IBM 2007 Annual Report Download - page 5

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3
service-oriented architecture (SOA), information on demand,
virtualization and open, modular systems for businesses of all sizes.
IBM is a leader in all these areas.
Business: Impelled by this new global arena and new technology
model, business leaders expanded their horizons
—
driven both
by competitive pressures and a remarkable array of new innovation
capabilities. No longer content with cost savings from off-the-shelf
technologies and solutions, they were seeking to innovate. And
this involved not just their products and services, but their entire
companies: business processes, management systems, policies and
even their core business model. To accomplish that, they were looking
to integrate advanced technology deep into their processes and
operations. Our worldwide survey of CEOs has consistently confirmed
this shift in businesses’ perceptions and priorities.
To deliver this kind of client value requires intimate knowledge of
each client and the ability to make that knowledge operational on
a daily basis
—
and that can’t be done from corporate headquarters.
So we changed our own processes and organization to push
decision-making and delegation closer to the marketplace.
Put it all together, and IBM today is very different from what it
was when we entered the decade. We are different strategically,
with clarity around our twin imperatives of innovation and global
integration. We are different operationally, with a lower center of
gravity in our operations and with continually improving efficiency and
productivity. And we have a business model that is better aligned with
our clients’ needs and that generates stronger profitability and cash
flow. We see no major strategic shift on the horizon for our company.
So, how is this transformed company performing? Let me briefly
recap 2007. It was, quite simply, a great year for IBM.
Revenue and income: We delivered our strongest revenue
growth since 2003 and our strongest profit performance in more
than a decade. Our revenue as reported was a record $98.8 billion,
up 8 percent. Pretax income from continuing operations was
$14.5 billion, an increase of 9 percent and another record.
Margins: IBM’s gross profit margin rose for the fourth consecu-
tive year
—
to 42.2 percent, up more than five points since 2003.
We achieved this by continuing to shift our business mix to more
profitable segments, such as software, and by focusing on productivity.
Our pretax income margin rose to 14.7 percent. Both margins are at
their highest in more than a decade. The improvement in our pretax
A Transformed
Company
Put it all together, and IBM today is very different from what it
was when we entered the decade.