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    dear fellow investor, This is my last annual letter to you. By the time you read this, Sam Palmisano will be our new Chief Executive Officer, the eighth in IBM’s history. He will be responsible for shaping our strategic direction, as well as ibm annual report 2001 leading our operations. For a discussion of IBM’s performance in 2001, I invite you to read Sam’s first letter to shareholders, starting on page 45. I want to use this occasion to offer a perspective on what lies ahead for our industry. To many observers today, its future is unclear, following perhaps the worst year in its history. A lot of people chalk that up to the recession and the “dot-com bubble.” They seem to believe that when the economies of the world recover, life in the information technology industry will get back to normal. In my view, nothing could be further from the truth.

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    chairman’s letter 1 financial charts 6 sixteen decisions that transformed ibm 9 seven shifts that will transform the future 42 ceo’s letter 45 financial highlights 48 financial report 53 stockholder information 107 board of directors and senior management 108

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    chairman’s letter A massive shift is under way in our industry. You may have become unimportant. They now sit at the table think I mean the transition to a networked world. where technology is translated into business value. And After all, IBM was one of the first to recognize this their traditional bailiwick of infrastructure, too, has been change and the impact it would have. And make no mis- transformed by the networked world. But there’s no take, we are experiencing an explosion of technological question that business strategy now sets the technology innovation that will lead to permanent changes in busi- agenda, not the other way around. ness, government, education, health care and every other Prior to joining IBM, my career as a management area of human endeavor — as every significant institution, consultant and executive took me inside the inner work- every product and service, as well as billions of people, ings of many industries. So I was surprised, on entering become permanently “connected.” this one, to learn that the computer industry had been But that’s not the shift I’m talking about. The revolution able to get away with inventing new things and just I’m describing is that customers are finally driving the “throwing them over the wall,” leaving customers to figure direction of the information technology industry. out how to integrate and apply them. That wasn’t easy for those customers, for a lot of reasons. One was the Technologists Talking to Technologists absence of common standards. The industry model was The first 30 years of this industry’s history consisted of designed around a variety of proprietary architectures the technology inventors inside I/T companies talking (which, to be candid, technology providers were using to to the technology implementers inside businesses and control customers). institutions. For most of that era, the applications of This came as quite a shock to me, since all my prior the technology were fairly limited — focused on the experience had taught me that you either give the automation of back-office processes like accounting customer what he or she wants, or the customer walks. and payroll, or desktop applications such as word process- Well, guess what? Customers have finally put on their ing and e-mail. walking shoes. They’ve made it emphatically clear to this Then, starting in the early 1990s, businesspeople began industry that they will no longer cede control to the to understand the importance of information technology makers of the technology. to everything they wanted to do. It’s gotten to the point That means customers are demanding integration, where it’s almost impossible to distinguish between the and refusing to accept piece parts that aren’t designed business strategy and the I/T strategy of any successful and delivered to work together. It means they are enterprise. Approximately half of the investments that demanding solutions, not “speeds and feeds.” And it customers make in I/T are now driven by line-of-business means they insist that the technology adapt itself to managers, not chief information officers. This is a the needs of their business and help them gain some remarkable shift in just five or six years. Not that CIOs tangible competitive advantage — to squeeze cost from 1

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    chairman’s letter their supply chains, to create lasting relationships with starting our trek from an elevated base camp, or even customers, to empower their key constituencies (internal from sea level. This annual report captures a sense of the and external) with tools and knowledge. sheer range of what was involved to pull it off. Through it all, our guiding light came down to two A Tale of Two Revolutions words: customer focus. It has proved both galvanizing So the past decade hasn’t seen just one major shift, it’s seen and clarifying, serving as the criterion for reexamining two. For IBM, this was good news. Even in the depths of a whole lot of dogma, and for resolving many of our our decline, in 1993, it was obvious that no other company seemingly intractable internal debates. had both the technical expertise to win product battles Was it okay for IBM Global Services to recommend against competitors and the business knowledge to become competitors’ hardware or software? Should the IBM soft- a trusted partner for its customers. Contrary to the con- ware business develop solutions for Sun or HP servers? ventional wisdom of pundits, analysts, the media (and, of How about letting our hardware units support Oracle or course, our rivals), IBM still had a raison d’être. Microsoft products? In every case, the answer was: We’ll Of course, we had to unlock both capabilities, and, in do what customers want. fact, make them feed each other. That goal — creating a Once we started really listening to customers, it’s business model that uniquely combines technical and striking how many aspects of our business improved — business innovation, a company with one foot in the lab and not just on the market-facing side, but also in and one in the boardroom — underpins the new IBM we procurement, with our suppliers and even in technology, set out to build. where the quality and quantity of our output have bene- Thus, the big decision we made early on — to reverse fited enormously from exposure to the marketplace. the then-current plan to break up the company and This is important. The relationship between business commit instead to making all of IBM’s parts work and technology isn’t one-way. Technology itself isn’t together — was a fairly easy one. It didn’t involve a lot of some force of nature that we simply direct or use. It, too, research or market analysis. The real question in my mind is the product of human intentionality and choice. So yes, was not “Should IBM exist?” but rather, “Can we become we apply technology to solve customer problems. And what this new era demands?” Put another way: Could we we also apply marketplace knowledge to help shape our aspire to lead again? I can’t think of many companies, in research agenda — whether it’s the direction of the econ- any industry, that have led two eras. But I can tell you omy, or growth opportunities, or emerging forms of now that, even in the dark days, we began believing that governance and education, or demographic and social we could defy history. trends, or discoveries in other fields such as life sciences. Of course, that’s like deciding to climb Mount Everest. A decade ago, the two were disconnected — and one of You still have to climb the mountain! And we weren’t them was running amok. Technology was being pursued for 2

