IBM 2012 Annual Report Download - page 3

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2
price, eciency and economies of scale. Ours is a
dierent choice: the path of innovation, reinvention
and shift to higher value.
We remix to higher value: We do so in our portfolio,
in our organic R&D investment, and through targeted
acquisitions and divestitures.
• We remix our research and development: Two decades ago,
70 percent of our researchers were working in materials
science, hardware and related technology. Even the
one-in-ten working in software were focused on
operating systems and compilers. Today, 60 percent
are in fields that support our key growth initiatives,
such as the 400 mathematicians developing algorithms
for business analytics, as well as a diverse group of
specialists that include medical doctors, computational
biologists, experts in natural language processing, and
weather and climate forecasters. Since the beginning of
2010, we have spent $19 billion on R&D, and in 2012
IBM earned the most U.S. patents for the 20th straight
year, with a record total of 6,478.
• We acquire new capabilities: Organizations run into
trouble when they look to fulfill a new strategy or provide
the basis for transformation through acquisitions. We
practice a disciplined approach that asks three questions:
Does it build on or extend a capability IBM already has?
Does the company have scalable intellectual property?
Can it take advantage of our reach into 170 countries?
Our balanced formula has built a strong track record since
2000, with more than 140 acquisitions.
• We divest nonstrategic assets: Always moving to the future
isn’t just about what you invent. It also involves
choices about when to move on. Over the past decade
we have divested almost $15 billion of annual revenue
—
businesses that no longer fit our strategy. If we had
not done so, we would be a larger company today,
but with lower margins and capabilities less essential
to our clients.
2012 Performance
($ in billions except per share amounts)
For the year ended December 31: 2012
Operating earnings per share $ 15.25
Revenue $104.50
Operating net income $ 17.60
Free cash flow $ 18.20
Returned to shareholders $ 15.80
We make markets: We create new markets by category,
by geography and by client.
• We make markets by category: Our software and
services businesses today look very dierent from just
a few years ago, oering new solution categories like
MobileFirst, Social Business and Smarter Commerce.
In our hardware business, momentum is building for
our new PureSystems family, which launched the new
category of workload-optimized systems. PureSystems
has seen more than 2,300 installations in more than
70 countries in just two quarters.
• We make markets by geography: We are achieving
strong results in the world’s growth markets, working
closely with businesses, institutions and governments
as they seek to modernize their infrastructures and
societies. We opened 144 new branches in these markets
in 2012. We also continue remixing to more profitable
opportunities in these countries, through Smarter Planet
solutions such as Smarter Transportation, Smarter
Finance and Smarter Cities.