UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report: April 18, 2000
(Date of earliest event reported)
INTERNATIONAL BUSINESS MACHINES CORPORATION
(Exact name of registrant as specified in its charter)
New York 1-2360 13-0871985
(State of Incorporation) (Commission File Number) (IRS employer
Identification No.)
ARMONK, NEW YORK 10504
(Address of principal executive offices) (Zip Code)
914-499-1900
(Registrant's telephone number)
<PAGE>
Item 5. Other Events
The registrant's press release dated April 18, 2000, regarding its
financial results for the period ended March 31, 2000, including unaudited
consolidated financial statements for the periods ended March 31, 2000, are
attached.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
Date: April 18, 2000
By: Mark Loughridge
-------------------------------------
(Mark Loughridge)
Vice President and Controller
<PAGE>
April 18, 2000
IBM Announces First-Quarter 2000 Results
IBM today announced first-quarter 2000 diluted earnings per common share of $.83
compared with diluted earnings per common share of $.78 in the first quarter of
last year. First-quarter 2000 net income was $1.52 billion compared with net
income of $1.47 billion in the first quarter of 1999. IBM's first-quarter 2000
revenues totaled $19.3 billion, a decline of 5 percent (3 percent at constant
currency) compared with the year-earlier period.
Louis V. Gerstner, Jr., IBM chairman and chief executive officer, said: "This
was a transitional quarter, as we expected, with Y2K lockdowns continuing until
late in the quarter in many of our large enterprise accounts. In addition, a
series of previously announced actions -- which are improving our business
structure over the long term -- hurt our revenues in the first quarter.
Nevertheless, we had good earnings per share, improving results in our server
business, and strong performance in such growth areas as e-business services,
database and Web application software, and custom chips.
"We believe that IBM is uniquely positioned to benefit from the many changes
that are occurring in our industry. Our significant investments in e-business
are beginning to pay off in exciting new growth prospects for us. In the first
quarter, for example, we made several major announcements in B2B commerce, Web
hosting and wireless technologies. We're pleased that we've been able to deliver
solid earnings performance during a time of substantial transition in IBM's
business portfolio. Looking forward, we continue to believe that 2000 will be a
good year for IBM," Mr. Gerstner said.
In the Americas, first-quarter revenues totaled $8.4 billion, down 4 percent (4
percent at constant currency) from the same period of 1999. Revenues from
Europe/Middle East/Africa were $5.4 billion, down 13 percent (4 percent at
constant currency). Asia-Pacific revenues increased 15 percent (8 percent at
constant currency) to $4.0 billion. OEM revenues declined 19 percent to $1.4
billion, primarily due to a year-over-year decline in hard disk drive revenues.
Hardware revenues totaled $7.7 billion in the first quarter, a decrease of 12
percent (11 percent at constant currency) compared with the year-earlier period.
Personal computer revenues fell, as the company continued to take actions to
improve long-term
<PAGE>
profitability in this area. These steps included bringing dealer inventories to
record low levels while reducing low-profitability special bid activity. Despite
the overall decline in personal computer revenues, Netfinity server and ThinkPad
revenues increased in the quarter. Revenues also grew in IBM's Web server
product line, which includes the RS/6000 and NUMA-Q products, with particularly
strong demand for the advanced RS/6000 S80 model. AS/400 revenues increased year
over year, led by growth in mid-range and high-end models. System/390 revenues
declined, although in the first quarter customers absorbed most of their
remaining excess Y2K test capacity. Microelectronics revenues increased, with
continued significant acceleration in shipments of custom logic chips. Total
storage revenues declined, principally due to unanticipated weakness in the
company's hard disk drive product line.
Revenues from IBM Global Services were adversely affected by two transitional
events: the sale of the IBM Global Network last year to AT&T and a sharp
year-over-year decline in Y2K services activity. After adjusting for these
factors, Global Services revenues (excluding maintenance) increased 9 percent
(10 percent at constant currency) compared with the same period of last year. On
an as-reported basis, revenues from Global Services totaled $7.6 billion, flat
year over year (up 1 percent at constant currency). IBM signed $8.6 billion in
services contracts in the quarter, and e-business services revenues grew 70
percent.