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    chairman’s letter its own sake, and was either buried in labs (in the case of 2 . TH E N EW B US I N E S S MODE L : Services-Led IBM), or generating premature visions of business triumph A lot of people now understand the lead role played (in the “build it and they will come” fantasies of the dot-com by I/T services. However, building up the requisite skill paper billionaires and “new economy” moguls). base, not to mention an appropriately sophisticated We needed to reassert a proper balance. And that led, management system, is nontrivial. You can’t buy your in IBM, to a handful of strategic bets on the future drivers way into it, or just go out and hire a lot of smart people. of our industry. I would highlight four. You need a certain scale and range of disciplines. Also, you can’t just layer one kind of expertise on top of 1 . TH E N EW I N DUSTRY MODE L : Innovate or Integrate another. This isn’t just filling up two beakers, one To survive, you have to do one or the other really well. labeled “customer” and the other labeled “technology.” To lead, you have to do both. It takes years and a lot of knowledge to be able to mix The vertical integration of the technology industry those elements properly. in the ’60s and ’70s had given way by the early 1990s to a Plus, services is rapidly expanding and evolving in dizzying array of “pure play” companies (specialists in some surprising ways. It now encompasses not just labor- PCs, databases, application software and the like). This intensive consulting, but also the utility-like delivery of explosion of entrepreneurial and technical creativity was, computing — from applications, to processing, to storage. on the one hand, a testament to our industry’s enduring We see the beginnings of this trend in Web hosting power. It’s a well that will never run dry. and our own “e-business on demand” offerings, where Businesses, however, desperately needed someone to customers don’t buy computers, but acquire computing help them make sense of this chaos. Hence, the emergence services over the Net, on a pay-for-use basis. To play over the past several years of technology integrators — here, as well as in the globally booming strategic out- and the rush of traditional professional services companies sourcing arena, you have to be willing and able to use into e-business consulting. your balance sheet to support growth. As I/T moves out of the back office and into the execu- IBM, of course, had deep experience in I/T services. tive suite, value and growth in our industry are driven less But in our old business model, it was buried inside than they used to be by technical innovation or product a revenue stream dependent on selling hardware. We excellence, as necessary as those remain. What matters had to extract our service operations and turn them most today is the ability to integrate technology into the into a profit center in their own right. That involved a lifeblood of business. The people who help customers lot of trial and error. But today, IBM Global Services apply technology to transform their businesses have has evolved into the world’s largest and most innova- increasing influence over everything from architecture and tive consultancy, systems integrator and strategic standards to hardware and software choices and partners. outsourcing leader. 3

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    chairman’s letter 3 . THE NEW COMPUTING MODEL: Infrastructure Plus Ubiquity mainframe. Like IBM, it’s back — transformed, more It became clear to some of us in the mid-’90s that the PC- powerful, and doing quite nicely. driven, client/server computing model had run its course, • In software, through acquisition and internal develop- and was being replaced by network-based, distributed ment, we built the biggest middleware business in the computing. This meant that, on one end of the scale, world. That’s fortunate, because middleware— which helps the workload was moving back to the infrastructure — customers integrate their applications and processes — to industrial-strength servers, storage, databases and has emerged as the fastest-growing sector of the software transaction-management systems. On the client end, it industry. As a development platform, it’s becoming more has spawned a proliferation of network-connected devices important than operating systems. And that, in turn, has of all kinds: PDAs, cell phones, videogame systems, set-top helped IBM Software to become more deeply integrated boxes and beyond — to the whole pervasive-computing into the wider software industry than ever before, much world of embedded components in everything from better positioned to share in its future growth. household appliances, to medical devices, to cars. And • In component technology, what began as a search for a tying it all together was an emerging category of software new revenue stream to support our R&D expenses turned with a wonderfully descriptive name, which hardly into a significant growth engine in its own right — our anybody had heard of five years ago — middleware. OEM, or original equipment manufacturer, business. Yes, It stood to reason that, in a distributed model, prof- that part of IBM has been hit by the general downturn itability would be distributed, too. So we zeroed in on in technology purchasing. But we remain confident in three sweet spots of the new computing “stack”: enterprise the long-term future of the business, which is based on systems, integrating middleware, and the specialized, exactly the kinds of specialized components for which high-value components (such as custom chips) that turn demand will be greatest in a post-PC world. every sort of device into a computer. This is anything but a “portfolio” approach. We’re not Of course, we are no longer alone in drawing this new just hedging our bets, and we’re certainly not trying to be computing model. But while pretty much everyone now all things to all people. Our choices have been about agrees on the outlines, there is much disagreement about both what businesses to pursue aggressively, and what the approach. Basically, it comes down to whether you ones to exit (such as enterprise application software and believe in interoperability and common standards or not. networking hardware). We have certainly placed our bet. • In enterprise systems, we retooled our storage family 4 . TH E N EW MAR K ETP LACE MODE L : An Open Playing Field and entirely revamped and consolidated our server lines. A lot of companies — including many of our leading And, let the record note, we didn’t accept another piece competitors — still don’t acknowledge or fully understand of conventional wisdom — we didn’t give up on the that common standards are essential in a networked 4

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    SAM U E L J. PALM I SANO JOH N M. THOM P SON LOU I S V. G E R STN E R, J R. President and Chief Executive Officer Vice Chairman of the Board Chairman of the Board 5

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    4.44 $ 100 $ 10 $5 4.35 4.12 8.1 88.4 87.5 7.7 7.7 85.9 3.29 81.7 6.3 3.00 6.1 78.5 5.4 75.9 2.50 80 6 3 71.9 4.2 1.76 64.5 64.1 3.0 62.7 1.24 60 2 1 40 -2 -1 -2.17 -5.0 20 -6 -3 -3.55 -8.1 0 -10 -5 92 93 94 95 96 97 98 99 00 01 92 93 94 95 96 97 98 99 00 01 92 93 94 95 96 97 98 99 00 01 R EVE N U E N ET I NC OM E EAR N I NG S P E R S HAR E — DI LUTE D ($ in billions) ($ in billions) $ 20 39.7 45% 39.0 35.1 32.6 29.7 24.8 16 27% 14.3 18.5 14.3 11.8 12 9% 10.7 10.3 10.1 9.3 9.3 8.9 8.3 8 -9% 6.3 -15.4 4 -27% -35.2 0 -45% 92 93 94 95 96 97 98 99 00 01 92 93 94 95 96 97 98 99 00 01 CAS H F LOW F ROM OP E RATION S R ETU R N ON STO CK HOLDE R S’ EQU IT Y ($ in billions) 6

