IBM 2015 Annual Report Download - page 22

20 Management Discussion
International Business Machines Corporation and Subsidiary Companies
The following table provides the company’s (non-GAAP) operating
earnings for 2015 and 2014.
($ inmillions except per share amounts)
For the year ended December 31: 2015 2014
Yr.-to-Yr.
Percent
Change
Net income as reported $13,190 $12,022 9.7%
Loss from discontinued operations,
net of tax (174) (3,729) (95.3)
Income from continuing operations $13,364 $15,751 (15.2)%
Non-operating adjustments
(net of tax)
Acquisition-related charges 562 670 (16.1)
Non-operating retirement-related
costs/(income) 734 280 161.8
Operating (non-GAAP) earnings* $14,659 $16,702 (12.2)%
Diluted operating (non-GAAP)
earnings per share $ 14.92 $ 16.53 (9.7)%
* See pages41 and 42 for a more detailed reconciliation of net income to operating
earnings.
In 2015, the company delivered $81.7billion in revenue, $13.4billion
in income from continuing operations and $14.7billion in operat-
ing (non-GAAP) earnings resulting in diluted earnings per share
from continuing operations of $13.60 as reported and $14.92 on an
operating (non-GAAP) basis. The results of continuing operations
exclude a net loss from discontinued operations of $174million
in 2015 and $3,729 million in 2014 related to the divestiture of the
Microelectronics business. On a consolidated basis, net income
in 2015 was $13.2billion, with diluted earnings per share of $13.42.
The company generated $17.0billion in cash from operations and
$13.1billion in free cash flow in 2015 driving shareholder returns of
$9.5billion in gross common stock repurchases and dividends.
Total consolidated revenue in 2015 decreased 11.9percent as
reported and 1percent year to year adjusted for currency and
the divestitures of the Systemx and customer care businesses
reflecting a modest improvement in year-to-year performance
compared to the year ago period on an adjusted basis. Currency
had an 8point, or $7.2billion impact on reported revenue in 2015.
Revenue was impacted by 3points in 2015 from the divested
businesses. Combined, the impact of currency and divested busi-
nesses reduced the reported revenue growth by 11points.
In 2014, the company declared its strategic imperatives around
big data and analytics, cloud, mobile, social and security, areas
where clients were looking to the company to help move them to
the future. The company has made significant progress in shifting
its business toward these strategic imperatives and is continuing
to invest in capabilities which are not yet reflected in its revenue
stream. In 2015, strategic imperatives revenue grew 17percent year
to year as reported and 26percent adjusted for currency and the
Systemx divestiture, with double-digit growth in each quarter. In
total, the strategic imperatives generated $28.9billion in revenue
in 2015, which represents approximately 35percent of the com-
pany’s total revenue, an increase of 13points from 2013.
Cloud revenue increased 43percent as reported in 2015 and
57percent adjusted for currency and the System x divestiture.
In 2015, Cloud revenue was $10.2billion making the company
the largest cloud provider. The company has been building off
its extensive relationships in enterprise IT and incumbency in the
data center to help clients implement hybrid cloud environments.
In addition:
• As-a-Service revenue increased 50percent (61percent
adjusted for currency) year to year to $4.5billion and the
company exited 2015 with an annual run rate of $5.3billion.
• 2015 Cloud revenue included $5.6billion of revenue from
foundational offerings—where the company provides
software, hardware and services for clients to build their
own clouds.
• Clients are using cloud not just to reduce costs, but also to
gain agility and to enable innovation. The company has
been leading clients in making the move to cloud through
consuming as-a-Service, or through their own clouds or the
implementation of a hybrid environment.
• The company made seven cloud acquisitions in 2015 includ-
ing; Cleversafe, for object storage, Gravitant, for cloud
brokerage services and Clearleap, for cloud video services.
The company also invested nearly $1billion in 2015 to expand
its global cloud data center footprint to 46. The company
possesses an ecosystem of developers globally and its Blue-
mix Platform-as-a-Service has already expanded to over a
million users, adding 15thousand developers a week.
Business analytics revenue of $17.9billion in 2015 increased 7per-
cent as reported and 16percent year to year adjusted for currency
making the company the largest analytics provider. The company
has also been moving into new areas including Watson Health and
Watson Internet of Things (IoT).
• In Watson Health, the company is integrating its own organic
capabilities with content acquired through Merge Healthcare,
Phytel and Explorys. Healthcare represents a new revenue
and profit opportunity as the company changes the face of
healthcare through its cognitive platform to provide value to
providers, payers and partners.
• In the IoT market, The Weather Company acquisition will
not only provide the company tremendously valuable
data, but also a high-volume, cloud-based, insight-driven
platform to integrate with Watson to address significant
new opportunities.