IBM 2009 Annual Report Download - page 45

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Software revenue of $22,089 million increased 10.5 percent (8
percent adjusted for currency) in 2008 led by growth in the Key
Branded Middleware products and strong contributions from
the annuity base and acquisitions. Clients continue to embed
the company’s software in the fabric of their IT infrastructures.
Key Branded Middleware revenue increased 14.4 percent
(12 percent adjusted for currency) and represented 56 percent
of total Software segment revenue, an increase of 2 points from
2007. When adjusted for currency, growth in 2008 was led
by Information Management, Rational and Lotus. Strategic
acquisitions, including Cognos and Telelogic, have extended the
segment’s middleware capabilities.
WebSphere Family revenue increased 6.2 percent (5 per-
cent adjusted for currency) in 2008 and was led by growth
in WebSphere Application Servers and WebSphere Business
Integration software. In December 2008, the company com-
pleted the acquisition of ILOG, whose products help customers
improve business decisions with optimization, visualization and
business rules software. The WebSphere products provide the
foundation for Web-enabled applications and are a key product
set in deploying a client’s SOA. Information Management reve-
nue increased 24.5 percent (22 percent adjusted for currency) in
2008 versus the prior year, reflecting contribution from Cognos
and strong demand for the distributed relational database
products. Cognos’ performance management solution helps
customers improve decision-making across the enterprise to
optimize business performance.
Lotus revenue increased 10.4 percent (8 percent adjusted
for currency) in 2008 led by growth in Lotus Notes products
as customers continue to invest to improve their workforce effi-
ciency. Lotus software is well established as a tool for providing
improved workplace collaboration and productivity.
Tivoli revenue increased 2.9 percent (2 percent adjusted
for currency) in 2008 when compared to 2007. Revenue per-
formance was led by growth in Tivoli Security and Storage
Management products. Tivoli software provides the advanced
capabilities required to run large mission-critical environments.
This includes security and storage software which helps cus-
tomers improve utilization and reduce costs.
Rational revenue increased 13.2 percent (12 percent adjusted
for currency) in 2008 driven primarily by Telelogic contributions.
Telelogic’s suite of system programming tools complements
Rational’s IT tool set, providing a common framework for soft-
ware and systems delivery across a clients enterprise.
Revenue from Other middleware products increased 5.2 per-
cent (3 percent adjusted for currency) in 2008 versus the prior
year. This software product set includes more mature products
which provide a more stable flow of revenue.
Other software segment revenue increased 34.4 percent (31
percent adjusted for currency) versus 2007 reflecting continued
growth in software-related services.
($ in millions)
Yr.-to-Yr.
For the Year Ended December 31: 2008 2007 Change
Software:
External gross profit $18,859 $17,015 10.8%
External gross profit margin 85.4% 85.2% 0.2 pts.
Pre-tax income $ 7,075 $ 6,002 17.9%
Pre-tax margin 28.5% 26.8% 1.7 pts.
Software segment gross profit increased 10.8 percent to $18,859
million in 2008, driven primarily by the strong revenue growth.
The large annuity base of this business continues to provide a
predictable and growing profit stream. Gross profit margin was
85.4 percent in 2008, an increase of 0.2 points versus 2007.
The company has been investing significantly in the software
business with good results. The Software segment contributed
$7,075 million of pre-tax profit in 2008, an increase of 17.9 per-
cent versus 2007 while successfully integrating Cognos and
Telelogic. Software contributed approximately 40 percent of the
company’s segment pre-tax profit in 2008. The segment pre-tax
profit margin increased 1.7 points to 28.5 percent. The pre-tax
income and margin improvements have been driven primarily by
revenue growth and increasing operational efficiencies.
43