IBM 2006 Annual Report Download - page 15

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or financial flexibility. See note V, “Retirement-Related Benefits,” on
pages 100 to 111 for additional information, including the incremental
effect on the Consolidated Statement of Financial Position.
• The company divested its Personal Computing business to Lenovo on
April 30, 2005. The details of this significant transaction are discussed
in note C, “Acquisitions/Divestitures,” on pages 77 and 78. As a
result of this divestiture, the company’s reported financial results do not
include any activity in 2006 and include four months of activity for the
Personal Computing Division in 2005 as compared to 12 months in
2004. This lack of comparable periods has a material impact on the
company’s reported revenue growth. Therefore, in the Management
Discussion, within the “Year in Review” section on pages 22 to 25 and
the “Prior Year in Review” section on pages 37 and 38, the company
has presented an analysis of revenue both on an as-reported basis
and on a basis that excludes the revenue from the divested Personal
Computing business from both the 2005 and 2004 periods. The com-
pany believes that the analysis that excludes the Personal Computing
revenue is a better indicator of the company’s operational revenue
performance on an ongoing basis.
• IBM made changes to its management system effective as of the first
quarter of 2006. In accordance with SFAS No. 131, “Disclosures about
Segments of an Enterprise and Related Information,” these changes
impacted the company’s reportable segments and resulted in the reclassi-
fication of certain revenue and cost within its Consolidated Statement of
Earnings from previously reported information. See note W, “Segment
Information,” on page 111 for additional information on the changes in
reportable segments. These changes did not impact IBM’s total revenue,
cost, expense, net income, earnings per share, Consolidated Statement of
Financial Position or Consolidated Statement of Cash Flows from pre-
viously reported information. The Consolidated Statement of Earnings
on page 56 reflects these changes for all periods presented.
• The reference to constant currency in the Management Discussion is
made so that certain financial results can be viewed without the impacts
of changing foreign currency exchange rates and therefore facilitates a
comparative view of business growth. See “Currency Rate Fluctuations”
on page 47 for additional information.
• Within the financial tables in this Annual Report, certain columns and
rows may not add due to the use of rounded numbers for disclosure pur-
poses. Percentages reported in the financial tables throughout this Annual
Report are calculated from the underlying whole-dollar numbers.
MANAGEMENT DISCUSSION
INTERNATIONAL BUSINESS MACHIN ES CORPORATION AND SUBSI DIARY COMPANIES
13
HELPFUL HINTS
Organization of Information
• This Management Discussion section provides the reader of the
financial statements with a narrative on the company’s financial
results. It contains the results of operations for each segment of
the business, followed by a description of the company’s financial
position, as well as certain employee data. It is useful to read the
Management Discussion in conjunction with note W, “Segment
Information,” on pages 111 to 115.
• Pages 56 through 61 include the Consolidated Financial
Statements. These statements provide an overview of the company’s
income and cash flow performance and its financial position.
• The notes follow the Consolidated Financial Statements. Among
other things, the notes contain the company’s accounting policies
(pages 62 to 71), acquisitions and divestitures (pages 73 to 78),
detailed information on specific items within the financial statements,
certain contingencies and commitments (pages 89 to 92), and the
results of each IBM segment (pages 111 to 115).
DISCONTINUED OPERATIONS
On December 31, 2002, the company sold its hard disk drive
(HDD) business to Hitachi, Ltd. (Hitachi). The HDD business was
accounted for as a discontinued operation under generally accepted
accounting principles (GAAP) which requires that the income state-
ment and cash flow information be reformatted to separate the
divested business from the company’s continuing operations. See page
41 for additional information.
FORWARD-LOOKING AND
CAUTIONARY STATEMENTS
Certain statements contained in this Annual Report may constitute
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements involve a
number of risks, uncertainties and other factors that could cause
actual results to be materially different, as discussed more fully else-
where in this Annual Report and in the company’s filings with the
Securities and Exchange Commission (SEC), including the company’s
2006 Form 10-K filed on February 27, 2007.
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