2015 IBM Road MapEach year IBM describes how the company manages its business and serves its shareholders in a detailed financial road map.A long-term perspective ensures IBM is well positioned to take advantage of major shifts occurring in technology, business and the global economy. It also galvanizes the company to deliver superior performance.IBM0a1e033b-5563-44c7-aaa8-abced7fe8f88... superior performance.78d4c946-cfc5-4b4f-b238-3d1061ea24f8To take advantage of major shifts occurring in technology, business and the global economy.e03f8581-f210-404a-9dfb-f65a80c555e3Business MixContinually change our business mix e3102b97-0297-4551-bb9c-b9919bee5c3b1We continually change our business mix toward higher-value, more profitable technologies and market opportunities.Hardware & Financing43e72a74-837d-4f4e-adc4-ee1d15ceea641.142e274b8-285d-4f13-b684-423a77380273Pretax IncomeBillion DollarsAbout 50% of IBM segment income expected to come from Software by 20152015-12-3135%3.32000-01-012000-12-3116%3.62011-01-012011-12-31Services2f3d24df-1f32-4aef-89ad-d8d41cda67eb1.260baa079-44c8-482b-9e9e-cd19a7f0c7dfPretax IncomeBillion Dollars2015-12-3138%3.72000-01-012000-12-3141%9.32011-01-012011-12-31Software708262da-40ab-41ee-bd99-fede968ecfcd1.3c7f4f0ca-eaca-4bcf-8021-e9c946ab25d0Pretax IncomeBillion Dollars2015-12-3127%32.62000-01-012000-12-3144%10.02011-01-012011-12-31Growth & ProductivityCapture new growth and improve productivity.3ef45595-d114-4b3e-a92a-dc22286f925b2We have become a globally integrated enterprise, to capture new growth and improve productivity.Global Integrationbe2e9049-e3d4-4b69-be06-0a8cfe5b750c2.15474a46c-f4a8-41fb-91f7-ebcc61b48146Growth Market Share of Geographic RevenuePercentageApproaching 30% of geographic revenue from growth markets by 2015302015-12-31IBM operations in more than 170 countries leverage the company’s global scale and expertise.Global integration of all our major enterprise functions—from service delivery to marketing—has enabled IBM to gain more than $6 billion in enterprise productivity savings over the past five years while improving quality.A globally integrated model allows us to focus resources on client-oriented work and enable rapid deployment of IBM capabilities to growth markets.222011-01-012011-12-31212010-01-012010-12-31192009-01-012009-12-31182008-01-012008-12-31172007-01-012007-12-31162006-01-012006-12-31112000-01-012000-12-31Alignment & GrowthAlign our business model with our clients’ needs and invest in future sources of growthd13e4d05-df52-4575-a5ea-2978482769d33By aligning our business model with our clients’ needs we generated superior financial results … allowing us to invest in future sources of growth and provide record returns to our shareholders.IBM Clientse370136f-38d6-4c4d-a257-f923d3efd9fcea684de5-2483-4ba3-befd-188374311196Pre-Income Tax MarginPercentageOur operating (non-GAAP) pre-tax income margin in 2011 was 20.2 percent, 10 points higher than in 2000. The primary driver of this performance was gross profit margin expansion, as a result of the shift in our business mix to more profitable, higher-value segments and improved productivity across the enterprise.20.22011-01-012011-12-3110.22000-01-012000-12-31918cc589-9c3d-4d74-8cee-755f2fae498dR&D InvestmentBillion DollarsAt the same time, we’ve increased R&D investment. Since the beginning of 2000, we’ve spent nearly $70 billion in R&D, enabling us to deliver key innovations and maintain U.S. patent leadership for our 19th consecutive year in 2011.702000-01-012011-12-3110.22000-01-012000-12-3159e1ff93-a44e-416e-a43d-c1db72c26b61Free Cash FlowBillion DollarsOur strong business model performance has resulted in consistently strong free cash flow generation. In 2011 our free cash flow was $16.6 billion—an increase of nearly $10 billion since 2000.16.62011-01-012011-12-31About $6.6 billion2000-01-012000-12-31cd422ee5-415a-4e25-96a8-76d8b11a5d91Capital ExpendituresBillion DollarsWe have invested more than $50 billion over the past 12 years to advance our capabilities, including a global delivery center in Columbia, Missouri, advanced semiconductor manufacturing in Fishkill, New York, and a research facility in Ontario, Canada.502000-01-012011-12-31c52973fc-ffb1-46b8-b54d-45b2602cfb0fAcquisitionsNumberWe expect to spend $20 billion in acquisitions over the 2015 Road Map period to support growth initiatives.2015-12-31Since the beginning of 2000, we have acquired 130 companies in strategic areas including analytics, cloud, security and Smarter Commerce. 