IBM 2008 Annual Report Download - page 44

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Management Discussion
INTERNATIONAL BUSINESS MACHINES CORPORATION and Subsidiary Companies
Management Discussion ................................................................................................18
ROAD MAP ............................................................................................................ 18
FORWARD-LOOKING AND CAUTIONARY STATEMENTS ...................................... 18
MANAGEMENT DISCUSSION SNAPSHOT ............................................................ 19
DESCRIPTION OF BUSINESS................................................................................ 20
YEAR IN REVIEW ...................................................................................................25
PRIOR YEAR IN REVIEW ......................................................................................39
DISCONTINUED OPERATIONS ..............................................................................44
OTHER INFORMATION ..........................................................................................44
GLOBAL FINANCING .............................................................................................53
Report Of Management ............................................................................................... 58
Report Of Independent Registered Public Accounting Firm ................................. 59
Consolidated Statements ............................................................................................ 60
Notes ............................................................................................................................... 66
Systems and Technology segment revenue decreased . percent
( percent adjusted for currency). On June , , the company
completed the divestiture of its printing business to Ricoh. This
resulted in the loss of approximately $ million of Systems and
Technology revenue in  when compared to . Systems and
Tech nology revenue, excluding the printing business, was flat
(declined
 percent adjusted for currency) in  versus .
System z revenue decreased . percent ( percent adjusted for
currency). System z MIPS shipments increased  percent. System z
revenue declined in the second half of  following a long and suc-
cessful technology cycle of over two-and-a-half years. Converged
System p revenue increased . percent ( percent adjusted for cur-
rency). The increase was primarily driven by strength in midrange
POWER+ and POWER servers, which increased  percent.
Legacy System i revenue decreased . percent ( percent adjusted
for currency). Although legacy System i revenue declined year over
year, fourth-quarter  revenue increased  percent with growth in
POWER servers which were introduced late in the third quarter of
. System x revenue increased . percent ( percent adjusted for
currency). Revenue performance was driven by System x server
products which grew  percent and System x blades which increased
 percent in  versus . System Storage revenue increased
. percent ( percent adjusted for currency). The increase was pri-
marily driven by  percent growth in tape products, while external
disk products increased  percent. Enterprise tape products had
strong double-digit revenue growth, while midrange tape products
had mid single-digit revenue growth. Retail Store Solutions revenue
increased . percent ( percent adjusted for currency) primarily
due to the continued roll out of new programmable point-of-sale
solutions to large retail clients.
Microelectronics OEM revenue decreased . percent driven
by reduced demand for game processors. Printing Systems revenue
decreased as a result of the divestiture of the business. The 
results included five months of revenue while the  results
included  months of revenue.
($  )
Yr.-to -Yr.
For the year ended December : 2007 2006 Change
SYSTEMS AND TECHNOLOGY
GROSS PROFIT:
Gross profit $8,468 $8,284 2.2%
Gross profit margin 39.7% 37.7% 2.0
pts.
The increase in Systems and Technology gross profit dollars was
primarily due to higher gross profit margins in System z, converged
System p and System x servers. The Systems and Technology gross
profit
margin increased . points to . percent. Converged
System p performance contributed . points to the overall margin
improvement, while System z and System x contributed . points
and . points, respectively. These increases were partially offset by
lower gross margins in legacy System i of . points and System
Storage of . points.
Systems and Technology segment pre-tax margin expanded
. points to . percent driven primarily by a strong combination of
operational cost management and the value that virtualization has
driven in the enterprise space.
Global Financing
See pages  and  for a discussion of the Global Financing segment.
Geographic Revenue
($  )
Yr.-to -Yr.
For the year ended December : 2007 2006 Change
TOTAL REVENUE: $98,786 $91,424 8.1%
Geographies: $95,320 $87,564 8.9%
Americas 41,122 39,511 4.1
Europe/Middle East/Africa 34,699 30,491 13.8
Asia Pacific 19,501 17,566 11.0
OEM $ 3,465 $ 3,856 (10.1)%
From a geographic perspective, revenue increased in all geographies
in  when compared to . Adjusted for currency, revenue
growth was led by Asia Pacific and steady performance throughout
the year in EMEA.
Americas revenue increased . percent ( percent adjusted for
currency) in . Revenue increased in all regions with the U.S. up
. percent, Canada . percent ( percent adjusted for currency) and
Latin America . percent ( percent adjusted for currency).
EMEA revenue increased . percent ( percent adjusted for
currency) in  when compared to . Within the European
market, IT spending grew at a moderate rate, and the company’s
mid single-digit revenue growth rates throughout  reflected
that environment. Revenue increased in all major countries with
Spain up . percent ( percent adjusted for currency), Germany
. percent ( percent adjusted for currency), the U.K. . percent
( percent adjusted for currency), France . percent ( percent
adjusted for currency) and Italy . percent (decreased  percent
adjusted for currency).