Software revenues totaled $2.9 billion, flat year over year (up 3 percent at
constant currency). Revenues grew strongly in the company's database and Lotus
Notes product lines, while operating system revenues declined. Revenues from
WebSphere, the company's leading Web application server product, more than
doubled year over year.
Global Financing revenues increased 16 percent (17 percent at constant currency)
in the first quarter to $816 million.
Revenues from the Enterprise Investments/Other category, which comprises
customized hardware and software products for specialized customer uses,
declined 13 percent (10 percent at constant currency) to $341 million.
IBM's total gross profit margin was 36.2 percent in the first quarter compared
with 35.7 percent in the first quarter a year ago.
Total first-quarter expenses declined 6 percent, and the company
<PAGE>
improved its expense-to-revenue ratio by 0.4 points year over year to 25.0
percent.
IBM spent approximately $2.1 billion on common share repurchases in the first
quarter. The average number of basic common shares outstanding in the quarter
was 1.78 billion compared with 1.82 billion in the same period of last year.
There were 1.77 billion basic common shares outstanding at March 31, 2000.
The company's debt in support of operations, excluding global financing,
increased $618 million from year-end 1999 to $2.2 billion, with a
debt-to-capitalization ratio of 13 percent. Global financing debt decreased $834
million from year-end 1999 to $26.0 billion, resulting in a debt-to-equity ratio
of 5.2 to 1.
Effective in the first quarter, results reflect changes the company made in the
organization of its business segments, including the transfer of the
system-level product business from the Technology segment to the Enterprise
Systems group and the transfer of point-of-sale terminals from Enterprise
Investments to the Personal Systems Group. Also reflected are changes the
company made in its expense allocation methodology, allocating expense items
previously unallocated and enhancing shared expense allocation. First-quarter
1999 results have been reclassified to conform with the 2000 presentation.
Forward-Looking and Cautionary Statements
Except for the historical information and discussions contained herein,
statements contained in this release may constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
These statements involve a number of risks, uncertainties and other factors that
could cause actual results to differ materially, as discussed in the company's
filings with the Securities and Exchange Commission.
<PAGE>
Financial Results Attached
INTERNATIONAL BUSINESS MACHINES CORPORATION
COMPARATIVE FINANCIAL RESULTS
(Unaudited; Dollars in millions except per share amounts)
Three months ended March 31
Percent
2000 1999* Change
------ ------- -------
REVENUE
Hardware $ 7,712 $ 8,751 -11.9%
Gross profit margin 27.4% 27.4%
Global Services 7,552 7,550 0.0%
Gross profit margin 25.9% 26.3%
Software 2,927 2,920 0.2%
Gross profit margin 80.0% 81.0%
Global Financing 816 705 15.8%
Gross profit margin 52.9% 55.9%
Enterprise Investments /
Other 341 391 -12.6%
Gross profit margin 47.6% 29.7%
TOTAL REVENUE 19,348 20,317 -4.8%
GROSS PROFIT 7,011 7,258 -3.4%
Gross profit margin 36.2% 35.7%
EXPENSE
S,G&A 3,706 3,937 -5.9%
% of revenue 19.2% 19.4%
R,D&E 1,172 1,181 -0.8%
% of revenue 6.1% 5.8%
Other income 189 134 40.3%
Interest expense 152 174 -12.4%
TOTAL EXPENSE 4,841 5,158 -6.1%
% of revenue 25.0% 25.4%
INCOME BEFORE
INCOME TAXES 2,170 2,100 3.3%
Pre-tax margin 11.2% 10.3%
Provision for income taxes 651 630 3.3%
Effective tax rate 30.0% 30.0%
NET INCOME $ 1,519 $ 1,470 3.3%
Net margin 7.8% 7.2%
Preferred stock
dividends 5 5
NET INCOME
APPLICABLE TO COMMON
SHAREHOLDERS $ 1,514 $ 1,465 3.3%
======= =======
EARNINGS PER SHARE
OF COMMON STOCK
- ASSUMING DILUTION $ 0.83 $ 0.78 6.4%
======= =======
EARNINGS PER SHARE
OF COMMON STOCK
- BASIC $ 0.85 $ 0.80 6.3%
======= =======
AVERAGE NUMBER OF
COMMON SHARES OUT-
STANDING (M's)
DILUTED 1830.0 1882.9
BASIC 1777.2 1823.8
* Reclassified to conform with 2000 presentation.
