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: January 19, 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 (IRS employer
File Number) 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 January 19, 2000, regarding its
financial results for the periods ended December 31, 1999, including unaudited
consolidated financial statements for the periods ended December 31, 1999, 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: January 20, 2000
By: Mark Loughridge
-------------------------------------
(Mark Loughridge)
Vice President and Controller
<PAGE>
IBM ANNOUNCES 1999 FOURTH-QUARTER, FULL-YEAR RESULTS
ARMONK, N.Y., January 19, 2000 . . . IBM today announced fourth-quarter
1999 diluted earnings per common share of $1.12 compared with diluted earnings
per common share of $1.24 in the fourth quarter of 1998. Fourth-quarter 1999 net
income was $2.1 billion compared with net income of $2.3 billion in the
year-earlier period. IBM's fourth-quarter 1999 revenues totaled $24.2 billion, a
decline of 4 percent (2 percent at constant currency) compared with the fourth
quarter of 1998.
Louis V. Gerstner, Jr., IBM chairman and chief executive officer, said:
"As we had anticipated, the Y2K issue hit us hard in the fourth quarter. Many of
our large customers -- who handle much of the world's critical data -- had
locked down their computer systems as they prepared for the Y2K transition.
While we are pleased that this transition is proceeding smoothly for our
customers, these lockdowns had a significant negative impact on our revenues and
earnings in the quarter.
"However, the Y2K issue should not overshadow the fact that 1999 was a
good year for IBM. We had record net income and earnings per share and our
e-business revenues grew at an extraordinary rate. Our e-business services
revenues, for example, were up 60 percent from the previous year. We also had
very good results on a full-year basis in our strategic growth areas of
services, software and OEM technology. In addition, we generated strong cash
flows, completed 17 acquisitions and spent $6 billion on capital expenditures.
"As we enter the new year, the e-business revolution is continuing to
accelerate at businesses of all sizes throughout the world," Mr. Gerstner said.
"IBM -- with the broadest portfolio of products and services in the industry --
is exceptionally well positioned to benefit from this growing e-business demand.
We continue to believe that, once the Y2K transition is completed, this can be a
very good year for IBM."
In the Americas, fourth-quarter revenues were $10.4 billion, down 4
percent (2 percent at constant currency) from the 1998 period. Revenues from
Europe/Middle East/Africa were $7.2 billion, down 15 percent (6 percent at
constant currency). Asia-Pacific revenues increased 12 percent (2 percent at
constant currency) to $4.4 billion. OEM revenues grew 12 percent (12 percent at
constant currency) to $2.2 billion.
Hardware revenues declined 11 percent (10 percent at constant currency) to
$10.2 billion from the 1998 fourth quarter. Y2K-related declines in customer
demand were a significant factor behind fourth-quarter revenue decreases in
System/390, AS/400, RS/6000, and personal computers. However, within IBM's
server family, Netfinity PC revenues increased significantly, as did revenues
from RS/6000 mid-range servers, including the advanced RS/6000 Model S80.
Microelectronics revenues increased substantially, principally due to growth in
custom logic shipments. Shipments of IBM's new "Shark" disk storage product were
strong in the quarter, although overall storage revenues declined largely as a
result of ongoing price pressures in hard disk drives. The overall hardware
gross profit margin declined to 26.6 percent from 34.2 percent.
Revenues from IBM Global Services, after normalizing for the 1999 sale of
the IBM Global Network to AT&T, increased 7 percent in the quarter (excluding
maintenance). On an as-reported basis, revenues for Global Services -- including
maintenance and without normalizing for the Global Network sale -- grew 2
percent (4 percent at constant currency) to $8.7 billion. IBM signed $10.3
billion in services contracts in the quarter and concluded the year with a total
services contract backlog of approximately $60 billion.
Software revenues totaled $3.6 billion, up 2 percent (6 percent in
constant currency) over the prior year's final quarter. Middleware -- which is
critical for e-business -- grew 8 percent (13 percent at constant currency),
with record fourth-quarter shipments of Lotus Notes and Domino groupware
products and strong performance in database, transaction processing, and Tivoli
system management software. The software gross profit margin improved 1.1 points
year over year to 83.4 percent.
