International Business Machines Corporation · NYSE:IBM
International Business Machines — IBM — Q4 2004 Earnings Presentation
24 slides from International Business Machines's earnings presentation, January 2005
Slide 1: IBM 4Q 2004 Earnings Presentation
-1- IBM 4Q 2004 Earnings Presentation January 2005
Slide 2: Forward-looking statements notice
-2- Certain comments made in this presentation may be characterized as forward looking under the Private Securities Litigation Reform Act of 1995. Those statements involve a number of factors that could cause actual results to differ materially. Additional information concerning these factors is con
Slide 3: IBM Financial Summary
-3- IBM FINANCIAL SUMMARY Continuing Operations B/(W) ($B except EPS) B/(W) B/(W) Yr/Yr 4Q04 Yr/Yr FY04 Yr/Yr w/o Chg* Revenue 27.7 7% 96.5 8% 8% @CC 3% 4% 4% GP% 39.2% 0.8 pts 37.3% 0.3 pts 0.3 pts Expense 6.5 (6%) 24.0 (8%) (7%) E/R% 23.4% 0.1 pts 24.9% (0.1 pts) 0.3 pts Pre-Tax Income 4.4 13% 12.
Slide 4: IBM Revenue
-4- IBM REVENUE % of ($B) B/(W) Yr/Yr B/(W) Yr/Yr FY 4Q04 Rptd @CC FY04 Rptd @CC Rev Global Services 12.6 10% 6% 46.4 9% 4% 48% Hardware 9.5 4% 1% 31.2 10% 7% 32% Software 4.5 7% 3% 15.1 5% 1% 16% Global Financing 0.7 (10%) (13%) 2.6 (8%) (12%) 3% Enterprise Inv. / 0.4 1% (2%) 1.2 9% 5% 1% Other IBM
Slide 5: IBM Geographic Revenue
-5- IBM GEOGRAPHIC REVENUE % of B/(W) Yr/Yr B/(W) Yr/Yr ($B) FY 4Q04 Rptd @CC FY04 Rptd @CC Rev Americas 11.1 5% 4% 40.1 5% 4% 42% Europe/ME/A 10.0 9% 1% 32.1 10% 1% 33% Asia Pacific 5.8 6% 3% 21.5 11% 5% 22% OEM 0.8 10% 10% 2.9 10% 9% 3% IBM 27.7 7% 3% 96.5 8% 4% 100% May not add due to rounding
Slide 6: IBM Revenue - Key Industry Sales Units
-6- IBM REVENUE - KEY INDUSTRY SALES UNITS As Reported ($B) % of B/(W) B/(W) FY 4Q04 Yr/Yr* FY04 Yr/Yr* Rev Financial Svcs 7.1 7% 24.5 10% 25% Public 4.3 8% 14.8 6% 15% Industrial 3.5 1% 12.6 6% 13% Distribution 2.5 8% 8.8 8% 9% Communications 2.5 10% 8.9 10% 9% Small / Medium 6.2 7% 21.2 8% 22% All
Slide 7: IBM Gross Profit Margin
-7- IBM GROSS PROFIT MARGIN % of B/(W) B/(W) FY 4Q04 Yr/Yr FY04 Yr/Yr Rev Global Services 25.1% 0.3 pts 24.9% (0.3 pts) 48% Hardware 33.0% 2.0 pts 29.6% 1.8 pts 32% Software 89.0% 0.2 pts 87.3% 0.8 pts 16% Global Financing 59.7% 7.5 pts 60.0% 4.2 pts 3% Enterprise Inv./Other 32.8% (8.9 pts) 40.3% (3
Slide 8: IBM Expense Summary
-8- IBM EXPENSE SUMMARY ($B) B/(W) B/(W) B/(W) Yr/Yr 4Q04 Yr/Yr FY04 Yr/Yr w/o Charge* SG&A 5.3 (9%) 19.4 (9%) (7%) RD&E 1.5 (8%) 5.7 (12%) (12%) IP and Custom Dev. Income (0.3) 6% (1.2) -- -- Other Income and Expense -- nm -- nm nm Interest Expense -- (26%) 0.1 5% 5% Total Expense and Other 6.5 (6%
Slide 9: IBM Cash Flow Analysis - FY
-9- IBM CASH FLOW ANALYSIS - FY ($B) FY03 FY04 Net cash from Operations (Cont. Ops.) 14.6 15.4 Less: GF Accounts Receivable 1.9 2.5 Net cash from Operations (Cont. Ops.), excl GF rec. 12.7 12.9 Investing Activities Capital Expenditures, Net (3.9) (3.7) GF A/R 1.9 2.5 GF Debt (2.6) (1.7) Net GF Debt
Slide 10: IBM Balance Sheet
-10- IBM BALANCE SHEET ($B) Dec Dec Dec 2002 2003 2004 Cash & Marketable Securities 6.0 7.6 10.6 Non-GF Assets* 56.4 61.8 64.9 Global Fin. Assets* 34.1 35.0 33.7 Total Assets 96.5 104.5 109.2 Other Liabilities 47.7 53.0 56.5 Non-GF Debt 2.2 0.4 0.6 Global Fin. Debt 23.8 23.3 22.3 Total Debt 26.0 23.
