IBM Power Symposium … · About IBM - Company Profile (FY 2006) IBM delivers on-demand solutions...

1© 2006 IBM Corporation

Integrated Operations - ISC Global Procurement

© IBM Integrated Operations© Copyright 2007 IBM Corp.

IBM Power Symposium October - 2007

Pat TivnanDirector ISC Engineering

2© IBM Integrated Operations

Integrated Operations - ISC Global ProcurementIBM Integrated Operations - Integrated Supply Chain

© Copyright 2007 IBM Corp. 2

About IBM - Company Profile (FY 2006)

IBM delivers on-demand solutions through the following business segments:

Business Segment FY’06 %

Global Services $48.2 52.8%

Hardware $22.5

$18.2

$2.4

$0.1

$91.4B

Software

24.6%

19.9%

2.6%

0.1%

Global Financing

Enterprise Investments/Other

Total Revenue = 100%

Incorporated in 1911 as the Computing-Tabulating-Recording Company (C-T-R)

In 1924, C-T-R became International Business Machines Corporation

Mainframe Computers

Personal ComputersPunch cards Tabulating Machines Networking

e-Business

Business Process Transformation

Services

2006 Year-end from Continuing Operations:Revenue: $91.4 billion

Net Income: $9.4 billion

Earnings per share: $6.06

Total Assets: $103.2 billion

Net Cash from Operating Activities: $15.0 billion

Number of employees: 355,766

Number of registered stockholders: 613,993

Over time, the nature of our business operations has shifted from a hardware oriented business to what is now a services-led business.

A Balanced Mix of Hardware, Software and Services




IBM Organization




ISC Engineering Initiatives (& Themes)

Ensure IBM’s Technical Superiority (Competitiveness)Drive Design for Supply Chain across the brands, particularly product simplification

Ensure Outstanding Quality (Quality)Drive reduction in Mfg Stop Ships and Field Impacts

Drive End-to-End Cost Reductions (Brand Convergence)Cost reductions, Simplification, Supplier Recoveries, Cost avoidance of HW Warranty spend, Design for System Value, Design and Operations Excellence (DOX)

Drive the Globalization of the Supply Chain (People, Competitiveness)Distributing technical work based on skills, not geographic or brand boundariesFurther develop WW ISC engineering talentGrow strategic business missions.




ISC WW Engineering Optimization BenefitsConvergence

Implementation of cross-brand best practices /standardizationCreate a “flexible workforce” to better leverage skills and workload across key competencies Do once vs. Do many

Center of CompetenciesCreate “teams of expertise” to drive optimizationBuild around key commodities (components, HDD, ECAT, etc.) and functions (new products, fulfillment, etc. ) to drive common strategy

Brand structure Maintain and improve alignment with brand, development, procurement and manufacturing teams Simplify focal points




IBM Financials




2Q07 IBM GEOGRAPHIC REVENUE

($B)2Q07

B/(W) Yr/YrRptd @CC

Americas 10.1 6% 5%

Europe/ME/A 8.2 13% 6%

Asia Pacific 4.6 10% 10%

OEM 0.9 (9%) (9%)

IBM 23.8 9% 6%

Emerging countries +25% yr/yr @CC




2Q07 GROWTH DYNAMICS1Q07 2Q07

Geographic RevenueAmericas 1% 6%Europe/ME/A 13% 13%Asia Pacific 10% 10%Emerging Countries 24% 32%

Segment RevenueGlobal Technology Services 7% 10%Global Business Services 9% 10%Systems & Technology 2% 2%Software 9% 13%Global Financing 6% 4%

EPS 12% 19%EPS excl. Printer Sale 12% 15%

Free Cash Flow (excl. GF Receivables) $0.1B $1.7B

Year-to-Year Growth




2Q07 SEGMENT REVENUE and GROSS MARGIN

Revenue Gross Margin

($B) 2Q07B/(W) Yr/Yr

Rptd @CC 2Q07B/(W)

Yr/Yr Pts

7%

Global Business Services 4.3 10% 8%

0.0 pts29.8%

24.3%

37.3%

84.9%

46.0%

42.0%

0.9 pts

0.8 pts

0.7 pts

(5.0 pts)

0.6 pts

Systems and Technology 5.1 2% 0%

9%

1%

6%

41.8% 0.6 ptsTotal IBM 23.8 9% 6%

Total Segments 23.6 8%

Global Technology Services 8.8 10%

Software 4.8 13%

Global Financing 0.6 4%




2Q07 GLOBAL SERVICES SEGMENTS($B) 2Q07 Yr/Yr @CCGlobal Technology Services (GTS)

Global Business Services (GBS)

7%PTI Margin 8.6% (0.8 pts)

8%

Revenue (External) 8.8 10%

Revenue (External) 4.3 10%PTI Margin 10.4% 0.9 pts

$B Yr/YrGlobal Technology Services

Total 6.5 20%

Total Signings 11.7 22%

Total 5.1 23%

Global Business ServicesShort-Term 3.2 6%Long-Term 1.9 70%

Short-Term 2.1 8%Long-Term 4.5 27%

Yr/Yr @CC

Strategic Outsourcing 8%

15%

15%

10%

10%

10%

5%

Bus. Transformation Outsourcing 11%

Integrated Tech Services 12%

Global Business Services 8%

Maintenance

Global Technology Services 7%

7%

RevenueSignings




2Q07 SYSTEMS & TECHNOLOGY SEGMENT

2Q07 Revenue

MIPS +45%Specialty engines up >130%POWER6 in 3QContinued share gainsGrowth in all geographiesBlades up 15%Tape +19%, Disk flat

