quarter, reflecting the tough
business environment. We also once again demonstrated exceptional
management of our cost and expense structure, and we ended the year
with very powerful free cash flow.
"We had our share of challenges, too, but these were largely
expected: slow PC sales and ongoing weakness in our OEM business. Our
overall revenue decline came principally from these two units, and
we've taken a number of actions to improve our long-term
competitiveness in these areas. As we have demonstrated time after
time, our diverse business portfolio allows us to overcome weakness in
certain areas and still deliver strong results.
"Business conditions remain difficult as we enter the new year,
although we believe that our business will strengthen as we move
through the year," Mr. Gerstner said. "Further, and most important, we
have absolutely no doubt that customer buying patterns throughout the
world are continuing to shift in IBM's favor. Customers increasingly
are demanding fully integrated technology -- not the latest single-
function offerings from the piece-part makers -- and that plays
directly to IBM's strengths in e-business software, in powerful, secure
servers, and in our unparalleled global services capabilities."
In the Americas, fourth-quarter revenues were $9.8 billion, a
decrease of 9 percent (8 percent at constant currency) from the 2000
period. Revenues from Europe/Middle East/Africa were $6.9 billion,
down 6 percent (6 percent at constant currency). Asia-Pacific revenues
declined 10 percent (1 percent at constant currency) to $4.5 billion.
OEM revenues decreased 34 percent (33 percent at constant currency) to
$1.6 billion compared with the fourth quarter of 2000.
Revenues from Global Services, including maintenance, declined 1
percent (up 1 percent at constant currency) in the fourth quarter to
$9.1 billion. Global Services revenues, excluding maintenance,
declined 2 percent (up 1 percent at constant currency). New contract
signings for Global Services in the fourth quarter were approximately
$15 billion. IBM's total services backlog at year-end 2001 was $102
billion. Overall, the gross profit margin for Global Services improved
1.2 points year over year to 28.2 percent.
Hardware revenues decreased 24 percent (21 percent at constant
currency) to $8.7 billion from the 2000 fourth quarter. Revenues from
z900 mainframe servers were essentially flat, reflecting a difficult
year-over-year comparison. Mainframe computing capacity grew 12
percent in the fourth quarter as measured in MIPS (millions of
instructions per second). Revenues from IBM's UNIX-based pSeries
declined, in large part because of a transition to IBM's new "Regatta"
family of UNIX servers, which began shipping on December 14. Personal
computer and microelectronics revenues decreased substantially over the
prior year's quarter, principally due to price pressures in PCs and an
ongoing downturn affecting the worldwide semiconductor and OEM markets.
Revenues from IBM's high-end storage product line -- Shark -- grew in a
declining market.
Software revenues increased 6 percent (8 percent at constant
currency) to $3.8 billion compared to the prior year's fourth quarter.
Overall, IBM's middleware software revenues grew 10 percent at constant
currency. IBM's premier data management and WebSphere products grew 48
percent and 43 percent, respectively. Operating system revenues fell 2
percent. The company's total gross profit margin in software improved
1.8 points, to 85.2 percent.
Global Financing revenues decreased 5 percent (4 percent at
constant currency) in the fourth quarter to $927 million. As expected,
revenues from the Enterprise Investments/Other area, which includes
products for specialized customer uses, declined 20 percent (18 percent
at constant currency) compared to the fourth quarter of 2000 to $340
million. IBM has been consistently shifting development and
distribution of products in this segment to third-party companies.
The company's total gross profit margin improved to 38.3 percent
in the 2001 fourth quarter from 37.3 percent in the 2000 fourth
quarter.
Despite absorbing workforce-balancing actions and writedowns of
certain equity investments, IBM's total expenses improved 6 percent
year over year to $5.4 billion. The improvement came from each of the
company's two main expense categories: selling, general and
administrative expenses as well as research and development expenses.
