IBM 1999 Annual Report Download - page 75

notes to consolidated financial statements
International Business Machines Corporation
and Subsidiary Companies
In January 1998, the company acquired Software Artistry, Inc., a
leading provider of both consolidated service desk and cus-
tomer relationship management solutions for distributed
enterprise environments. In March 1998, the company acquired
CommQuest Technologies, Inc., a company that designs and
markets advanced semiconductors for wireless communications
applications such as cellular phones and satellite communica-
tions. In connection with these acquisitions, the company
recorded a pre-tax charge for IPR&Dof $111 million ($111 mil-
lion after tax, or $.06 per diluted common share).
On April 16, 1997, the company purchased a majority interest in
NetObjects, a leading provider of Web site development tools
for designers and intranet developers. In 1999, as a result of
NetObject’s initial public offering, the company’s interest
declined to less than 50 percent. In September 1997, the com-
pany acquired the 30 percent equity interest held by Sears in
Advantis, the U.S. network services arm of the company’s
Global Network. Advantis was then owned 100 percent by the
company. Advantis became part of the company’s Global
Network, which the company sold to AT&Tin 1999. In December
1997, the company acquired Eastman Kodak’s share of
Technology Service Solutions, which was formed in 1994 by the
company and Eastman Kodak. In December 1997, the company
acquired Unison Software, Inc., a leading developer of workload
management software. In connection with these acquisitions
the company recorded a pre-tax charge for IPR&Dof $111 mil-
lion ($111 million after tax, or $.05 per diluted common share).
Divestitures
In December 1998, the company announced that it would sell
its Global Network business to AT&T. During 1999, the company
completed the sale to AT&Tfor $4,991 million. More than 5,300
IBM employees joined AT&Tas a result of these sales of oper-
ations in 71 countries.
The company recognized a pre-tax gain of $4,057 million
($2,495 million after tax, or $1.33 per diluted common share).
The net gain reflects dispositions of Plant, rental machines and
other property of $410 million, other assets of $182 million and
contractual obligations of $342 million.
E Inventories
(Dollars in millions)
At December 31: 1999 1998
Finished goods $«1,162 $«1,088
Work in process and raw materials 3,706 4,112
Total $«4,868 $«5,200
F Plant, Rental Machines and Other Property
(Dollars in millions)
At December 31: 1999 1998
Land and land improvements $«««1,026 $«««1,091
Buildings 10,395 11,088
Plant, laboratory and office equipment 22,503 27,025
33,924 39,204
Less: Accumulated depreciation 19,268 22,463
14,656 16,741
Rental machines 5,692 5,666
Less: Accumulated depreciation 2,758 2,776
2,934 2,890
Total $«17,590 $«19,631
G Investments and Sundry Assets
(Dollars in millions)
At December 31: 1999 1998
Net investment in sales-type leases*$«14,201 $«14,384
Less: Current portion—net 6,220 6,510
7,981 7,874
Deferred taxes 2,654 2,921
Prepaid pension assets 5,636 4,836
Customer loan receivables—
not yet due 4,219 3,499
Installment payment receivables 848 1,087
Alliance investments:
Equity method 595 420
Other—available for sale 1,439 138
Goodwill, less accumulated amortization
(1999, $2,646; 1998, $2,111) 1,045 945
Marketable securities—non-current 113 281
Other investments and sundry assets 1,557 1,509
Total $«26,087 $«23,510
*These leases relate principally to IBM equipment and are generally for
terms ranging from three to five years. Net investment in sales-type leases
includes unguaranteed residual values of approximately $737 million and
$685 million at December 31, 1999 and 1998, respectively, and is reflected
net of unearned income at those dates of approximately $1,600 million for
both years. Scheduled maturities of minimum lease payments outstanding
at December 31, 1999, expressed as a percentage of the total, are approxi-
mately as follows: 2000, 49 percent; 2001, 32 percent; 2002, 14 percent;
2003, 4 percent; and 2004 and beyond, 1 percent.
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