IBM 2001 Annual Report Download - page 48

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