2011 Annual Report: Software to drive half of IBM profits by 2015
Delaney Turner 270003RQ8K Delaney.Turner@ca.ibm.com | | Tags:  service-management information-insights ibmsoftware
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Software is expected to drive nearly half of IBM's profits by 2015 according to its 2011 Annual Report. In her first Letter to Shareholders, new CEO Ginni Rometty ushered in IBM's second century by highlighting record revenue, profit, free cash flow and earnings per share. "Our strong strategic positioning, solid balance sheet, recurring revenue, robust profit streams and unmatched global reach give us confidence that we will achieve success in the next five years, as we have during the past decade," she wrote. I've extracted some highlights below. The full report is available here.
Business mix changes drive growth
IBM continually changes its business mix toward higher-value, more profitable technologies and market opportunities and is "well on track" toward meeting its 2015 RoadMap Goal of $20 operating EPS. Software drove 44 percent of IBM income last year; by 2015, that figure is expected to reach 50 percent. Rometty outlined four specific growth plays that will drive growth into the future:
1: Growth Markets. Revenue for Growth Markets Unit was up 11 percent at constant currency for the second year in a row. Growth markets contributed 22 percent of IBM’s geographic revenue in 2011, up from 11 percent in 2000, and IBM expects them to approach 30 percent by 2015.
2: Business Analytics. Analytics business grew 16 percent for the year. Having spotted early the emergence of “big data,” IBM built the world’s leading analytics software and consulting practice, and we are translating it into powerful new capabilities, which enable our clients to identify, manage and even predict outcomes that matter to their success. Sign up for next Tuesday's Smarter Analytics Leadership Summit to see where we're going next.
3: Cloud. IBM has helped thousands of clients adopt aspects of cloud computing, where IT resources are virtualized, highly automated and accessed by self-service. Our cloud revenue in 2011 was more than three times the prior year.
4: Smarter Planet. All of this comes together in our solutions to build Smarter Planet systems, transforming systems such as supply chains, retail, energy, transportation, telecommunications, food and water. It includes the successful establishment of large new market categories, such as Smarter Cities and Smarter Commerce. Smarter Planet revenue grew by almost 50 percent in 2011.
"The next decade holds enormous promise for IBM, most importantly because of what it holds for business and society at large," writes Rometti. "We are uniquely positioned to deliver the benefits of a vast new natural resource—a gusher of data from both man-made and natural systems that can now be tapped to help businesses and institutions succeed in an increasingly complex and dynamic global economy."