IBM 2013 Annual Report Download - page 100

Notes to Consolidated Financial Statements
International Business Machines Corporation and Subsidiary Companies
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The company’s worldwide x86 business is reported in the Systems
and Technology segment, and the associated maintenance opera-
tions are part of the Global Technology Services segment. In 2013,
this combined business delivered approximately $4.6 billion of
revenue, and was essentially breakeven on a pre-tax income basis.
2013
On September 10, 2013, IBM and SYNNEX announced a definitive
agreement in which SYNNEX will acquire the company’s worldwide
customer care business process outsourcing services business for
$505 million, consisting of approximately $430 million in cash, net
of balance sheet adjustments, and $75 million in SYNNEX stock,
which represents less than 5 percent equity ownership in SYNNEX.
As part of the transaction, SYNNEX will enter into a multi-year agree-
ment with the company, and Concentrix, SYNNEX’s outsourcing
business, will become an IBM strategic business partner for global
customer care business process outsourcing services.
The transaction will be completed in phases—the initial closing
was completed on January 31, 2014, with subsequent closings
expected to be completed in the second quarter of 2014, subject to
customary closing conditions, local agreements and the information
and consultation process in applicable countries. The company
expects to recognize a total pre-tax gain on the sale of between
$150 - $175 million. This gain will be recognized consistent with the
closing schedule for the transaction. The company’s worldwide
customer care business process outsourcing services and industry
process services are included in the Global Technology Services
segment. In 2013, the divested business delivered $1.3 billion of rev-
enue, approximately 1 percent of the company’s total revenue,
approximately $0.1 billion of pre-tax income, and had approximately
$50 million in tangible assets.
In the first quarter of 2013, the company completed the divesti-
ture of its Showcase Reporting product set to Help/Systems.
Showcase Reporting, which was acquired by the company through
the SPSS acquisition in 2009, is an enterprise-class business intel-
ligence platform that enables customers to build and manage
analytical reporting environments.
In the fourth quarter of 2013, the company completed two dives-
titures, the Applicazioni Contabili Gestionali (ACG) business and the
Cognos Application Development Tools (ADT) business.
The ACG business was purchased by TeamSystem. The ACG
product is an Italian Enterprise Resource Planning solution for small-
and medium-sized companies. The Cognos ADT business was
purchased by UNICOM Systems, Inc. The Cognos ADT product
suite represents a legacy family of products that provide application
development environments that would enable programmers to
develop COBOL applications at a higher productivity level.
Financial terms of each transaction were not disclosed and did not
have a material impact in the consolidated financial results.
2012
On April 17, 2012, the company announced that it had signed a
definitive agreement with Toshiba TEC for the sale of its Retail Store
Solutions business to Toshiba TEC. As part of the transaction,
Toshiba TEC and the company also signed a multi-year business
partner agreement to integrate retail store solutions for Smarter
Commerce. The transaction price was $850 million, and the com-
pany received approximately $800 million in cash, net of closing date
working capital adjustments.
Through December 31, 2012, the company completed the first
three phases of the sale. For the completed phases, the company
received net proceeds of $546 million, recorded a note receivable
of $251 million and recognized a net pre-tax gain of $446 million.
The gain was net of the fair value of certain contractual terms, cer-
tain transaction costs and the assets and liabilities sold. The gain
was recorded in other (income) and expense in the Consolidated
Statement of Earnings and the net proceeds are reflected within
divestitures of businesses, net of cash transferred within cash flows
from investing activities in the Consolidated Statement of Cash
Flows. In addition, in the third quarter, the company acquired a 19.9
percent ownership interest for $161 million in Toshiba Global Com-
merce Solutions Holding Corporation, the new holding company
that Toshiba TEC established for the business. The company will
retain this ownership for a period of three years at which time
Toshiba TEC will purchase the company’s equity interest for the
initial acquisition value. This investment was recorded in investments
and sundry assets in the Consolidated Statement of Financial Posi-
tion and the payment was reflected within purchases of marketable
securities and other investments within cash flows from investing
activities in the Consolidated Statement of Cash Flows.
The company closed additional phases of the divestiture in 2013.
Overall, the company has recognized a pre-tax gain on the sale of
$463 million through December 31, 2013.
2011
During the fourth quarter of 2011, the company completed the dives-
titure of the iCluster business to Rocket Software. iCluster, which
was acquired in the Data Mirror acquisition in 2007, was part of the
Software business. This transaction was not material to the consoli-
dated financial results.
During the second quarter of 2011, the company completed two
divestitures related to subsidiaries of IBM Japan. The impact of these
transactions was not material to the consolidated financial results.