130bd9193eb-6f07-4e25-b0a1-67b177e9f086Share Repurchase & DividendsBillion DollarsWe expect to return $70 billion to shareholders in our 2015 Road Map period—$50 billion through share repurchases and $20 billion in dividends.702015-12-31We have returned $133 billion to our shareholders since the beginning of 2000. At the end of 2011 our quarterly dividend per share was six times higher than 2000. During this period we reduced shares outstanding by one third. 1332000-01-012011-12-31Value & PerformanceDeliver long-term value and high performance for IBM stakeholders8af26342-efd6-411f-8d68-748fb130f15e4This delivers long-term value and high performance for all key IBM stakeholders—investors, clients, employees and society …IBM StakeholdersBeneficiaryIBM InvestorsPerformerBeneficiaryIBM ClientsBeneficiaryIBM EmployeesPerformerBeneficiarySocietyBeneficiarySoftwaref61b4438-aee5-4102-b9e1-d7bfd465997e4.133bb0262-4108-45f3-bf64-1e853b18ac61Segment ProfitPercentageSoftware becomes about half of segment profit502015-12-31Growth Marketsd509917f-ddef-4ab9-86ec-342609b51b7e4.284d2e56a-a1cf-44d1-b7fd-5e9cb101b3e8Geographic RevenuePercentageGrowth markets approach 30 percent of geographic revenue302015-12-31ProductivityTransform the enterprise to generate productivity5fb818f8-d0c5-42f4-a687-38d9f22c589b4.3c8bfc9d4-9bf4-43f9-960e-f9617da203e7ProductivityBillion DollarsGenerate $8 billion in productivity through enterprise transformation82015-12-31Capital ReturnedReturn capital to shareholders31c8af58-2838-4541-ad72-bf8bee12f37b4.448533243-33f7-479a-b6fd-8976aca67560Capital ReturnedBillion Dollars$70 billion of capital returned to shareholders702015-12-31Acquisitionsab6ca48a-177b-4f71-9ebf-08836e09b6aa4.5958579e9-31e4-46e3-b3dd-49c11ca2f0e5AcquisitionsBillion Dollars$20 billion in spending on acquisitions202015-12-31New EraDriving a new era of growth and leadership for IBM1317bc1d-1950-41a0-acaf-0b80c5ef30315…while driving a new era of growth and leadership for IBM…Our four complementary growth initiatives -- business analytics, cloud, growth markets and Smarter Planet -- target opportunities that are changing the global IT landscape. Beneficiary5a36648b-2826-446f-afad-ccfb4ceea0b1ae346000-de0d-41d1-92eb-92cf24a2155cRevenue GrowthPercentageWith strong contribution from these initiatives, IBM delivered 7 percent revenue growth in 2011.72011-01-012011-12-31b3aeeaf3-295e-4bc7-8244-daf2e93d662dGrowth Market Geographic RevenuePercentageGrowth markets approach 30 percent of geographic revenue302015-12-31222011-01-012011-12-31b74aa4e4-50d6-4b28-a75f-d4b3e24b50aaAcquisition SpendingBillion Dollars$20 billion in spending on acquisitions202015-12-31Growth MarketsInvest in the world’s emerging marketsdd01d5de-3aa0-497e-8547-1a1d39544e0c5.1The world’s emerging markets will drive more than 60 percent of global GDP growth in the next four years. Mazda Motor CorporationCollaboratorMazda Motor Corporation collaborated with IBM analytics, data modeling and traffic simulation experts to reduce human error in driving. The result was an early warning system using IBM analytics software that identifies accident-prone areas, warns drivers of danger and learns as conditions change.PerformerBeneficiaryGuangdong Hospital of Traditional Chinese MedicineGuangdong Hospital of Traditional Chinese Medicine worked with IBM Research to understand the effectiveness of traditional Chinese and Western treatments of chronic kidney disease. IBM information management and analytics software helps the hospital correlate patient information with demographics, such as age and gender, and relevant anonymized cases to improve outcomes, boost quality of care and reduce costs.PerformerBeneficiary44d8a85e-4596-4bf6-872c-47c358dfddc6CountriesNumberIBM is investing in more than 100 of these countries, which are building out critical infrastructure, developing strategic industries and responding to massive demographic shifts, such as rapid urbanization.1006e03c1bf-c88d-4281-aa6c-ed1745c1615fBranch OfficesNumberIn 2011, we opened nearly 100 new branch offices to expand our presence beyond large cities and beyond the BRICs (Brazil, Russia, India and China), and to participate in high-growth industries.1002011-01-012011-12-313320aa59-f8c0-4967-a0de-63923db19bb7Hubs of ExpertiseCreationWe are creating hubs of expertise around the world. These include the Institute for Electronic Government and the Energy and Utilities Solution Lab in China; Natural Resource Solution Centers in Perth and Rio de Janeiro; Banking Centers in Singapore and São Paulo; and