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52 Management Discussion
International Business Machines Corporation and Subsidiary Companies
Results of Continuing Operations
Segment Details
The following is an analysis of the 2014 versus 2013 reportable segment results. The table below presents each reportable segment’s
external revenue and gross margin results. Segment pre-tax income includes transactions between segments that are intended to reflect
an arm’s-length transfer price and excludes certain unallocated corporate items.
($ inmillions)
For the year ended December 31: 2014** 2013**
Yr.-to-Yr.
Percent/
Margin
Change
Yr.-to-Yr.
Percent Change
Adjusted for
Currency
Revenue
Global Technology Services $35,442 $35,737 (0.8)% 1.7%*
Gross margin 39.0% 39.1% (0.1) pts.
Global Business Services 19,512 21,210 (8.0)% (1.1)%*
Gross margin 30.4% 30.2% 0.1 pts.
Software 25,434 25,932 (1.9)% (0.9)%
Gross margin 88.6% 88.8% (0.2 ) pts.
Systems Hardware 9,996 12,988 (23.0)% (16.8)%*
Gross margin 39.5% 40.8% (1.3) pts.
Global Financing 2,034 2,022 0.6% 3.0%
Gross margin 49.4% 45.6% 3.7 pts.
Other 374 478 (21.7)% (20.4)%
Gross margin (215.0)% (195.6)% (19.4) pts.
Total consolidated revenue $92,793 $98,367 (5.7)% (1.5)%*
Total consolidated gross profi t $46,407 $48,684 (4.7)%
Total consolidated gross margin 50.0% 49.5% 0.5 pts.
Non-operating adjustments
Amortization of acquired intangible assets 416 388 7.2%
Acquisition-related charges — 5 (100.0)%
Retirement-related costs/(income) 173 629 (72.4)%
Operating (non-GAAP) gross profi t $46,996 $49,706 (5.5)%
Operating (non-GAAP) gross margin 50.6% 50.5% 0.1 pts.
* Adjusted for divestitures and currency.
** Reclassified to conform with 2015 presentation.
Global Services
In 2014, the Global Services segments delivered revenue of
$54,954 million, a decrease of 3.5percent as reported, but an
increase of 1percent adjusted for the divestitures of the customer
care and Systemx businesses (2points) and currency (2points).
Pre-tax income decreased 8.4percent and the pre-tax margin
decreased 0.8points to 16.5percent. Total outsourcing revenue
of $24,520 million decreased 6.3percent as reported, but was flat
year to year when adjusted for divestitures (4points) and currency
(2points). Total transactional revenue of $23,581 million decreased
0.4percent, but increased 2percent adjusted for currency.