IBM continued to reduce its expenses and improve operating efficiencies
through the use of electronic procurement, sales, education and
customer support systems. These systems -- known as e-procurement,
IBM.com, e-learning and e-Care -- have resulted in substantial
productivity improvements.
IBM's tax rate in the fourth quarter was 29.3 percent compared
with 29.5 percent in the fourth quarter of 2000.
IBM spent approximately $1.0 billion on share repurchases in the
fourth quarter. The average number of basic common shares outstanding
in the quarter was 1.72 billion compared with 1.75 billion shares in
the same period of 2000.
Full-year 2001 Results
Net income for the year ended December 31, 2001 was $7.7 billion,
or $4.35 per diluted common share, compared with net income of $8.1
billion, or $4.44 per diluted common share, in 2000. Revenues in 2001
totaled $85.9 billion, a decline of 3 percent (up 1 percent at constant
currency) compared with revenues of $88.4 billion in the year-earlier
period.
In the Americas, full-year revenues were $37.4 billion, down 3
percent (2 percent at constant currency) from the 2000 period.
Revenues from Europe/Middle East/Africa were $24.0 billion, a decrease
of 1 percent (up 3 percent at constant currency). Asia-Pacific
revenues fell 2 percent (up 8 percent at constant currency) to $17.2
billion. OEM revenues decreased 7 percent (6 percent at constant
currency) to $7.2 billion.
Revenues from Global Services totaled $35.0 billion, an increase
of 5 percent (10 percent at constant currency). Hardware revenues in
2001 were $33.4 billion, a decrease of 12 percent (8 percent at
constant currency). Software revenues totaled $12.9 billion, an
increase of 3 percent (7 percent at constant currency). Global
Financing revenues totaled $3.4 billion, a decrease of 1 percent (up 1
percent at constant currency). Revenues from the Enterprise
Investments/Other area declined 18 percent (14 percent at constant
currency) to $1.2 billion.
Common share repurchases totaled approximately $5.3 billion in
2001. The average number of basic shares outstanding was 1.73 billion
in 2001 compared with 1.76 billion in 2000. There were 1.72 billion
basic common shares outstanding at December 31, 2001.
IBM completed 2001 with $6.4 billion in cash, after major
expenditures which included the share repurchases, capital investments
of $5.6 billion and an 8 percent dividend increase.
The company's debt in support of operations, excluding global
financing, increased $543 million from year-end 2000 to $1.6 billion,
resulting in a debt-to-capitalization ratio of 7 percent at the end of
2001. Global financing debt declined $2.0 billion from year-end 2000
to a total of $25.5 billion, resulting in a debt-to-equity ratio of 6.8
to 1.
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, as discussed in the company's filings with the
Securities and Exchange Commission.
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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
2001 2000* Change 2001 2000* Change
------- ------- ------- ------- ------- -------
REVENUE
Global Services $9,061 $9,186 -1.4% $34,956 $33,152 5.4%