a Latin American micro-financing center in Lima.In Africa, IBM is investing to bring expertise in areas like financial services. For example, we are working with five leading Kenyan banks on infrastructure projects and helping Safaricom, through a partnership with Vodafone, provide its M-PESA mobile money service to more than 15 million customers.Business Analytics3398b767-c90d-4e9e-bc6f-7d03051086ff5.2Organizations are reaching far beyond the structured tables of databases. They are analyzing the streaming, unstructured data generated by events as they occur in the world, and acting upon those insights -- from customer preferences or patient outcomes, to process inefficiencies or safety -- in real time. They are integrating analytics into the way they work.08267eac-5c44-424b-a3f4-fe2cb1faf31fSolutions & SoftwareIBM has the world’s deepest portfolio of analytics solutions and software; a leading position in powerful optimized systems; and the business and industry expertise of almost 9,000 business analytics and optimization consultants, 400 researchers and eight analytics solution centers. Companies AcquiredNumberIBM has acquired 28 companies to build targeted analytics and information expertise since 2005. 282005-01-011138df2a-bfe0-48d6-bcfa-21e6f7dfaf18Patents & TechnologiesWe have generated hundreds of patents a year in analytics, and invented breakthrough technologies like IBM Watson, a learning system that answers questions in natural language, and InfoSphere Streams, software that can correlate and analyze thousands of real-time data sources.CloudDeliver business and IT services over the network8d911812-5717-4805-b2c6-b229f84e4a165.3Cloud, which delivers business and IT services over the network, is transforming the way data centers are designed and software is developed, providing far more efficiency and flexibility. That has the potential to change the way many industries work. But it requires addressing important issues of security and privacy. So, enterprises seek not just clouds, but smarter clouds. IBM is helping them build private clouds in areas central to their business, while also enabling them, like consumers, to tap into cloud services provided by IBM and others.IBM is focused on the enterprise cloud... The IBM SmartCloud portfolio addresses the full scope of enterprise client requirements:EnterprisesBeneficiary0a143c92-80f7-472d-9659-e97f3d75ad68IBM Cloud Application UsersNumberWe have more than 1 million enterprise application users working in the IBM cloud ...b5756906-90f8-4751-af48-ad3bdcf8808eTransactions AnalyzedBillion Dollarsand analyze more than $100 billion in commerce transactions a year in the cloud. 10039ea64d8-7e30-4353-9a8b-e90e544da363Security Events MonitoredBillion Per DayWe monitor 13 billion security events every day 132a1d7525-7657-4865-826b-7773892d4790Researchers & DevelopersNumberand have more than 1,000 researchers and developers working on security and privacy breakthroughs.1000Private CloudsEnable clients to build private clouds.feff3976-b703-43ea-9ce7-ece75bb8eca75.4IBM SmartCloud Foundation enables clients to build private clouds.Dutch CloudDutch Cloud, a service provider in the NetherlandsInfrastructure Builderuses IBM SmartCloud technologies to build low-touch infrastructure-as-a-service for its small and medium-sized business clients.BeneficiaryPerformerNetherlandsBeneficiaryLockheed Martin Application DeveloperLockheed Martin uses IBM SmartCloud technology to develop mission critical applications and technologies and to support a broader evolution to cloud computing for the U.S. Government.PerformerBeneficiaryU.S. GovernmentBeneficiaryLucky BrandLucky Brand, a designer clothing retailerPersonalized Shopping is using IBM cloud-based analytics to personalize customers’ online shopping experience, resulting in improved customer loyalty and increased sales.77c6783c-3310-498c-8531-95db4f45e888Cloud Infrastructure ServicesOffer cloud infrastructure services managed and run by IBM.0ed230fd-6857-4eef-9701-2bf163ae65995.5IBM SmartCloud Services offers cloud infrastructure services managed and run by IBM.Beneficiarydbd0611e-89d2-41c4-9d97-e95009c2877bSoftware & Business ProcessesOffer software and business processes as a service.cfc9a993-3493-4fd2-9dec-2b378540249c5.6IBM SmartCloud Solutions offers software and business processes as a service.Beneficiary516f5e4c-229d-4792-80f6-280fbb363af8Smarter PlanetChange the way people, organizations and entire industries approach what they do62185e52-95a6-49df-97a6-71d664c9a45f5.7…and