Slide 11: Global Services
-11- GLOBAL SERVICES Revenue $12.6B, +10%; 6% @CC ($B) 4Q04 Yr/Yr Revenue 12.6 10% Margin 25.1% 0.3 pts Revenue Strategic Outsourcing 12% Business Consulting Services 12% Integrated Tech Services 6% Maintenance 3% IGS WW Contract Signings 20 15 4Q04 Signings @ spot rates $14.7B ($B) Longer-Term 10 S
Slide 12: Hardware
-12- HARDWARE Revenue $9.5B, +4%; 1% @CC; GP% +2 pts 4Q Rev GP% Share FY Rev GP% Share Systems & Technology $5.9B 5% + = 9% + = zSeries (4%) + = 15% + + pSeries 15% + + 7% - + iSeries (9%) - - (17%) - - xSeries Servers 25% + + 24% + + Storage (11%) - - 2% + = Technology OEM 10% + 6% + Personal Syste
Slide 13: Software
-13- SOFTWARE Revenue $4.5B, +7%; 3% @CC Act. Act. Brand Yr/Yr OS 1% WebSphere Family 18% Distributed 9% Data Management 8% Lotus 5% 8% Middleware Host Tivoli 25% 7% Rational 8% Other Middleware (2%) 4Q04 Yr/Yr GP Margin 89.0% +0.2 pts Gained share in several key product segments Candle performance
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Slide 15: Currency: Year-to-Year Comparison
-S1- CURRENCY: YEAR-TO-YEAR COMPARISON QUARTERLY AVERAGES PER US$ 1/17 @ 1/17 Spot 3Q04 4Q04 Spot 1Q05 2Q05 Euro 0.82 0.77 0.76 Yr/Yr 8% 8% 5% 8% Pound 0.55 0.54 0.54 Yr/Yr 11% 8% 2% 3% Yen 110 106 102 Yr/Yr 6% 3% 5% 7% IBM Revenue Impact 4 pts 4 pts 3 pts 4-5 pts
Slide 16: IBM Cash Flow Analysis - Quarter
-S2- IBM CASH FLOW ANALYSIS - QUARTER ($B) 4Q03 4Q04 Net cash from Operations (Cont. Ops.) 4.8 4.1 Less: GF Accounts Receivable (2.3) (2.3) Net cash from Operations (Cont. Ops.), excl GF rec. 7.0 6.4 Investing Activities Capital Expenditures, Net (1.1) (1.0) GF A/R (2.3) (2.3) GF Debt (0.3) (0.4) Ne
Slide 17: IBM Cash Flow (FAS 95) - FY
-S3- IBM CASH FLOW (FAS 95) - FY ($B) FY03* FY04 Net Income from Continuing Ops. 7.6 8.4 Depreciation / Amortization 4.9 4.9 Working Capital / Other 0.1 (0.4) GF A/R 1.9 2.5 Net cash provided by operating activities 14.6 15.4 Capital Expenditures, Net (3.9) (3.7) Divestitures 0.1 0.0 Acquisitions (1
Slide 18: IBM Cash Flow (FAS 95) - Quarter
-S4- IBM CASH FLOW (FAS 95) - QUARTER ($B) 4Q03* 4Q04 Net Income from Continuing Ops. 2.7 3.1 Depreciation / Amortization 1.3 1.3 Working Capital / Other 3.0 2.1 GF A/R (2.3) (2.3) Net cash provided by operating activities 4.8 4.1 Capital Expenditures, Net (1.1) (1.0) Divestitures 0.1 0.0 Acquisitio
Slide 19: Non-GAAP Financial Measures
-S5- NON-GAAP FINANCIAL MEASURES In an effort to provide investors with additional information regarding the Company's results as determined by generally accepted accounting principles (GAAP), the Company also discloses the following non-GAAP information which management believes provides useful inf
Slide 20: Non-GAAP Financial Measures (con't)
-S6- NON-GAAP FINANCIAL MEASURES (con't) Management includes a presentation of cash flows that excludes the effect of Global Financing Receivables and subtracts net capital investments from Net Cash from Operations. For a financing business, increasing receivables is the basis for growth. Receivable
Slide 21: Non-GAAP Financial Measures (con't)
-S7- NON-GAAP FINANCIAL MEASURES (con't) Management refers to earnings expectations excluding the year-to-year effects of pension charges. Management believes that such view provides additional insight into year over year performance and clarifies the basis for earnings expectations.
Slide 22: Reconciliation to Net Cash from Operations
-S8- RECONCILIATION TO NET CASH FROM OPERATIONS EXCLUDING GF RECEIVABLES, EXCLUDING PENSION FUNDING AND INCLUDING NET CAPITAL INVESTMENTS ($B) FY03 FY04 Yr/Yr Net cash from Operations (Cont. Ops.), excl GF rec, 8.7 9.2 0.4 incl Net Capital Investments Less: Pension Funding (0.6) (1.8) (1.2) Net cash
Slide 23: Reconciliation of 2005 Estimated EPS Without Pension Impact
-S9- RECONCILIATION OF 2005 ESTIMATED EPS WITHOUT PENSION IMPACT TO 2005 ESTIMATED EPS Actual Estimated 2004 2005 Yr/Yr% EPS as Reported $4.94 One-time Settlement Charge of $320M 0.11 Average Analyst Estimates * $5.55 Impact of 4Q 2004 Over-achievement 0.05 2005 Yr/Yr Pension Impact 0.39 EPS without
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