Global Financing revenues increased 19 percent (22 percent at constant
currency) in the fourth quarter to $915 million.
Revenues from the Enterprise Investments/Other area, which comprises
custom applications and other products designed to meet specialized customer
requirements, declined 13 percent (10 percent at constant currency) year over
year to $687 million. The revenue decline resulted from IBM's strategy to exit
certain non-strategic businesses.
The company's total gross profit margin was 36.7 percent in the 1999
fourth quarter compared with 39.0 percent in the 1998 fourth quarter.
Total fourth-quarter expenses declined 9 percent, and the company improved
its expense-to-revenue ratio by 1.5 points year over year to 24.4 percent.
IBM spent approximately $2.1 billion on common share repurchases in the
fourth quarter. The average number of basic common shares outstanding in the
quarter was 1.79 billion compared with 1.84 billion in the same period of 1998.
<PAGE>
Full-year 1999 Results
Net income for the year ended December 31, 1999 was $7.7 billion, or $4.12
per diluted common share, compared with net income of $6.3 billion, or $3.29 per
diluted common share, in 1998. Revenues in 1999 totaled $87.5 billion, an
increase of 7 percent as reported and in constant currency, versus revenues of
$81.7 billion in 1998.
IBM's full-year 1999 results include an after-tax benefit of $750 million,
or $.40 per diluted common share, resulting from several actions that occurred
in the year. Specifically, IBM sold its Global Network to AT&T. The company
completed several acquisitions which resulted in charges for acquired in-process
research and development; took actions intended to improve the long-term
competitiveness of the company; and shortened the depreciable lives of personal
computers.
In the Americas, full-year revenues were $38.8 billion, up 5 percent (7
percent at constant currency) from the 1998 period. Revenues from Europe/Middle
East/Africa were $25.7 billion, an increase of 2 percent (6 percent at constant
currency). Asia-Pacific revenues grew 19 percent (8 percent at constant
currency) to $15.2 billion. OEM revenues increased 15 percent (14 percent at
constant currency) to $7.8 billion.
Hardware revenues in 1999 were $37.0 billion, an increase of 5 percent (4
percent in constant currency). Global Services revenues totaled $32.2 billion,
an increase of 11 percent (11 percent at constant currency). Software revenues
totaled $12.7 billion, an increase of 7 percent (8 percent at constant
currency). Global Financing revenues totaled $3.1 billion, an increase of 9
percent (10 percent at constant currency). Revenues from the Enterprise
Investments/Other area declined 2 percent (1 percent at constant currency) year
over year to $2.5 billion.
Common share repurchases totaled approximately $7.3 billion in 1999. The
average number of basic common shares outstanding was 1.81 billion in 1999
compared with 1.87 billion in 1998. There were 1.78 billion basic common shares
outstanding at December 31, 1999.
The company's debt in support of operations, excluding global financing,
decreased $104 million from year-end 1998 to $1.6 billion at year-end 1999,
resulting in a debt-to-capitalization ratio of 9 percent. Global financing debt
declined $1 billion from year-end 1998 to $26.8 billion at year-end 1999,
resulting in a debt-to-equity ratio of 5.5 to 1.
