IBM 2009 Annual Report Download - page 5
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The explanation for this performance
—
and for
our optimism about both the near-term and the
longer-term future
—
is threefold. It rests, rst,
on the ongoing transformation of our company;
second, on our focused strategy to capture the large
opportunity of a globally integrating world; and
third, on a business model that reliably generates
strong prots and cash, giving us the nancial
exibility to invest for future growth.
I will talk about each of these factors in detail
in this letter. It is important for you to understand
the ways in which IBM today is a very different
company than it was just a few years ago. This
repositioning explains why we have demonstrated
such stability and strong results during this
downturn and why we believe we will benet as
the economy recovers and growth returns.
A Strong Year
Capping a
Strong Decade
Two thousand nine was a tough year by any mea-
sure, but IBM’s performance was indicative both of
our high-value market position and of the discipline
we apply to our strategy and operations. Since the
dot-com crash in 2002, we have added $12 billion
to IBM’s pre-tax prot base, increased our pre-tax
margin 2.5 times, quadrupled our earnings per
share and more than doubled our free cash ow.
Cumulatively, we have generated about $80 billion
of free cash ow.
Our strong 2009 continued this record of
superior performance:
: IBM’s gross prot margin rose for
the sixth consecutive year
—
to 45.7 percent, up
9.2 points since 2003. Our pre-tax income margin
rose to 18.9 percent. Both margins are at their
highest in more than a decade. We achieved this by
driving productivity and continuing to shift our
business mix to more protable segments. Once
again, more than 90 percent of our segment prot
in 2009 was from software, services and nancing.
: We have continued to
achieve strong EPS growth. Last year was another
record, with diluted earnings per share of $10.01,
up 13 percent. This marked seven straight years in
which we have grown EPS by double digits.
: IBM has consistently generated
strong cash ow, a key indicator of real business
performance. In 2009 our free cash ow, excluding
the year-to-year change in Global Financing
receivables, was $15.1 billion, an increase of
$800 million from 2008. IBM ended 2009 with
$14 billion of cash and marketable securities.
: Our revenue was
$95.8 billion, down 5 percent at constant currency.
Nonetheless, in 2009 we grew pre-tax income from
continuing operations by 9 percent, to $18.1 billion,
our highest ever.
3
A LETTER FROM THE CHAIRMAN