2. Certain comments made in the presentation may be characterized as
forward looking under the Private Securities Litigation Reform Act of
1995. Those statements involve a number of factors that could cause
actual results to differ materially. Additional information concerning
these factors is contained in the Company's filings with the SEC.
Copies are available from the SEC, from the IBM web site, or from IBM
Investor Relations.
These charts and the associated remarks and comments are integrally
related, and are intended to be presented and understood together.
In an effort to provide additional and useful information regarding the
company’s results as determined by generally accepted accounting
principles (GAAP), certain materials presented include non-GAAP
information. The rationale for management’s use of this non-GAAP
information, the reconciliation of that information to GAAP, and other
related information is included in supplementary materials entitled “Non-
GAAP Supplementary Materials” that are posted on the Company’s
investor relations web site at
http://www.ibm.com/investor/events/analyst0509/
The Non-GAAP Supplementary Materials are also included as
Attachment II to the Company’s Form 8-K dated May 13, 2009.
2
3. Agenda
Strategy and Transformation
2010 Roadmap
Driving Long Term Performance
3
4. The traditional IT industry is undergoing fundamental shifts
High Business
Value
Individual/ Traditional Enterprise
Consumer IT Industry
Focused Focused
Lowest Cost
IT Producer
4
5. IBM strategy addresses shifts in IT industry
I. Changes in world markets:
We are at the forefront of global integration
II. Changes in client needs:
We are focused on integration and innovation
III. Changes in IT:
We are shifting to higher value segments
5
6. We remixed our businesses in order to move to the emerging
higher-value spaces
6
7. We became a globally integrated enterprise in order to capture
the best growth opportunities and improve IBM’s profitability
7
9. As a result, IBM is a higher-performing enterprise today than it
was a decade ago
9
10. We have been able to invest in future sources of growth and
provide record return to investors...
...while continuing to invest in R&D
10
11. Agenda
Strategy and Transformation
2010 Roadmap
Driving Long Term Performance
11
12. Long Term EPS Roadmap: May 2007
10% 14% 16%
CGR CGR CGR
~$11
~$10 ~$0.90
10% - 12% CGR EPS Model
~$9
~$1.10
~$1.20
~$1.00
$6.05 ~$0.75
5% +1 to 2 pts
Revenue Revenue
Growth Growth
2006 EPS Historical Margin Share Estimated Growth Future 2010 EPS Retirement 2010 EPS
Revenue Expansion Repurchases 2010 EPS Initiatives Acquisitions w/o Related Objective
Growth of 3% (Base) Retirement Costs Yr/Yr
Related
Costs Yr/Yr
12 Note: EPS has been restated to reflect the adoption of EITF 03-6-1
13. Long Term EPS Roadmap: Progress through 2008
~ 0.35 ~ 0.90 ~ 0.65 ~ 0.45 ~ 0.50 Total ~ 2.85
Exceeded revenue
Revenue growth and Will vary based on EPS of $8.89
growth of 3% in 2007 Net margin Share repurchases
margin expansion interest rates and
and achieved 2.3% expansion in model of ~ $30 B through 2008
above model market performance
in 2008 @ CC
~$11
~$10 ~$0.90
~$9
~$1.10
~$1.20
~$1.00
$6.05 ~$0.75
5% +1 to 2 pts
Revenue Revenue
Growth Growth
2006 EPS Historical Margin Share Estimated Growth Future 2010 EPS Retirement 2010 EPS
Revenue Expansion Repurchases 2010 EPS Initiatives Acquisitions w/o Related Objective
Growth of 3% (Base) Retirement Costs Yr/Yr
Related
Costs Yr/Yr
13
Progress through 2008 Note: EPS has been restated to reflect the adoption of EITF 03-6-1
14. We are well ahead of pace to achieve the 2010 roadmap objective
2010 $10-$11
Transformed business mix
Significant annuity content
Competitive cost structure
2008 $8.89
Strong cash generation
2007 $7.15
Financial flexibility
2006 $6.05
EPS Note: EPS has been restated to reflect the adoption of EITF 03-6-1
14
15. Agenda
Strategy and Transformation
2010 Roadmap
