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MANAGEMENT DISCUSSION
INTERNATIONAL BUSINESS MACHIN ES CORPORATION AND SUBSI DIARY COMPANIES
16 2006 Annual Report
In IBM’s view, the future of business is being shaped by the forces of
global integration and innovation. They are foundational and inti-
mately related to one another. A globally integrated enterprise is a new
institutional form that shapes its strategy, management and operations
globally, based on economics, expertise and open business environ-
ments. It is optimized for innovation in a worldwide economy and
society that are increasingly integrated and specialized. IBM’s strategic
moves over the past several years—from divestitures and acquisitions,
to areas of focus for innovation, to the transformation of its core lines
of business—have been shaped by this vision.
IBM’s strategic priorities to pursue this vision include:
• Offering enterprises in the global economy innovative, high-
value solutions based on IBM’s ability to integrate technology and
business model innovation to deliver measurable results for IBM
and its clients;
• Leading in the delivery of business value by providing business
and information technology consulting and implementation ser-
vices; building, running and maintaining cross-industry and
industry-specific business process services; leveraging leadership
technology and engineering services; and accelerating increased
business value through Service Oriented Architectures (SOA) and
Information on Demand;
• Leading in the delivery of advanced infrastructure through
enterprise SOA and infrastructure software and services; increased
share leadership in servers; driving to leadership in storage; and
leading the transition to standardized services offerings; and
• Making IBM the premier Globally Integrated Enterprise—lower-
ing costs and increasing effectiveness by integrating the company’s
decision making at the point of client contact (“lowering IBM’s
center of gravity”); moving work to where it can best be per-
formed; focusing IBM’s resources to create the greatest value; and
excelling in business collaboration.
IBM’S STRATEGY
The company has divested low growth commoditizing product lines and acquired higher value opportunities to leverage IBM’s infrastructure.
IT INDUSTRY LANDSCAPE
Hardware
Software
Services
Infrastructure Value
Business Value
Component Value
PwCC Daksh
Maersk IT
Corio
Equitant
Viacore
Lotus
Tivoli
Rational
Informix
Sector7
Access360
Logical Networks
Cyanea
Candle
Trigo Tech
Venetica
Schlumberger
Healthlink
SRD
Ascential
DWL
DataPower
Isogon
Collation
Meiosys
Micromuse
FileNet
MRO
CIMS Labs
Language
Analysis System
Unicorn
REMBO
BuildForge
Webify
ISS
Network
HDD
DRAM
Displays
EDI Services
4xx Power PC PCs
PRE 2004 2004 2005 2006
Divestitures Acquisitions
Management Discussion ........................................................
Road Map ............................................................................. 
Forward-Looking and Cautionary Statements ..................... 
Management Discussion Snapshot ...................................... 
Description of Business ....................................................... 
Year in Review...................................................................... 
Prior Year in Review ............................................................. 
Discontinued Operations ..................................................... 
Other Information ................................................................ 
Global Financing .................................................................. 
Report of Management .........................................................
Report of Independent Registered Public Accounting Firm ....
Consolidated Statements ....................................................... 
cyan mag yelo black
MAC
2718 CG10