Gross margin 28.2% 27.0% 27.5% 26.7%
Hardware 8,714 11,463 -24.0% 33,392 37,777 -11.6%
Gross margin 26.3% 30.4% 27.7% 28.4%
Software 3,784 3,571 6.0% 12,939 12,598 2.7%
Gross margin 85.2% 83.4% 82.5% 81.9%
Global Financing 927 971 -4.6% 3,426 3,465 -1.1%
Gross margin 55.4% 42.9% 50.6% 43.3%
Enterprise Investments/
Other 340 425 -20.0% 1,153 1,404 -17.9%
Gross margin 45.8% 44.9% 45.0% 46.8%
TOTAL REVENUE 22,826 25,616 -10.9% 85,866 88,396 -2.9%
GROSS PROFIT 8,745 9,553 -8.4% 31,782 32,054 -0.9%
Gross margin 38.3% 37.3% 37.0% 36.3%
EXPENSE
S,G&A 4,176 4,340 -3.8% 15,490 15,639 -1.0%
% of revenue 18.3% 16.9% 18.0% 17.7%
R,D&E 1,263 1,449 -12.8% 5,006 5,151 -2.8%
% of revenue 5.5% 5.7% 5.8% 5.8%
Other income (48) (125) -62.4% 95 (617) -115.4%
Interest expense 54 102 -47.3% 238 347 -31.4%
TOTAL EXPENSE 5,445 5,766 -5.6% 20,829 20,520 1.5%
% of revenue 23.9% 22.5% 24.3% 23.2%
INCOME BEFORE
INCOME TAXES 3,300 3,787 -12.9% 10,953 11,534 -5.0%
Pre-tax margin 14.5% 14.8% 12.8% 13.0%
Provision for
income taxes 967 1,117 -13.4% 3,230 3,441 -6.1%
Effective tax
rate 29.3% 29.5% 29.5% 29.8%
NET INCOME $2,333 $2,670 -12.7% $7,723 $8,093 -4.6%
Net margin 10.2% 10.4% 9.0% 9.2%
Preferred stock
dividends 0 5 10 20
NET INCOME
APPLICABLE TO COMMON
STOCKHOLDERS $2,333 $2,665 -12.5% $7,713 $8,073 -4.5%
====== ====== ====== ======
EARNINGS PER
SHARE OF COMMON
STOCK - ASSUMING
DILUTION $1.33 $1.48 -10.1% $4.35 $4.44 -2.0%
====== ====== ====== ======
EARNINGS PER
SHARE OF COMMON
STOCK - BASIC $1.35 $1.52 -11.2% $4.45 $4.58 -2.8%
====== ====== ====== ======
AVERAGE NUMBER OF
COMMON SHARES OUT-
STANDING (M's)
DILUTED 1,758.0 1,790.6 1,771.2 1,812.1
BASIC 1,722.4 1,749.2 1,733.3 1,763.0
* Reclassified to conform with 2001 presentation.
INTERNATIONAL BUSINESS MACHINES CORPORATION
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At At
(Dollars in millions) December 31, December 31, Percent
2001 2000 Change
----------- ----------- -------
ASSETS
Cash, cash equivalents,
and marketable securities $6,393 $3,722 71.8%
Receivables - net, inventories,
and prepaid expenses 36,068 40,158 -10.2%
Plant, rental machines,
and other property - net 16,504 16,714 -1.3%
Investments and other assets 29,348 27,755 5.7%
-------- --------
TOTAL ASSETS $88,313 $88,349 -0.0%
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term debt $11,188 $10,205 9.6%
Long-term debt 15,963 18,371 -13.1%
-------- --------
Total debt 27,151 28,576 -5.0%
Accounts payable, taxes,
and accruals 23,931 26,201 -8.7%
Other liabilities 13,617 12,948 5.2%
-------- --------
TOTAL LIABILITIES 64,699 67,725 -4.5%
STOCKHOLDERS' EQUITY 23,614 20,624 14.5%
-------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $88,313 $88,349 -0.0%
======== ========
INTERNATIONAL BUSINESS MACHINES CORPORATION
SEGMENT DATA
FOURTH QUARTER 2001
--------------------------------------------
Pre-tax
(Dollars in millions) --------- Revenue --------- Pre-tax Income
External Internal Total Income Margin
-------- -------- -------- ------- -------
SEGMENTS
Global Services $9,061 $724 $9,785 $1,413 14.4%
% change -1.4% 22.7% 0.1% 8.4%
Technology 1,879 530 2,409 (293) -12.2%
% change -30.2% -36.5% -31.7% -200.7%
