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4 2006 Annual Report
Results from Continuing Operations
Revenue
(Dollars in billions)
Income
(Dollars in billions)
2005 performance includes results from four months of the IBM PC business, which was divested on April 30, 2005.
0
81.2
02
89.1
03
96.3
04
91.1
05
91.4
06
20
40
60
80
$100
have learned, it’s better to be in businesses that are truly
differentiating in the eyes of the client than to go simply for
size, volume and thin margins
—
where the client doesn’t
receive unique value, and the investor doesn’t benefit.
This is why we have entered new, more attractive spaces,
through acquisition and by redirecting our R&D investments.
Let me describe how these shifts are impacting each of
our major businesses.
• Software: In the world of software, we are witnessing
a shift toward new architectures and the componentization
of applications. This new model, inherently networked
and based upon open standards, enables different
business designs and the horizontal integration of business
processes. Within the enterprise, its main impact is
occurring at the level of middleware. Because we began
years ago to build a position as the worldwide leader in
middleware, IBM is now uniquely able to capitalize on it.
IBM’s software segment revenues totaled $18.2 billion
in 2006, an increase of 8 percent. Software generated
40 percent of IBM’s segment pretax profits. We are
recognized as the industry leader in SOA
.
The information
on demand practice we launched in 2006, grouped
under Information Management, grew 68 percent. Our
acquisition of companies such as FileNet, MRO and
Micromuse enhanced our growth in information and
systems management. Our industry-leading WebSphere
family grew 23 percent for the year, with particular
strength in application servers and business integration.
Rational software tools grew 4 percent, and Tivoli
26 percent. Our Lotus division
—
which introduced
well-received Web 2.0-enabled collaboration tools for
the enterprise in early 2007
—
grew 12 percent. We will
be expanding our software offerings in 2007 to move
beyond one-on-one and team collaboration
—
introducing
tools that build communities of expertise.
• Global Services: The global services industry is being
reshaped by two trends. The first is the emergence of a
new services model, based on the integration of software
and services, and the breaking-up of formerly monolithic
business processes into components that can be delivered
over the Web. IBM Global Services is leading the industry
in the development of business componentization
and the technology enablement of business processes.
The second trend is a shift to smaller deals of shorter
duration, higher profitability and more industry-specific
focus. While our transition to this model experienced some
hiccups initially, we are making steady progress and saw
solid growth in short-term signings in 2006.
IBM remains the leading IT services company in the
world, with more than twice the revenue of our nearest
rival. Revenues from our two Global Services segments
in 2006 totaled $48.3 billion, an increase of 2 percent.
Services’ share of IBM’s segment pretax profits increased
to 37 percent. Revenues from the Global Technology
0
4.2
02
6.6
03
7.5
04
8.0
05
9.4
06
2
4
6
8
$10
Chairman’s Letter
cyan yelo black
MAC
2718