IBM 2009 Annual Report Download - page 31

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Software revenue of $21,396 million decreased 3.1 percent
(1 percent adjusted for currency) in 2009 compared to 2008.
Adjusted for currency, growth in the Key Branded Middleware
products was offset by decreased revenue in other compo-
nents of the software portfolio. Overall, the software business
has continued to perform well in an uncertain environment. The
company’s recent acquisitions increased revenue and the com-
pany is continuing to invest in capabilities that accelerate the
development of new market opportunities like business analytics
and smarter planet.
Key Branded Middleware revenue increased 1.1 percent (3
percent adjusted for currency) and represented 59 percent of
total Software revenue, an increase of 2 points from 2008. The
company continued to solidify its lead in the middleware market,
gaining share for nine consecutive quarters. Organic invest-
ments and acquisitions in middleware capabilities continue to
result in it becoming a larger portion of the software portfolio and
improving the overall software revenue growth rate. Growth in
2009, adjusted for currency, was led by WebSphere and Tivoli.
WebSphere Family revenue increased 10.5 percent (13
percent adjusted for currency) in 2009 with strong performance
throughout the year. Application Servers, which provide custom-
ers with a secure and resilient infrastructure for mission-critical
business applications, grew 5 percent adjusted for currency.
Business Integration software had double-digit revenue growth
in 2009, including strong contribution from ILOG, a company
acquired in the fourth quarter of 2008.
Information Management revenue decreased 0.5 percent
(increased 2 percent adjusted for currency) in 2009 versus the
prior year, with revenue growth, adjusted for currency, in both
Information Management solutions and infrastructure offerings.
Cognos and InfoSphere software, two key components of the
business analytics area, both had double-digit revenue growth
adjusted for currency. The acquisition of SPSS, which was com-
pleted in early October, 2009, further expands the company’s
business analytics capabilities.
Lotus revenue decreased 10.0 percent (8 percent adjusted
for currency) in 2009. Demand for Lotus software was impacted
by customer consolidations and downsizing throughout 2009.
Tivoli revenue increased 2.9 percent (5 percent adjusted for
currency) in 2009 when compared to 2008, driven by growth
in storage software. Tivoli storage revenue grew consistently
throughout the year as customers managed their rapidly grow-
ing storage data.
Rational revenue increased 0.2 percent in 2009 as reported
and increased 3 percent adjusted for currency versus 2008.
Rational’s integrated software tools improve the speed, qual-
ity and efficiency for customers with software development
projects. Telelogic contributed strong revenue growth in 2009
and extended the brand’s reach into the systems development
market opportunity.
Revenue from Other middleware products decreased 6.3
percent (3 percent adjusted for currency) in 2009 versus the
prior year. This software product set includes more mature prod-
ucts which provide a more stable flow of revenue.
Operating systems product revenue decreased 7.4 percent
(5 percent adjusted for currency) in 2009 compared to 2008,
reflecting declining sales in all system brands.
Product Lifecycle Management revenue decreased 23.0
percent (22 percent adjusted for currency). The company and
Dassault Systemes (DS) signed an agreement in October 2009
under which DS intends to acquire the company’s sales and
client support operations encompassing DS’s Product Lifecycle
Management software application portfolio, as well as customer
contracts and related assets. The company expects to record a
gain when this transaction is completed, which is anticipated in
the first quarter of 2010.
($ in millions)
Yr.-to-Yr.
For the year ended December 31: 2009 2008 Change
Software:
External gross profit $18,405 $18,859 (2.4)%
External gross profit margin 86.0% 85.4% 0.6 pts.
Pre-tax income $ 8,095 $ 7,075 14.4%
Pre-tax margin 33.6% 28.5% 5.2 pts.
Software gross profit of $18,405 million in 2009 decreased 2.4
percent versus 2008, driven primarily by declining revenue.
Gross profit margin expanded 0.6 points to 86.0 percent in
2009. The Software segment delivered $8,095 million of pre-tax
profit in 2009, an increase of 14.4 percent versus 2008. The
segment pre-tax profit margin expanded 5.2 points to 33.6 per-
cent. The breadth of the software portfolio, the strong recurring
revenue stream and the actions taken to improve efficiency and
productivity combined to deliver strong profit results.
29