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    chairman’s letter world, and that no one will ever again control customers scientific and market-driven; able to create intellectual through proprietary technology. capital on a worldwide scale, and to deliver it to a customer We can certainly appreciate their struggle. We’ve had of one. This new breed continually learns, changes and to turn a company that long ago made its fortune from renews itself. It is tough and focused — but open to new proprietary technologies into one that saw the benefits of ideas. It abhors bureaucracy, dissembling and politicking. openness. Maybe it’s precisely because we were so acutely It rewards results. Above all, it covets talent and passion aware of the siren call of proprietary control that we for everything it does. have learned to resist it. But one thing is apparent: In a It’s hard work— the hardest any business can undertake, customer-driven world, open architectures and common in my view— but we’re making good progress. From a standards are inevitable. changed approach to hiring and performance-based com- Today, we are focusing all our technical expertise and pensation; to groundbreaking work on distance learning; marketing energy — previously devoted to creating and to providing the tools, opportunities and flexibility for marketing self-sufficient systems — toward reimagining employees to control their own work/life balance; we and rebuilding them for open platforms. We now share are creating not just the theory, but also the practice— our emerging software products with the developer and the mindset — of a true e-business. community; license our technology and patents; and This is a very different place from the one I joined champion common standards at all levels, from Linux, nine years ago, in many ways that are obvious, even to to Java, to Web services. Most important of all was the the casual observer — and in some that aren’t, even to the work we undertook to open up our technical architectures. observant insider. It is smarter, more unified and much, Absolutely every piece of IBM hardware and software much faster. Instead of consistently resisting change, today is a fundamentally different beast (and a more more IBMers now lead it. Our employee population is socialized one) than it was ten years ago. as skilled and comfortable collaborating online — across We know what it’s like to be on the wrong side of history. geographies, functions, roles — as any I’ve seen. And The future won’t be kind to those who ignore this lesson. we are even learning to make a virtue of our size and complexity, becoming more adept at working the matrix * * * Put these models together, and you see a changed com- to get things done. petitive landscape with very new dynamics. There will be a different lineup of winners and losers. And at the head Farewell of the pack, we will see the emergence of a new type of Nine years! As must be obvious by now, I am not exactly enterprise with a whole new type of corporate culture. ready for retirement. And I would love nothing better We’ve been building such a company for nearly a decade: than to help drive, and learn from, all that I see happening big but fast; entrepreneurial and disciplined; at once in the laboratories of IBM and the work we’re doing with 7

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    chairman’s letter customers — everything from “smart dust” to e-sourcing, Thanks to a smart, committed board of directors, who from global e-learning to e-government, from life sciences provided wisdom, guidance and support for an agenda to grid computing. What a world is hurtling toward us! full of risk-taking change. However, a decade or so is long enough to be the Thanks to the many IBM executives who gave me a leader of a large, complex company like IBM. To win in chance, who helped me learn and supported me in the this industry, you’ve got to get out in front of the big early days — when they could very easily have been anti- shifts that come along about every ten years. You need bodies resisting this invader from outside. fresh thinking and the courage to lead wrenching change. And, thanks — 320,000 thanks — to all my colleagues in With e-business, we caught the wave early. We bet the this magnificent company. No matter what the challenge — company on the networked world, and that will serve from IBM’s own near-death experience, to Y2K, to dot-com IBM well for years. But I’m sure that Sam will face, during mania, to recession, to 9/11— IBM employees blessed all his long and illustrious career, another major shift. When of us with their grit, their passion, their compassion and it comes, I hope he throws out everything Gerstner ever their class. did. Adjusting to the market’s evolution is why IBM is I’m proud to have served and worked with all of you. now succeeding — just as an inability to do so was once I’m grateful for all that you’ve taught me, and for sharing IBM’s fundamental failure. with me the business opportunity of a lifetime. We see fascinating hints already of the company IBM And now — go get ’em. will become. I am confident that, with Sam Palmisano’s leadership, the best is yet to come. As Chairman of the Board for the remainder of this year, I will continue to be involved in any way that Sam desires. But my time as IBM’s leader is over. It has been an enormously exhilarating run, Louis V. Gerstner, Jr. and I have learned more, much more, than I ever expected. Chairman of the Board I don’t comfortably express my deepest feelings in public. So let me just say, to all my colleagues, all our loyal customers, all our invaluable partners, and to my friend and worthy successor — thank you. Thanks to the IBM customers who rooted for us to come back from the brink. Thanks to our shareholders, who took the time to understand what was happening in IBM against the back- drop of industry change. 8

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    Sixteen decisions that transformed IBM

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    The Wall Street Journal, Tuesday, November 10, 1992

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    no. 1 We decided not to die K E E P I NG I B M TO G ETH E R Did the world need a company like IBM anymore? In the early 1990s, our way of computing and our way of working with customers had fallen out of vogue, and we were on a fast track to being dismantled, from within. Then, in the spring of 1993, new leadership brought a new vision — and a surprising decision. IBM would stay together. We believed niche players weren’t the future. In fact, breaking up the company would have been the end of everything IBM stood for. We made a big bet that customers needed a partner who could both create technologies and integrate them— with each other, and with the customer’s business processes. At the time, it was a gutsy call. They always are when you’re alone. But we decided that we should be true to ourselves. It all started with that.

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    Chess Grandmaster Garry Kasparov versus IBM supercomputer Deep Blue, May 11, 1997

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    no. 2 We reaffirmed our technical heritage R EVITALI Z I NG I B M R E S EARCH AN D DEVE LOP M E NT For us, IBM’s heritage isn’t captured in the volume of patents we earn, as impressive as that is. (In 2001, we became the first company to receive more than 3,000 U.S. patent awards in one year. It was also the ninth straight year we were awarded more patents than any enterprise in any industry.) Nor is it mostly a function of the discoveries in new fields that are pouring out of our labs, as exciting as those are. (On the horizon, we look to the promise of our pioneering work in areas such as autonomic systems, nanotechnologies and quantum computing.) For IBM, the true heart of our technical and scientific heritage is in doing research and development that matter. IBM’s heritage is technology that changes how business is done, how states can govern, how students can learn . IBM’s R&D finds its ultimate scorecard not in scientific journals, but in the impact it has on the fundamental problems and opportunities that exist in the world. Maybe that’s why one Sunday evening in 1997 was such a signal moment. A supercomputer named Deep Blue defeated the reigning chess grandmaster — and announced that IBM was, once again, the place where grand challenges are taken on, and where paradigms get shifted. In 2001 our strained silicon technology stretches silicon to speed the flow of electrons through a chip—potentially boosting chip performance or cutting power consumption by 35 percent our carbon nanotube technology uses tiny cylinders of carbon atoms—as small as 10 atoms across—to build transistors, which could lead to smaller, faster, lower-power computer chips our researchers execute the most complicated computation ever performed on a quantum computer, a type of experimental system that harnesses certain properties in billions of atoms to perform calculations exponentially faster than conventional computers

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    K EVI N B I S HOP E NA D. CANTU Director of Marketing Supercomputer Storage UK/Ireland/Netherlands/ and Systems Administrator South Africa camp springs, maryland london, england Spends 100% of her time at Works 20% of his time from The National Center for home, 40% on the road with Environmental Predictions, customers, partners, and the maintaining the NCEP’s IBM team that runs end-to-end operational weather and marketing programs in Europe. climate forecasting system. . P R I SCI LLA E. HAY K I S HOR E CHAN NABASAVAIAH Senior Problem Manager Executive Architect IBM Baulkham Hills Centers for IBM Command Centre Operations e-business Innovation sydney, australia chicago, illinois Monitors the I/T systems Spends 40% of his time for more than 80 customers in customer locations, the simultaneously from rest in the IBM multimedia the IBM Global Services center solving complex command center. e-business problems.