Driving Long Term Performance
• Growth Markets
• Acquisitions
• Technology Leadership
• Margin Expansion
• New Growth Initiatives
15
16. Growth Markets: Leading future growth requires differentiated
strategies and approaches based on market stages and client needs
Major Markets Growth Markets
Key Market Statistics Key Market Statistics
GDP (2009) $3.2T GDP (2009) $1.5T
GDP Growth (2008 - 2012) 1% GDP Growth (2008 - 2012) 3%
Served IT Market (2009)* $799B Served IT Market (2009)* $139B
Served IT Market Growth (2008 - 2012) 2% Served IT Market Growth (2008 - 2012) 6%
IBM Focus IBM Focus
Manage for productivity Invest for growth
FY08 Results FY08 Results
# of Countries ~ 30 # of Countries ~ 140
% of IBM Revenue 82% % of IBM Revenue 18%
Yr/Yr Revenue Growth 5% Yr/Yr Revenue Growth 10%
Yr/Yr Growth @ CC 2% Yr/Yr Growth @ CC 10%
*Served IT Market Opportunity is IBM Global Market View, 2H09 at constant currency
16
17. Acquisitions: Our acquisition portfolio continues to deliver
attractive revenue and profit growth
ESTIMATED ACQUISITION REVENUE GROWTH ESTIMATED ACQUISITION PRE-TAX INCOME MARGIN
40%
30%
35%
24%
21%
20%
30% 20% 22%
19%
25%
11%
13%
10%
20%
14% -2% 3%
13% 13% 0%
10%
-10%
-13%
0% -20%
Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 1 Yr 2 Yr 3 Yr 4 Yr 5
Actual Projected Without amortization of acquired intangibles
17 Note: Includes 2002-2005 acquisitions less than $500M, and all 2006 & 2007 acquisitions
18. Technology Leadership: R&D spending enables technology leadership
R&D SPENDING
Last 5 fiscal years ($B)
40 IBM spends more on R&D than most
36 of our Tech peers
35 – Enhancing our leadership in
30 enterprise servers & software
30
– Leveraging IP assets to remain the
#1 provider of IT services
25
20
20 18 Making the right organic investments
– Virtualization
15
– Cloud Computing
10 – SOA
10
– Service Product Lines & Quality
5 – Business Analytics
– Smarter Planet
0
MSFT IBM Cisco HP Oracle
18 Note: As of May 7, 2009
19. Margin Expansion: We have further opportunity to expand margin
25% of companies in S&P 500 have
PRE-TAX INCOME MARGIN PTI margins in excess of 20%
50%
40%
30%
20%
IBM
10%
0%
-10% 30% of companies in Tech Universe
have PTI margins in excess of 20%
-20%
-30%
-40%
S&P 500 Tech Universe *
-50%
19
*Note: As of April 21, 2009. Includes 333 worldwide technology companies with market cap > $1B
20. New Growth Initiatives: We are investing to capture future growth
Business Analytics & Smarter Planet Cloud Computing
Optimization
Business
Optimization
The Enterprise Cloud
Business Intelligence
Resource planning
Business
Automation
What’s required? The world is getting smarter New consumption &
delivery model
Insight on our clients and industry IBM is leading the charge to think Benefits:
and act in new ways –
Foundational software platforms Economically, Socially, and Self-service
Technically Rapid Provisioning
Mathematical and analytical skills of Automation
IBM Research Standardization
Smarter Traffic Systems
Smarter Oil Economies-of-scale
Balanced price performance and scale
Smarter Energy Grids
Smarter Healthcare
Market validating client experience
20 Smarter Cities
21. IBM’s strategy and execution drives improved financial performance
25% $11
Objective
Transformation $10 to $11
in 2010
$10
Shifting portfolio to higher value
20% PTI Margin %
$9 spaces with greater opportunity for
EPS margin expansion
$8
Driving productivity and efficiency in
15% our cost structure
PTI Margin %
$7
EPS
Investing in skills and capabilities to
$6 drive future growth
10%
$5 Returning capital to shareholders
$4 Significant operating leverage in
5% businesses with improved long-term
growth prospects
$3
Well ahead of pace for 2010
0% $2
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09e
roadmap
Revenue Divested Revenue: PC, HDD, Printers, Displays, EDI, Interconnectivity Products
21 Note: EPS has been restated to reflect the adoption of EITF 03-6-1