for the economies, cities and people of the world...The infusion of digital intelligence into the world’s systems is changing the way people, organizations and entire industries approach what they do -- how they interact, organize and create value. CitiesNowhere is the potential for transformation greater than in our cities. Around the world, city leaders are struggling with economic challenges, overtaxed infrastructures and dramatic demographic shifts. In more than 2,000 Smarter Cities engagements, we see forward-thinking leaders emerging with new approaches to make their communities smarter and to make them work better.BeneficiaryPeople of the WorldBeneficiaryOrganizationsBeneficiaryIndustriesBeneficiary994d8f14-25e5-4d15-87a1-596b36ad3b56Law EnforcementSmarter Law Enforcement2f4add72-a303-4a15-be43-3e8f58d674b55.7.1Inside the solution: The system relies on IBM predictive analytics software that correlates historic data with the latest incident reports to create multilayer maps of “hot spots.”Memphis Police Department Predictive AnalyticsMemphis Police Department precinct commanders start their day with data. A predictive analytics system looks for patterns in criminal activity that help the department see emergent trends in their communities in time to make a difference.Beneficiary8111d695-90af-43d8-9ef6-a162707c9189Water & Sewer SystemsSmarter Water and Sewer Systems4cb51fca-eacc-4c5c-bdad-105502f3627f5.7.2Inside the solution: The system integrates IBM asset management and geographic information software to locate and monitor assets such as pumps, fittings and other parts of the water infrastructure.San Francisco Public Utilities Commission Drawing on usage data and many other variables, San Francisco is predicting and preventing breakdowns and reducing pollution from its sewer system’s 1,000 miles of pipes and three treatment facilities, which together process 500 million gallons of wastewater and storm runoff per day during the rainy season.BeneficiaryPerformer9dc05484-1a26-4cdb-b90a-b406fd893289Government ServicesSmarter Government Servicesb43fa7cb-c3cc-4626-a2f7-89de6c0c71235.7.3Inside the solution: The solution was created by IBM with the support of TIS Innovation Park, developed on an IBM application server, with data management and messaging software integrated with Android mobile devices.Bolzano, Italy, Remote Patient Monitoring As part of a pilot to extend healthcare services without increasing costs, elderly citizens in Bolzano, Italy were given access to advice and medical attention from their homes, via mobile devices. In addition, wireless sensors monitored the environment within the homes, generating alerts delivered via SMS text message, email and Twitter to family members and social services professionals.BeneficiaryPerformer4ad8249c-64cd-408a-b339-6a7aa3d90f10TransportationSmarter Transportation0a46466d-6b6c-4891-9b03-d99bbae957b45.7.4Inside the solution: The Authority’s fare processing clearinghouse uses IBM data management, analytics and transaction processing software running on IBM Power systems.Singapore’s Land Transport Authority Singapore commuters move easily among all forms of public transportation, thanks to a smart system that charges by distance, not by mode of transport. A highly intelligent algorithm constructs the ideal journey for each commuter across rail and bus lines. In the process, the Land Transport Authorty gets real-time insight to anticipate capacity needs.Beneficiary090ae340-a16c-49cb-9dee-8a3828caee1aOperations CenterSmarter Operations Centerb63f2413-0857-43ee-b18c-09367aa88b065.7.5Inside the solution: The Intelligent Operations Center combines patented analytics technologies, created by IBM Research in collaboration with the city, and IBM collaboration, analytics and asset management software and systems integration expertise.Rio de Janeiro’s Integrated Operations Center Dashboard OperatorRio de Janeiro’s operations center provides a single dashboard of the city’s critical systems. Information on weather, traffic and medical services helps city agencies anticipate looming problems, engage citizens as part of the solution and plan for major events, like the upcoming World Cup and Olympic Games. A predictive weather forecasting system designed by IBM researchers helps model flooding patterns, identifying where events such as mud slides are likely to occur.BeneficiaryBeneficiarye6b5fb96-23b9-4f43-8a91-c4a227d1362c2012-03-312015-12-312013-09-02http://www.ibm.com/annualreport/2011/ghv/OwenAmburOwen.Ambur@verizon.net