<PAGE>
INTERNATIONAL BUSINESS MACHINES CORPORATION
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(Unaudited; Dollars in millions)
At At
March 31, December 31, Percent
2000 1999 Change
-------- ----------- -------
ASSETS
Cash, cash equivalents,
and marketable securities $ 3,606 $ 5,831 -38.2%
Receivables - net, inventories,
and prepaid expenses 35,533 37,324 -4.8%
Plant, rental machines,
and other property - net 16,959 17,590 -3.6%
Investments and other assets 26,666 26,750 -0.3%
------- -------
TOTAL ASSETS $82,764 $87,495 -5.4%
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term debt $13,844 $14,230 -2.7%
Long-term debt 14,295 14,124 1.2%
------- -------
Total debt 28,139 28,354 -0.8%
Accounts payable, taxes,
and accruals 21,767 25,348 -14.1%
Other liabilities 13,340 13,282 0.4%
------- -------
TOTAL LIABILITIES 63,246 66,984 -5.6%
STOCKHOLDERS' EQUITY 19,518 20,511 -4.8%
------- -------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $82,764 $87,495 -5.4%
======= =======
<PAGE>
INTERNATIONAL BUSINESS MACHINES CORPORATION
SEGMENT DATA
FIRST QUARTER 2000*
-------------------------------------------------
(Dollars in millions)
Pre-tax
----- Revenue ----- Pre-tax Income
External Internal Total Income Margin
-------- -------- ----- ------- ------
SEGMENTS
Technology $1,940 $793 $2,733 $20 0.7%
% change -12.2% -6.6% -10.7% 11.1%
Personal Systems 3,261 10 3,271 (178) -5.4%
% change -13.1% 42.9% -13.0% -223.6%
Enterprise Systems 2,416 163 2,579 439 17.0%
% change -11.8% 14.0% -10.5% -19.7%
Global Services 7,552 595 8,147 998 12.2%
% change 0.0% -11.1% -0.9% 6.2%
Software 2,927 175 3,102 581 18.7%
% change 0.2% -17.1% -0.9% -17.7%
Global Financing 828 206 1,034 288 27.9%
% change 14.4% -0.5% 11.1% 20.5%
Enterprise Investments 341 1 342 (43) -12.6%
% change -10.7% -90.9% -13.0% 68.1%
TOTAL SEGMENTS 19,265 1,943 21,208 2,105 9.9%
% change -5.0% -7.3% -5.2% -6.9%
Eliminations / Other 83 (1,943) (1,860) 65
TOTAL IBM $19,348 $0 $19,348 $2,170 11.2%
% change -4.8% -4.8% 3.3%
FIRST QUARTER 1999*
-------------------------------------------------
(Dollars in millions)
Pre-tax
----- Revenue ----- Pre-tax Income
External Internal Total Income Margin
-------- -------- ----- ------- ------
SEGMENTS
Technology $2,210 $849 $3,059 $18 0.6%
Personal Systems 3,751 7 3,758 (55) -1.5%
Enterprise Systems 2,738 143 2,881 547 19.0%
Global Services 7,550 669 8,219 940 11.4%
Software 2,920 211 3,131 706 22.5%
Global Financing 724 207 931 239 25.7%
Enterprise Investments 382 11 393 (135) -34.4%
TOTAL SEGMENTS 20,275 2,097 22,372 2,260 10.1%
Eliminations / Other 42 (2,097) (2,055) (160)
TOTAL IBM $20,317 $0 $20,317 $2,100 10.3%
* Reclassified to conform with 2000 presentation.
PRE-TAX INCOME - THE EFFECT OF ORGANIZATION
CHANGES AND EXPENSE ALLOCATION CHANGES
FIRST QUARTER 1999
---------------------------------------
Previously
Reported Organiza- Expense
(Dollars in millions) Pre-tax tion Allocation Pre-tax
Income Change Change Income
-------- -------- ---------- -------
SEGMENTS
Technology $70 ($60) $8 $18
Personal Systems (89) 32 2 (55)
Enterprise Systems 498 43 6 547
Global Services 973 0 (33) 940
Software 657 42 7 706
Global Financing 297 0 (58) 239
Enterprise Investments (72) (64) 1 (135)
TOTAL SEGMENTS $2,334 ($7) ($67) $2,260