Personal and Printing
Systems 2,910 23 2,933 (17) -0.6%
% change -32.0% -11.5% -31.9% -116.2%
Enterprise Systems 4,074 163 4,237 719 17.0%
% change -13.2% -6.3% -13.0% -18.0%
Software 3,784 295 4,079 1,167 28.6%
% change 6.0% 26.6% 7.2% 21.4%
Global Financing 921 189 1,110 265 23.9%
% change -5.5% -24.1% -9.3% -8.0%
Enterprise Investments 336 2 338 (74) -21.9%
% change -21.9% -21.4% 14.9%
TOTAL SEGMENTS 22,965 1,926 24,891 3,180 12.8%
% change -11.1% -8.6% -10.9% -14.9%
Eliminations / Other (139) (1,926) (2,065) 120
TOTAL IBM $22,826 $0 $22,826 $3,300 14.5%
% change -10.9% -10.9% -12.9%
FOURTH QUARTER 2000*
--------------------------------------------
Pre-tax
(Dollars in millions) --------- Revenue --------- Pre-tax Income
External Internal Total Income Margin
-------- -------- -------- ------- -------
SEGMENTS
Global Services $9,186 $590 $9,776 $1,303 13.3%
Technology 2,693 835 3,528 291 8.2%
Personal and Printing
Systems 4,278 26 4,304 105 2.4%
Enterprise Systems 4,694 174 4,868 877 18.0%
Software 3,571 233 3,804 961 25.3%
Global Financing 975 249 1,224 288 23.5%
Enterprise Investments 430 0 430 (87) -20.2%
TOTAL SEGMENTS 25,827 2,107 27,934 3,738 13.4%
Eliminations / Other (211) (2,107) (2,318) 49
TOTAL IBM $25,616 $0 $25,616 $3,787 14.8%
* Reclassified to conform with 2001 presentation.
INTERNATIONAL BUSINESS MACHINES CORPORATION
SEGMENT DATA
TWELVE MONTHS 2001
--------------------------------------------
Pre-tax
(Dollars in millions) --------- Revenue --------- Pre-tax Income
External Internal Total Income Margin
-------- -------- -------- ------- -------
SEGMENTS
Global Services $34,956 $2,647 $37,603 $5,161 13.7%
% change 5.4% 8.5% 5.7% 14.3%
Technology 7,970 2,325 10,295 (374) -3.6%
% change -6.4% -22.7% -10.7% -155.1%
Personal and Printing
Systems 11,982 73 12,055 (153) -1.3%
% change -20.6% 4.3% -20.5% -251.5%
Enterprise Systems 13,743 710 14,453 1,830 12.7%
% change -3.2% 9.4% -2.6% -4.8%
Software 12,939 981 13,920 3,168 22.8%
% change 2.7% 18.5% 3.7% 13.4%
Global Financing 3,407 836 4,243 1,143 26.9%
% change -2.7% -11.4% -4.5% -2.8%
Enterprise Investments 1,118 4 1,122 (317) -28.3%
% change -18.3% 33.3% -18.2% -6.7%
TOTAL SEGMENTS 86,115 7,576 93,691 10,458 11.2%
% change -2.6% -4.6% -2.8% -4.0%
Eliminations / Other (249) (7,576) (7,825) 495
TOTAL IBM $85,866 $0 $85,866 $10,953 12.8%
% change -2.9% -2.9% -5.0%
TWELVE MONTHS 2000*
--------------------------------------------
Pre-tax
(Dollars in millions) --------- Revenue --------- Pre-tax Income
External Internal Total Income Margin
-------- -------- -------- ------- -------
SEGMENTS
Global Services $33,152 $2,439 $35,591 $4,517 12.7%
Technology 8,519 3,007 11,526 679 5.9%
Personal and Printing
Systems 15,098 70 15,168 101 0.7%
Enterprise Systems 14,194 649 14,843 1,922 12.9%
Software 12,598 828 13,426 2,793 20.8%
Global Financing 3,500 944 4,444 1,176 26.5%
Enterprise Investments 1,369 3 1,372 (297) -21.6%
TOTAL SEGMENTS 88,430 7,940 96,370 10,891 11.3%
Eliminations / Other (34) (7,940) (7,974) 643
TOTAL IBM $88,396 $0 $88,396 $11,534 13.0%
* Reclassified to conform with 2001 presentation.
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