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
(Dollars in millions except per share amounts)
<TABLE>
<CAPTION>
Three Months Twelve Months
Ended December 31, Ended December 31,
Percent Percent
1999 1998 Change 1999 1998 Change
---- ---- ------ ---- ---- ------
<S> <C> <C> <C> <C> <C> <C>
REVENUE
Hardware $10,238 $11,467 -10.7% $37,041 $35,419 4.6%
Gross margin 26.6% 34.2% 26.9% 31.6%
Global Services 8,736 8,560 2.0% 32,172 28,916 11.3%
Gross margin 27.9% 27.5% 27.6% 26.9%
Software 3,606 3,545 1.7% 12,662 11,863 6.7%
Gross margin 83.4% 82.3% 82.3% 80.9%
Global Financing 915 767 19.3% 3,137 2,877 9.0%
Gross margin 48.8% 49.7% 53.9% 48.0%
Enterprise Investments/
Other 687 792 -13.3% 2,536 2,592 -2.2%
Gross margin 38.9% 30.2% 38.6% 34.3%
TOTAL REVENUE 24,182 25,131 -3.8% 87,548 81,667 7.2%
GROSS PROFIT 8,883 9,809 -9.4% 31,929 30,872 3.4%
Gross margin 36.7% 39.0% 36.4% 37.8%
OPERATING EXPENSES
S,G&A 4,445 5,074 -12.4% 14,729 16,662 -11.6%
% of revenue 18.4% 20.2% 16.8% 20.4%
R,D&E 1,416 1,407 0.6% 5,273 5,046 4.5%
% of revenue 5.9% 5.6% 6.0% 6.2%
OPERATING INCOME 3,022 3,328 -9.2% 11,927 9,164 30.1%
Other income 134 187 -28.7% 557 589 -5.5%
Interest expense 171 213 -19.5% 727 713 2.0%
INCOME BEFORE
INCOME TAXES (1) 2,985 3,302 -9.6% 11,757 9,040 30.0%
Pre-tax margin 12.3% 13.1% 13.4% 11.1%
Provision for
income taxes 896 956 -6.3% 4,045 2,712 49.2%
Effective tax
rate 30.0% 28.9% 34.4% 30.0%
NET INCOME (1) $ 2,089 $ 2,346 -11.0% $ 7,712 $ 6,328 21.9%
Net margin 8.6% 9.3% 8.8% 7.7%
Preferred stock
dividends 5 5 20 20
NET INCOME
APPLICABLE TO COMMON
STOCKHOLDERS $ 2,084 $ 2,341 -11.0% $ 7,692 $ 6,308 21.9%
======= ======= ======= =======
EARNINGS PER SHARE
OF COMMON STOCK -
ASSUMING DILUTION $ 1.12 $ 1.24 -9.7% $ 4.12 $ 3.29 25.2%
======= ======= ======= =======
EARNINGS PER SHARE
OF COMMON STOCK -
BASIC $ 1.16 $ 1.27 -8.7% $ 4.25 $ 3.38 25.7%
======= ======= ======= =======
AVERAGE NUMBER OF
COMMON SHARES OUT-
STANDING (M's)
DILUTED 1,847.8 1,894.3 1,871.1 1,920.1
BASIC 1,793.0 1,839.5 1,808.5 1,869.0
</TABLE>
1) Twelve-month 1999 results include a pre-tax benefit of $1.8 billion
(after-tax benefit of $750 million, or $.40 per diluted common share) due to a
gain from the sale of the IBM Global Network, charges for acquired in-process
research and development related to acquisitions, a charge for actions intended
to improve the long-term competitiveness of the company, as well as a change in
PC depreciable lives.
Note: All references to the average number of common shares and per common share
data for all periods presented have been adjusted to reflect a 2-for-1 stock
split of the common stock effective May 10, 1999.