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    no. 3 We rewired the enterprise TRAN S FOR M I NG OU R CR ITICAL P RO CE S S E S AN D B EC OM I NG AN E-B US I N E S S We had met the enemy, and it was us. Too slow, too costly, too insular. So in 1994, we rolled up our sleeves and started to trans- form the way IBM works, from end to end. Most companies attempt one major reengineering project at a time. We launched 11— from the way we manage internal information systems, to the way we develop products and serve customers. It was ambitious — but it wasn’t enough. We came to realize that important organizational change also has to happen in a company’s social structures — in how people understand what is expected of them, in how they are rewarded and managed, in the ways that ideas are shared. In order to deliver on our value proposition, we had to change the very nature of work. Speed since 1993, cycle time for large systems development has been slashed 56 months to 16 months today. for low-end systems , it’s seven months—down from two years Superior Quality between 1997 and 2001 , the hardware reliability of our high-end servers improved by more than 200 percent while computing power increased by a factor of four Simplicity since 1993, we have reduced I/ T spending by 31 percent (e.g., by consolidating data centers)—for a total savings of more than $ 2 billion Trust employees regard ibm’s intranet as their most trusted source of company information—surpassing external media , coworkers and their immediate managers

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    no. 4 We didn’t take“no” for an answer W HAT TH E LOTUS AC QU I S ITION TAUG HT US History records that on June 5, 1995, we launched the hostile takeover of Lotus Development Corp. At the time, it was billed as the largest software acquisition ever. It was actually much bigger than that. It was the moment that signaled we were out of survival and turnaround mode; when we asserted the will to lead again. In acquiring Lotus and its elegant collaborative software program, Notes, we simultaneously filled a hole in our portfolio, made a bold move into the world of networked computing, and announced that IBM was back.

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    With its debut in 1964, the IBM System/360 defined an era in high-end computing. And the name was no accident. The 360, as in the perfect circle, was the paradigm of proprietary systems architecture — its own self-contained world of hardware, software and peripheral equipment.

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    no. 5 We fought for an open world TH E E N D OF P ROP R I ETARY C OM P UTI NG AT I B M IBM used to be the poster child for closed, proprietary computing. In the early days of the information technology industry, computer makers built systems that were compatible with their own product lines (mostly), but not with anyone else’s. Even today, that’s the way a few I/T companies still build their products— locking in customers and locking out flexibility and choice based on architectural “choke” points. But not IBM. By the 1980s, it was clear that any high-tech company that tried to impose closed technology on customers would be standing on the wrong side of history. Getting to the right side wasn’t easy. It involved opening up our software to run on all the industry-leading platforms, and supporting non-IBM software on our hardware. Even our services business had to change — recommending, installing and supporting non-IBM products. We did all that, and along the way built a reputation for backing any effort, with any vendor or any customer, to give our products an even more open identity. ibm produces more server-based middleware on the windows nt operating system than microsoft ibm actively backs the global grid forum community ’ s vision of open standards for the “ grid ” networks that will unite computer systems around the world, regardless of their location, operating system or maker ibm is a leading services provider for oracle and computer associates products 1,000 ibm developers — more than at any other company — are working on linux we donated more than $ 40 million in application development tools to a new, independent, open-source software community called eclipse

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    W I LLI E NATHAN Software Engineer GOP I ADVAN I S. LYN N SAN DE R S FOR E M I K E HARTU NG Product Development Team Leader, Advisory Engineer, Distinguished Engineer, Wireless RF Products eServer xSeries Architecture and Technology Enterprise Storage Systems MARCIA S P R I NG F I E LD Manager, BOAS B ETZ LE R D ONALD F E RG USON Mobile Hardware and Software Solutions Senior Software Engineer IBM Fellow RAVI AR I M I LLI IBM Fellow and Chief Architect, eServer Microprocessors & Systems N E LSON M. MAT TOS S USAN CAU NT DAVE BOUTCH E R Distinguished Engineer and Director, Hardware Management Console Project Manager, Senior Technical Staff Member, Information Integration — Data Management pSeries iSeries Linux Development

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    no. 6 We decided our products would set the standard NOT ON P LAN ET I B M, B UT ON P LAN ET EARTH For a long time, we won with such consistency that we started to look for another challenge. We began to compare the performance of our products against our own prior gener- ation, regardless of what our competitors were doing. By the early ’90s, it was clear we were playing the wrong game. So we stopped the internal benchmarks, and got serious about winning against the best the marketplace had to offer. That decision forced us to speed up, to bring new tech- nologies to market on shorter and shorter cycles. And it also triggered a chain reaction across the company — changing our investment and acquisition strategies, our approach to market analysis and the way we prioritize research efforts. Today, we are the number 1 or number 2 company in servers; collaborative software; custom logic; middleware; I/T services; maintenance; Web software; high-end disk storage; distributed application software; and total software. It’s remarkable how much more you win when you’re in the right game.