Retail Store Sols 18% 15% - + 6th consecutive qtr of growth

Printing Systems (41%) (41%) - Printer sale – June 1, 2007

Systems 7% 4% +

Game processor weaknessTransition to custom systems

As Rptd @CC

1%

(17%)4%

13%

4%

(9%)0%

GP% Share

+

+++

-

-E&TS (1%) -

System z 4% =

System i (15%) -System p 7% +System x Servers 16% +

System Storage 6% =

Microelectronics (9%)

2.6 pts6.2%PTI Margin0%

@CC2%5.1Revenue (External)

Yr/Yr2Q07($B)




$0.11

$0.06$0.05

$0.03

$0.02 $0.03

$0.10

$0.05

$1.50

$1.30

2Q '06 EPS Revenue Growthof 9% As Rptd

Gross MarginExpansion 0.6

pts Y/Y

E/R Growth IncrementalRestructuring

Interest Expenseon $11.5B Debt

to Fund ASR

Tax Rate 30.0% to 28.5%

ShareRepurchases

2Q '07 EPS

19% Yr/Yr

15% Yr/Yr

Printer Sale Gain

$1.55

2Q07 EARNINGS PER SHARE (EPS) ANALYSIS




IBM’s 2010 FINANCIAL ROADMAP

1H 2007 Results

• Revenue Growth of 5% @CC (8% as Rptd)

• Gross Margin Expansion of 0.9 pts

• Investing in key strategic areas

• Executed ASR(1H07 avg. share reduction of ~5%)

• EPS Growth 16%

Key Drivers of 2010 EPS Goal

• Revenue Growth of 3% - 8%

• Expand Margins

• Reduce Shares by average of 3% per year

• EPS Growth 10% - 16%

Good progress against 2010 roadmap

$6.06

~$10

~$11

EPS

w/Pension

2006

2010




Power Efficiency and IBM




Market TrendsIT Trends

Server market is not expected to grow significantly, but the storage growth is expected to be 5%

IT model is shifting, as real-time event-driven workloads, richer content, and modular technologies alter how systems are deployed and integrated

Enterprise networking has been steadily increasing its share of the systems HW market

Client TrendsLarge enterprise clients need to address increasing IT complexity & costs (labor, power/cooling)

Small and Medium Enterprise is the largest and fastest growing segment, growing faster than large enterprise

Web 2.0 outlays are expected to constitute 11% of the total IT spending by 2011

Demand for IT is increasing outside the data center, particularly in retail, telecom, and healthcare/life sciences

Product Trends– Virtualization addressing increasing IT

costs, providing asset management advantage

– Integrated infrastructure, industry specific solutions growing in popularity

– Significant market shifts occurring to x86 and to blades form factor

– Variability of web-centric workloads and the increasing deployment of x86 systems has led to a significant underutilized server capacity

Technology Trends– Power-efficient technologies becoming a

primary datacenter mgmt. Requirement

– Multi-core/multi-thread designs becoming primary drivers for system performance

– Real-time event-driven processes offering opportunity for specialized acceleration & offload engines




Energy efficiency: Data centers are at a tipping point

“. . . power will be the #1 issue for most large company IT executives to address in the next 2-4 years. Ignoring this issue will NOT be an option.”

“Left unchecked, the cost to power & cool servers in the future may well equal acquisition cost .”

-Robert Francis Group

-IDC

What is the greatest facilities problem with your primary data center? Gartner 2006

None of the above

Poor location

Excessive facility cost

Insufficient raised floor

Insufficient power

Excessive heat

0% 5% 10% 15% 20% 25% 30% 35%




Government regulations and proposed regulations in United States, Europe, and Japan

New BenchmarksSPEC server energy metric

InitiativesGreen Grid – IT professionals to reduce data center powerEuropean Computer Manufacturer’s Association –energy reduction

Power efficiency is becoming the subject of government regulations, and industry advertising, initiatives and benchmarks

Industrial activitiesFEM modeling of data center air flow and temperatureServer microprocessor “power down” states Advertisements touting ‘product greenness’




So What is IBM’s play??Drive leadership at data center (IT & Facilities) level

Expand to Measure/Monitor the entire IT environmentIntegrate IT and Facilities management for customer value– Drive partnerships with Facilities providers

• eg. Eaton, Eaton, Emerson, Aperture, Johnson Controls, …Deliver Leadership DataCenter ROI–Convert more Power/Cooling into compute cycles

Drive Power savings solutions leadership Component and System Level Enablement–Effective Metering–Power / Cooling Efficiency–Leadership Performance / Watt–Low Power ModesExpanded and New Automation Solutions–Director / Tivoli Management Automation

• Alert /Action plans for Power / Thermal Events• Change Management Support

–Data Center Level Actions• Integration with Facilities Partners

–Targeted Solutions• Blades based systems with Pre-packaged power savings modes.




Thank You

IBM Power Symposium … · About IBM - Company Profile (FY 2006) IBM delivers on-demand solutions...

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