IBM 2005 Annual Report Download - page 18
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ManagementDiscussion
INTERNATIONALBUSINESSMACHINESCORPORATION ANDSUBSIDIARYCOMPANIES
_17
Accountspayabledeclinedapproximately$1.1 billionduetothe
divestiture of the Personal Computing business. Total debt of
$22.6billiondecreased$0.3billionversus2004.
GlobalServicessigningswere$47 billionin2005 ascom-
paredto$43 billionin2004.TheGlobalServicesbacklogisesti-
mated to be $111 billion at December 31, 2005, flat versus
December 31, 2004. For additional information, see “Global
ServicesSignings” onpage 28.
Foradditionalinformation,seethe“YearinReview” section
onpages 22 through 33.
Looking forward, the company’s longer-term financial
model targets double-digit earningspershare growth througha
combination of revenue growth, productivity-driven margin
improvement andeffectivecapitaldeploymentforacquisitions
and returns to shareholders through dividends and common
stockrepurchases. Thecompany’sabilitytomeettheseobjec-
tivesdependsonanumberoffactors,includingthoseoutlined
onpage 21 andonpages 76 to78.
DescriptionofBusiness
PleaserefertoIBM’sAnnualReportonForm10-KfiledonFebruary
28, 2006, with the SEC for a more detailed version of this
DescriptionofBusiness,especially Item1Aentitled“RiskFactors.”
IBMisaninnovationcompany,servingtheneedsofenter-
prises and institutions worldwide. IBM seeks to deliver clients
successbyenablingtheirowncapacitytoinnovate,sothatthey
maydifferentiatetheirorganizationstocreateauniquecompet-
itiveadvantage.
To help its clients achieve growth, productivity, efficiency,
and the realization of greater value through innovation, IBM
drawsupontheworld’sleadingsystems,softwareandservices
capabilitiestoturnenterprisesofallsizes,ineverymajorindus-
try,intoondemand businesses. An on demand business is an
enterprise that is integrated end-to-end, and, with its business
ecosystemsofpartners,suppliersand clients,isabletomanage
that extended network dynamically to address new opportuni-
ties, respond to changes in demand or threats to its business,
enhanceflexibility,speedexecutionandultimatelyachieveprof-
itablegrowth.
InIBM’sview,beingondemandisthemostcomprehensive
way to enable a company to innovate—and thus differentiate
itself—consistently over time. IBM views enterprise innovation
notonlyintermsofproductsandservices,butacrossalldimen-
sions of a business: its business processes, business model,
managementsystems,cultureandroleinsociety.
IBM’sStrategy
IBM’sstrategyistopursueaninnovationagendawithitsclients,
partnersandinotherrelationships,andtocontinuerefiningits
portfoliotoachieve highervalue.Throughitsunderstanding of
wheretechnology,clientrequirementsandglobalbusinessare
headed,thecompanycontinuallymakesstrategicdecisionsto
maintain its leadership of this rapidly changing business by
focusingonhigh-valueinnovation-basedsolutionsandservices
whileconsistentlygeneratinghighreturnsoninvestedcapitalfor
itsshareholders.Thecompanyutilizesitsentireportfolio—hard-
ware,software,services,technologyandresearch—tomaintain
itsleadership.With those broadcapabilitiestoenableenterprise
innovation, the expertise and diversity of its global workforce
and its large network of suppliersand business partners, IBM
considersitselfwell-positionedtocapitalizeontheopportunities
represented by the needs of its clients and current trends in
economics and society. IBM believes these trends will have
major effects on business, government, education, healthcare,
transportationandmostotherfieldsofendeavor.Thesedevelop-
ments include, in part: the globalization of capabilities, skills,
andmarkets;theincreasinglyinterconnectednatureofcompa-
nies,industriesandeven economies; the growinginfluenceof
open-standardsandopen-sourcesoftware;theriseincollabo-
rativemodelsof creationanddevelopment;thematurationand
availabilityofsemiconductorandwirelesschiptechnology;the
useofservice-orientedarchitecturesandWebservicesinsoft-
waredevelopment;thegrowingnumberofserviceprovidersfor
awider range oftraditionalandemergingbusinessprocesses
and functions; and the advances made by IBM and others in
increasingcomputationalspeed,capacityandaccess.
Tocapitalize on the opportunitiespresentedby these and
otherdevelopments,andtoavoidcommoditizationofitsportfo-
lio,IBMregularlyreviewsitsbusinessesand investsin thosethat
representstrategicgrowthopportunities,reallocatingresources
asneeded;itacquiresbusinesses that contribute strategically
to its portfolio; it exits or divests itself of businesses that no
longersupportitsstrategyforinnovationandhighervalue;and
it seeks to improve productivity and drive efficiencies by inte-
gratingitsglobaloperations.
IBM’sstrategicprioritiesfor2006include:
• Capitalizingontechnological,businessandsocialtrendsand
theneedofenterprisestoinnovateinaddressingthosetrends;
• Maintaining market-share leadership in systems, middle-
waresoftwareandservices,asaplatformtodrivegrowth;
• Focusing investment and resources on emerging growth
areas, including Business Performance Transformation
Servicesandemergingcountries;
• ContinuingtheglobalintegrationofIBM,drivingproductivity
gainsandhighervalueinservicedelivery;
• FurtheringIBM’sleadershipininnovationinitiatives,including
advancedsemiconductordesignanddevelopment,collab-
orativeintellectual capital, business processexpertise and
integration, and advanced systems for supercomputing
capability—includingmainframesand“grid”networks;
• Acquiringbusinessesthatcontributestrategicallytoitsport-
folio,andexitingbusinessesthatnolongersupportitsstrat-
egyforinnovationandhighervalue.