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    0 $4 $8 $12 $16 $20 $24 $28 $32 $36 IBM forms Integrated Systems Solutions Corporation, 13.0 1991 ISSC — the precursor to IBM Global Services — and the IBM Consulting Group. IBM North America’s services business grows 38 percent 15.0 1992 to $4 billion. IBM becomes the largest services provider in Europe with revenues of $2.3 billion. IBM develops its first comprehensive companywide services 17.0 1993 strategy. IBM Japan Services Company is formed. IBM Global Network is created, linking more than 16.9 1994 20 separate IBM-managed networks worldwide. IBM becomes the world’s largest I / T services provider, 20.1 1995 surpassing EDS on a services-only basis. IBM’s services businesses and the IBM Consulting $ 38 billion 22.3 1996 Group combine to form IBM Global Services. Backlog IBM Global Services hires 15,000 new employees. IBM Australia takes $ 43 billion 109,000 25.2 1997 over Telstra’s data center, creating the largest data center in the Backlog Employees Southern Hemisphere. Total IBM Services Revenue ($ in billions) IBM Global Services signs more than $30 billion in new business. $ 51 billion 126,000 28.9 1998 Of 38 contracts worth $100 million or more, nearly half are from Backlog Employees outside the United States. IBM sells its data network infrastructure and connectivity operations $ 60 billion 138,000 32.2 1999 (the IBM Global Network) to AT&T for $5 billion. Backlog Employees IBM Global Services adds hosted storage and storage management $ 85 billion 149,000 33.2 2000 to its portfolio of network-delivered services. Revenue from e-business Backlog Employees services grows more than 70 percent. IBM services revenue surpasses IBM $ 102 billion 148,300 35.0 2001 hardware revenue for the first time. Backlog Employees

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    no. 7 We grew a business from the ground up TH E B I RTH OF I B M G LOBAL S E RVICE S Put another way, we realized that the future of the computer industry wasn’t in computers. In 1991, we were a $64.8 billion company that got less than $6 billion from non-maintenance services. Ten short years later, the business of information technology services gener- ated more than 40 percent of our $86 billion in sales and became the single largest source of revenue in our portfolio. How did that happen? It was partly the result of old-fashioned hard work and serious commitment — growing customer by customer; building disciplined management and financial systems; and investing to hire and train experts in everything from I/T consulting, to systems architecture, to Web services. We used our financial strength to fund the expensive push into outsourcing. And we placed informed bets on the future — in areas such as I/T utility services (“e-business on demand”) and hosted storage. But most important, the success of IBM Global Services comes from something very simple — a clear understanding of customers’ needs. We saw that technology and business were converging to create something new — and challenging — for every kind of enterprise. We had the deep experience in both areas to help our customers combine them most effectively.

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    IBM and Computer & Technologies Software Ltd. form a Sharp and IBM jointly form a new solutions company strategic alliance to provide e-business solutions in China. and enter into a strategic outsourcing partnership. IBM and Shanghai Telecom form a strategic alliance to IBM and The Bank of China’s Jiangsu Branch provide e-business hosting services. celebrate the installation of the 100th Shark Enterprise Storage Server. IBM and the Korea Institute of Science and Technology Malaysia’s CyberVillage Sdn Bhd joins IBM’s Information sign Asia’s largest supercomputer deal. Accelerated Growth Program.

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    no. 8 We put down roots in Asia CAPTU R I NG N EW MAR K ETS For IBM, Asia isn’t an “emerging market.” We started our first operations there in 1925, and have built a $17 billion franchise — which alone would make our Asian operations one of the largest information technology companies in the world. Identifying the world’s emerging growth markets isn’t that hard. The trick is operating inside those markets as a local enterprise, one that understands business practices and cultural traditions that can form barriers-to-entry more formidable than tariffs or entrenched competitors. Until the mid-’90s for example, Asian companies staunchly resisted strategic outsourcing, long after other parts of the world had embraced it. When we signed our first outsourcing con- tracts in Japan, it was because our customers understood that their employees were not moving to a foreign company with a local presence, but to a Japanese company with very familiar values and principles. strategic outsourcing revenue in asia went from nothing in 1995 to $2.6 billion in 2001 , with 47 percent growth at constant currency last year in japan , services revenue in 2001 increased 25 percent in a very difficult economy our staff in the people ’s republic of china stood at 120 in 1991. that ’s grown to a workforce of more than 11,000 today, including wholly owned subsidiaries and joint ventures. revenue increased 30 percent to $1.5 billion in 2001

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    PAU L CHOU PAU L BOR R E L DAVI D E. JOH N SON KATH E R I N E B ETZ DAVI D NAHAMO O Emerging Interactive Spaces Product Lifecycle Text Mining and Secure Electronic Payments Human Language Management Computational Linguistics Technologies IBM and Steelcase Inc.: IBM, The Bank of innovative work environ- IBM and Dassault Systèmes: IBM and Wachovia: Tokyo-Mitsubishi and IBM and T. Rowe Price: ments that integrate advanced solutions that a system that learns and The Industrial Bank the first natural language architecture, furniture enable product innovation, performs fast, accurate and of Japan: a framework understanding system that design and advanced I/T to design collaboration and high-volume text documen- for global financial allows 401(k) participants increase creativity, improve the sharing of product tation categorization. institutions and their to manage their accounts comfort and provide more data with pervasive corporate customers simply by speaking into personalization. computing technology. to use the Internet the phone. for payments. IBM Researchers who work on first-of-a-kind projects with customers, The Thomas J. Watson Research Center

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    no. 9 We brought the marketplace into our labs B R I NG I NG CUSTOM E R FO CUS TO OU R TECH N ICAL C OM M U N IT Y “IBM products aren’t launched. They escape.” During the early 1990s, we heard that frequently, both from customers and from our own scientists, engineers and developers. So we set to work reinventing the way we create, develop and deploy new technologies. We got innovations to market much faster, but we also found we had to do the reverse— bring real- world customer wants and needs into our laboratories. Today, the linkage between our research and development labs and the marketplace has never been tighter. At the same time our researchers are chasing computational grand challenges or pioneering the frontiers of material science, we’re just as apt to be building prototype solutions with a customer. In fact, one quarter of our researchers are involved in this kind of joint project. Ideas flow in. Technologies flow out. The result is a new type of creative chemical reaction — between the discoveries of the lab and the immediate needs of business — that opens up new possibilities in both.

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    N I NTE N D O CANON e.DIG ITAL DE LL GameCube PowerShot S30 Treo 10 Digital Inspiron 8200 Notebook Computer Digital Camera Music Jukebox

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    no. 10 We shared the crown jewels B U I LDI NG TH E OE M B US I N E S S There was a time when all our component technologies, such as semiconductors and hard disk drives, went inside our own products. And only there. That was then, this is now. In order to support our massive investments in R&D, we needed additional revenue streams, so we began doing something previously unthinkable — selling our technology products to other high-tech companies. Fortunately, our technology was so good that we sold a lot of it — multibillion dollars’ worth, creating a large OEM (origi- nal equipment manufacturer) business. But that was just for openers. Now is when it gets interesting. We’re entering a period of explosive demand for semi- conductors— from processors for the largest servers to chips in everything from your car to your microwave oven, plus billions of Net access devices like intelligent cell phones or PDAs. Every one of those devices needs memory, storage and communications capability, in addition to the processor. And for every kind of device, there’s a slightly different kind of chip design. This is a good time to have the largest custom chip business in the world. We do. In 2001, IBM was one of only two top-30 chip makers that grew revenue. C OM PAQ N I KON F RONTI E R LAB S e.DIG ITAL KYO CE RA M ITA iPAQ Pocket PC Coolpix 5000 Digital Camera Nex II Digital MXP 100 Digital ECOSYS Printer Audio Player Audio Player/Voice FS-1800 Recorder

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    January 2002

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    no. 11 We didn’t give up on the mainframe A R ETU R N TO E NTE R P R I S E C OM P UTI NG “ i predict that the last mainframe will be unplugged on march 15 , 1996.” Stewart Alsop, InfoWorld, March 1991 In 1991, Stewart Alsop was far from alone. Most respected industry pundits were declaring the end of the “mainframe era.” So we don’t hold it against him. We’re just glad he has the grace and good humor to see things differently today. To be fair, the “mainframe,” circa 1991, was a dead end. But we believed (along with a lot of our customers) that this way of computing— serious, secure, industrial-strength— would always be in demand. So we stuck with “big iron,,” but reinvented it from the inside — infusing it with an entirely new technology core, reducing its price, and building support for open standards and operating environments like Linux. Since 1992, shipments of mainframe computing capacity have increased more than 30 percent annually. And in the years since the last one was to have been unplugged, our mainframe business has generated revenues in excess of $19 billion. “ it ’s clear that corporate customers still like to have centrally controlled , very predictable , reliable computing systems—exactly the kind of systems that ibm specializes in.” Stewart Alsop, February 2002

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    J I M HAN EY Vice President Architecture and Planning whirlpool corporation “In today’s economy the investments “In our business, the supply chain we make in technology have to is as important to our competitive pay back. Our Tradetopia extranet advantage as the quality of our assists sales managers and food products. Our WebSphere-based brokers in planning and tracking trade promotions and in handling partner trade portal dramatically deductions. It produced 100 percent improved ordering time and cut our ROI in under a year.” costs by more than 80 percent.” DAN I E L P. DI LLON President and Chief Executive Officer welch foods, inc. P H I LI P F. MO ON EY Director, Corporate Archives the coca-cola company “In order to understand our brands and their positioning, our employees have to be steeped in the traditions, history and imagery of our company. We’ve been able to bring to life thousands of video clips, photos and documents and make “Flexible and efficient management of them instantly available to our associates CNN’s huge, daily volume of content is all over the world.” one of the keys to our success. Extending content — such as our 150,000 hours of archive content in a digital world — will be done with enterprise-level media management systems via IBM middleware.” GOR D ON CASTLE Senior Vice President, CNN Technology cnn “We’re transforming our business with a new e-business infrastructure— powered by IBM database, communica- tions, application and system management software. For customers, MAYNAR D W E B B this means new and better services. President, eBay Technologies For employees, it means our intranet, ebay e-Spacio, can simplify and speed up how we work.” “Our business is our website. We’ve got 42 million registered users who JOS E MAN U E L AG U I R R E LAR I ZGOITIA are listing millions of items and transacting Senior Vice President and CIO bbva group over $30 million in gross merchandise sales on the eBay site each day. You don’t run that kind of Web enterprise on anything but industrial-strength platforms.”

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    no. 12 We majored on middleware B U I LDI NG OU R SOF T WAR E B US I N E S S In 1993, nobody would have recognized the term “middleware.” Today, it is nearly 40 percent of the $230 billion software marketplace. It’s also what we bet our software business on in 1995, when we were looking for IBM’s next growth opportunities. Middleware is the collection of products — databases, transaction management systems, messaging, systems man- agement — that lets customers do things they care about. Things like allowing your online bookstore to make recom- mendations based on prior purchases, or keeping your credit card information confidential when you go to the Net to buy an airline ticket. Middleware represents 80 percent of our $13 billion soft- ware business. We’re the world’s leading provider, and we’re growing faster than our main competitors.

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    (music under) Web Guy: I’ve got some great ideas for our website. We could have a spinning logo like this one… or a flaming logo. This is cool! Boss: You know what would be a great idea? If people with PCs anywhere could order our products…and that was all tied together with inventory, billing, vendors. You know, the works. Then, that would change everything. Web Guy (perplexed): I don’t know how to do that. Closing title shot: IBM helps thousands of companies do real business on the Web. e-business logo...(music out)

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    no. 13 We found our voice R E I NVIGORATI NG TH E I B M B RAN D AN D EVANG E LIZ I NG E-B US I N E SS We recaptured something we’d lost — our ability to engage our customers and our industry in a meaningful conversation about what matters to us, and to them. This wasn’t about cranking up the volume, issuing more press releases, or producing memorable TV commercials. It was about rediscovering our confidence and articulating what we believe. Things like: • we are entering a post-pc era. • the dot-coms are fireflies before the storm. • the winners in this industry will do one of two things: innovate or integrate. When we rediscovered our voice, we discovered something else: our sense of direction, the courage to stand apart from the crowd and, ultimately, what it means to speak out like a leader again.

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    BOB QU I N N K I M S H E DLI N DAN I E L DR EYE R ETHAN R.R. McCART Y Finance Program Manager Administrative Assistant Human Resources Web Editor J IAN M. W U LAU R E N W I N STON B RADFOR D HOB B S LU BA M. LAB U N KA I/T Specialist Certified Sales Specialist, Director, Corporate Senior Project Manager, Personal Computing Brand Strategy Emerging Market Finance G E R I AR R IGO K I M B E R LY NAS UTA LAR RY R IC CIAR DI G RACE S U H Administrative Assistant Systems Management Integration Senior Vice President Program Manager Professional Corporate Community Relations JOH N T. O’LEARY MARY JO D’ALE S SAN DRO MAU R E E N P OW E R R ICHAR D M US H LI N Software Account Manager Legal Assistant Client Services Principal, Researcher, J. P. Morgan Chase & Co. Computational Biology Some of the IBM employees who walked into IBM headquarters in Armonk, New York, on January 15, 2002

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    no. 14 We loosened our tie CHANG I NG C OR P ORATE CU LTU R E In the early days of the 1990s, we knew that a lot of things about IBM had to change: financial, strategic, operational. We tackled those, and by the middle of the decade, the company was no longer on life-support. But there was one more hill to climb. In order to deliver on IBM’s value proposition — uniting business knowledge and technology to provide integrated solutions for our customers— we had to change something even tougher. Ourselves. We’ve reinvented how we compensate people and who we hire. We provided people with the tools, opportunities and flexibility to control their own work/life balance, and their own learning. We’ve rethought all kinds of assumptions about management , including the role of the manager. Changing a company’s culture— turning it once again into an unbeatable competitive asset, rather than a near-fatal malady— that’s about a lot more than allowing people to bring their dogs into the office or dropping a dress code. And, for the record, “dropping the IBM dress code” was the biggest culture-change move we never made. We simply said IBMers should dress appropriately for the task at hand. We trusted their judgment— on a lot more than clothing.

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    no. 15 We remembered our middle name B U I LDI NG A R E P UTATION I N B US I N E S S I N NOVATION At our core, we’ve always been a technology company — including back in the ’60s and ’70s, when we were taking a consultative approach to transforming customers’ back-office processes like accounting and payroll. In the late 1980s, however, we lapsed. We forgot that the commitment to business solutions — not technology for tech- nology’s sake — is what separates IBM from the field. That’s the reason we’re no longer organized by geographic regions or product sets, but align our expertise and resources around customers and industries. It’s why we created a serv- ices business and committed ourselves to integrated solutions. And it’s what led us to define the Internet phenomenon not as “the network” or “the Information Superhighway” or “the wired world,” but as “e-business.” It’s why we’re quite comfortable with our middle name.

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    September 21, 1959 The purpose ol ie eter ie te zeuke loral ofthe supervisory ‘personnelof the IBM Companythe policy of thie corporation regarding the Ding of personnelwith Under the American tem, each of the citizens of hi country has san equa righ to Live andwork in America I ia the polly af his organi aston to hire people who have the personality, talent andbackground neces arg bo fia ven job, regar oF race, coloror ers everyoneiIDM who hives new employees wil obaerve this rae, the corporation ili tai the typeof people require, an a he same time ve wil be affording an equal opportuni tall in accordancewith ‘American tradition,

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    no. 16 We never abandoned our values OU R R E S P ON S I B I LIT Y TO TH E C OM M U N ITI E S I N W H ICH W E WOR K AN D LIVE Everything else in this report has been about what changed over the past nine years. This is about what didn’t. Long before there was an Internet, before computers, or semiconductors, or even vacuum tubes, there were ethics, corporate citizenship, social and environmental responsibility and fairness. We make our business in the high-tech revolution of the networked world. But we built our business on a system of beliefs. These values transcend the progression of one gener- ation of technology to the next — or, for that matter, of one generation of people to another. Of course, as the needs within communities changed, so did the nature of our philanthropic efforts, or the way we applied our expertise and technologies. We adapted the approach, but never the underlying principles. So perhaps this last decision is really more of a pledge, or a promise that a company and its people make to the institution, and to one another: To remain faithful to values that never change. And to remember — at every step of the journey — who we are, and what we stand for. In 2001 ibm contributed more than $127 million to programs around the world that help people in need individual employees contributed another $ 51.2 million through matching grants and donations to nonprofit organizations and institutions ibmers volunteered more than 4 million hours of time and expertise to a broad range of local causes ibm continued its commitment to improve the quality of k-12 education throughout the world with its $70 million reinventing education grant program u.s. environmental protection agency presented ibm the 2001 energy star® “excellence in corporate commitment” award during the past six years , ibm has increased its number of women executives worldwide by 246 percent

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    Seven shifts that will transform the future (yours, and ours) 1. Computers will care for themselves. Mere humans don’t stand a chance of keeping pace with the coming onslaught of data volumes and transaction flows, not to mention the complexity of information sys- tems themselves. Fortunately, mere humans can infuse the systems with the ability to manage the complexity themselves. Called autonomic computing (after the human 3. Enterprises will autonomic nervous system that governs activities like dismantle industrial age workplaces. heart rate, digestion and breathing), this will make our Once, we shoehorned people systems more reliable, self-managing, self-protecting and into office complexes so even self-healing— freeing up enterprises to focus on more they could be near the filing creative things, like new uses for those very systems. cabinets and each other. No longer. “The office” will 2. Advanced computing devices will take be discarded in response to a lesson from a mollusk. a changing workforce with radically different expecta- Scientists today can etch tions, a marketplace that microscopic lines in com- has no time for bureaucracy (or time zones), and puting components that are technologies that make the traditional workplace an astoundingly fine, but the e-workplace. At IBM, we’re not only studying this in our processes are themselves labs — we’re also learning about it, and living it, in our astoundingly intricate, complex e-business-enabled work lives. and increasingly expensive. Now, scientists are taking a cue from the lowly abalone, which organically combines materials to form a shell 3,000 times stronger than its component elements. That principle of natural self- assembly is behind using chemical reactions to form materials with built-in nano-scale features. IBM scientists have already moved individual atoms. Tomorrow, they just might be able to make those individual atoms do some amazing work. 42

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    4. The small (and energy-efficient) will pack quite a wallop. For many of tomorrow’s 6. You’ll be able to manage most massive computing an army of “you.” challenges, IBM scientists People used to worry that cyberspace would mean the expect to see 10 times the loss of individual identity. If only. We collect too many energy efficiency at the identities — passwords, user names and customer profiles same cost by assembling that multiply every time we surf a new website — and as a “cellular architectures” of result, fragment the image we present any time we enter thousands, even millions a physical store, classroom, website, bank, or government of simpler microprocessors that will work in parallel on office. The solution? Technologies being developed discrete “chunks” of a problem. When aggregations of today by IBM and others can make possible one “virtual these power-efficient chips combine their resources over identity”— single, encompassing and under our total virtualized computing networks, we may see supercom- control through all our daily interactions and transactions. puter performance within reach, not just of enterprises of If we’ve earned preferred-customer status, we’ll get it. If all sizes, but individuals. we’re a first-timer in need of some extra hand-holding, that, too, will be obvious. 5. Converging technologies may decode (and extend) the book of life. 7. All computers (and computer users) The mapping of the human genome was as much a triumph will join “the grid.” of advanced computation as of advanced biology. Now Just as electricity has become part of the that we’ve created this autobiography of our species — global infrastructure on which a book 3 billion chemical letters long— what we read there modern life depends, the may drive astounding quality-of-life improvements: same thing is about to happen dramatic reductions in the cycle time for development of with computing. What’s coming new pharmaceuticals; personalized medications that is an interconnected, shared com- interact with an individual’s unique genetic make-up; puting infrastructure through which and the potential to defeat scourges like heart disease people will access the computational or AIDS. Some researchers resources of…the world. In essence, millions of believe we’re on the verge of computers will be interwoven into a gigantic grid which the first significant increase people will use like a utility. This emerging global infra- in life spans — on the order of structure will be, essentially, like one big computer. 20 years — since the intro- duction of antibiotics. 43

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    dear fellow investor , Last year at this time, Lou Gerstner said 2001 would be a “show me” year for IBM. We knew heading into 2001 that global economies were decelerating, and that IBM wouldn’t be immune from the slowdown. We also knew that a tight economy would provide an acid test of our competitive position, and that of our major competitors. No hiding. No getting swept along by a booming economy. Show me. 45

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    ceo’s letter In 2001, I believe IBM showed the world three things: growth potential in the battle for database software leadership. After making all those investments, we used • The strategies we’ve been following for the past several our strong cash position further to increase shareholder years are correct. value by raising our common stock dividend 8 percent • We’ve produced results through disciplined market- and by repurchasing $5.3 billion in IBM common shares. place execution. We ended the year with a cash balance of $6.4 billion. The strength of our performance relative to our • If we can gain share in a declining economy — which mainstream competitors was reflected in a 42 percent IBM did in 2001 — then we can keep winning when a increase in our stock price — this during a year when the rebound occurs. S&P 500 index declined 13 percent and the NASDAQ We delivered strong results in an environment that took was down 21 percent. While market valuations were a heavy toll on the high-tech sector. For the first time being decimated across the high-tech sector, our market in nearly a decade, the information technology industry capitalization at year end was $208 billion, up 41 percent. shrank. Yet, measured in constant currency, IBM’s rev- Most encouraging of all, we consistently outperformed enue was up 1 percent. That’s a modest increase, to be our major rivals and gained share in every strategic sure — but it was the first time since the early 1990s that business segment. This is the overriding message of IBM outperformed the industry. Our gross profit margins 2001. We won a lot more than we lost, and based on that improved, and we reduced our indirect expense by more record alone, IBM enters 2002 far stronger and better than $1 billion, reinvesting these savings in direct positioned than when last year began. expense that can drive future revenues and share gains. In an environment in which revenue growth was hard to come by, our two principal growth businesses— software Earnings declined from 2000 levels, yet we delivered very and services — delivered the strongest results. strong profitability — net income of $7.7 billion for the year and more than $14 billion of cash from operations. Software Our continued strong cash flow gave us the flexibility to make investments in our future — $5.8 billion in Our software growth was fueled by strong momentum research and development, $5.7 billion in capital expen- across our middleware products— the integrating software layer of e-business infrastructure. ditures, and $1.1 billion for strategic acquisitions to strengthen our portfolio. The bulk of our acquisition • In database and transaction management, we grew investment was used to acquire the database assets of and took significant share from the market leaders in Informix Corp., which improved our share position and both categories. 46

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    ceo’s letter • WebSphere — our suite of products that allow businesses Even in difficult economic times, customers invest in to build, deploy and manage all manner of e-business services to manage technical complexities and financial operations, grew 50 percent and significantly outpaced risks — and especially in the world of e-business, to trans- its competition. form their businesses. However, while some areas of services are countercyclical, others tend to correlate very • Lotus remains the market leader in collaborative closely with economic conditions. That’s especially true middleware, and Tivoli, which develops security and of high-value I/T consulting services — a business that software management products, got stronger through- had to work through a significant transition in 2001. As out 2001 after working through management and the market shifted and customers deferred spending product transitions. on consulting engagements, we were initially slow to respond. Throughout 2001, we took steps to rebalance Services skills in our consulting and systems integration businesses. Based on that work, and a strong pipeline of signings In the early 1990s, I was one of the starry-eyed optimists headed into 2002, we expect a markedly improved per- who were flying around closing the initial services con- formance across our services business this year. tracts. Well, today, IBM is a services-led business in a services-led industry. Enterprise Systems Our services story in 2001 mirrors what happened Across enterprise systems — eServers and storage across our entire portfolio: some businesses up, some subsystems — we had a strong year and gained 3 points down, but on balance a solid performance — with of share. underlying dynamics that point to continued strength this year. • Revenue from our zSeries mainframes increased — our The positives start with a dramatically improved first full year of revenue growth in the mainframe busi- services profit performance, contributing nearly half of ness since 1989 — and we saw a double-digit increase in all IBM pre-tax profit for the year. We increased revenues shipments of computing capacity. from services associated with e-business and strategic • Our UNIX servers gained significant share. Literally outsourcing; and revenues from Web hosting jumped five years to the day after we promised leadership in 35 percent. Contract signings remained strong, and we microprocessor technology on a UNIX platform, our closed the year with contracts for $102 billion in future technical team delivered Regatta, the world’s fastest UNIX services revenue. server. Customer demand has been strong. 47

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    F I NANCIAL H IG H LIG HTS International Business Machines Corporation and Subsidiary Companies (dollars in millions except per share amounts) FOR THE YEAR 2001 2000 Revenue $«««85,866 $«««88,396 Net income $«««««7,723 $«««««8,093 Per share of common stock: Assuming dilution $«««««««4.35 $«««««««4.44 Basic $«««««««4.45 $«««««««4.58 Net cash provided from operating activities $«««14,265 $«««««9,274 Investment in plant, rental machines and other property $«««««5,660 $«««««5,616 Cash dividends paid on common stock $««««««««956 $««««««««909 Per share of common stock $«««««««0.55 $«««««««0.51 AT YEAR EN D Cash, cash equivalents and marketable securities $«««««6,393 $«««««3,722 Total assets $«««88,313 $«««88,349 Working capital $«««««7,342 $«««««7,474 Total debt $«««27,151 $«««28,576 Stockholders’ equity $«««23,614 $«««20,624 Common shares outstanding (in millions) 1,723 1,743 Market capitalization $«208,438 $«148,146 Stock price per common share $«««120.96 $«««««85.00 Number of employees in IBM /wholly owned subsidiaries 319,876 316,303 48

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