<PAGE>
INTERNATIONAL BUSINESS MACHINES CORPORATION
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(Dollars in millions)
At At
December 31, December 31, Percent
1999 1998 Change
---- ---- ------
ASSETS
Cash, cash equivalents,
and marketable securities $ 5,831 $ 5,768 1.1%
Receivables - net, inventories,
and prepaid expenses 37,324 36,592 2.0%
Plant, rental machines,
and other property - net 17,590 19,631 -10.4%
Investments and other assets 26,750 24,109 11.0%
------- -------
TOTAL ASSETS $87,495 $86,100 1.6%
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term debt $14,230 $13,905 2.3%
Long-term debt 14,124 15,508 -8.9%
------- -------
Total debt 28,354 29,413 -3.6%
Accounts payable, taxes,
and accruals 25,348 22,922 10.6%
Other liabilities 13,282 14,332 -7.3%
------- -------
TOTAL LIABILITIES 66,984 66,667 0.5%
STOCKHOLDERS' EQUITY 20,511 19,433 5.5%
------- -------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $87,495 $86,100 1.6%
======= =======
<PAGE>
INTERNATIONAL BUSINESS MACHINES CORPORATION
SEGMENT DATA
TWELVE MONTHS 1999
------------------------------------------------
Pre-tax
(Dollars in millions) -------- Revenue ------- Pre-tax Income
External Internal Total Income Margin
-------- -------- ------- ------- -------
SEGMENTS
Technology $12,597 $3,800 $16,397 $764 4.7%
% change 5.9% -17.0% -0.4% -20.0%
Personal Systems 15,290 45 15,335 (557) -3.6%
% change 19.7% 55.2% 19.8% 43.9%
Server 8,718 326 9,044 1,590 17.6%
% change -17.9% -26.7% -18.3% -44.1%
Global Services 32,172 2,636 34,808 4,528 13.0%
% change 11.3% -4.0% 9.9% 20.5%
Software 12,662 767 13,429 2,830 21.1%
% change 6.7% 2.4% 6.5% 9.4%
Global Financing 3,219 835 4,054 1,286 31.7%
% change 8.1% 5.4% 7.5% 10.4%
Enterprise Investments 2,499 19 2,518 (324) -12.9%
% change 1.3% -66.1% -0.2% 47.4%
TOTAL SEGMENTS 87,157 8,428 95,585 10,117 10.6%
% change 6.9% -10.3% 5.1% 4.3%
Eliminations / Other 391 (8,428) (8,037) 1,640*
TOTAL IBM $87,548 $0 $87,548 $11,757 13.4%
% change 7.2% 7.2% 30.0%
TWELVE MONTHS 1998
------------------------------------------------
Pre-tax
(Dollars in millions) -------- Revenue ------- Pre-tax Income
External Internal Total Income Margin
-------- -------- ------- ------- -------
SEGMENTS
Technology $11,890 $4,578 $16,468 $955 5.8%
Personal Systems 12,776 29 12,805 (992) -7.7%
Server 10,624 445 11,069 2,842 25.7%
Global Services 28,916 2,747 31,663 3,757 11.9%
Software 11,863 749 12,612 2,588 20.5%
Global Financing 2,979 792 3,771 1,165 30.9%
Enterprise Investments 2,468 56 2,524 (616) -24.4%
TOTAL SEGMENTS 81,516 9,396 90,912 9,699 10.7%
Eliminations / Other 151 (9,396) (9,245) (659)
TOTAL IBM $81,667 $0 $81,667 $9,040 11.1%
* Pre-tax income includes a benefit of $1.8 billion due to a gain from the sale
of the IBM Global Network, charges for acquired in-process research and
development related to acquisitions, a charge for actions intended to improve
the long-term competitiveness of the company, as well as a change in PC
depreciable lives.
<PAGE>
INTERNATIONAL BUSINESS MACHINES CORPORATION
SEGMENT DATA
FOURTH QUARTER 1999
------------------------------------------------
Pre-tax
(Dollars in millions) -------- Revenue ------- Pre-tax Income
External Internal Total Income Margin
-------- -------- ------- ------- -------
SEGMENTS
Technology $3,565 $1,006 $4,571 $279 6.1%
% change 1.2% -20.9% -4.6% -6.7%
Personal Systems 4,112 19 4,131 (246) -6.0%
% change -7.4% 137.5% -7.1% NM
Server 2,350 89 2,439 281 11.5%
% change -32.2% -39.5% -32.5% -73.3%
Global Services 8,736 651 9,387 1,244 13.3%
% change 2.0% -8.8% 1.2% 1.1%
Software 3,606 206 3,812 876 23.0%
% change 1.7% 4.6% 1.9% 7.6%
Global Financing 945 236 1,181 339 28.7%
% change 17.1% -18.1% 7.9% 7.6%
Enterprise Investments 670 1 671 (62) -9.2%
% change -18.8% -93.8% -20.2% 56.0%
TOTAL SEGMENTS 23,984 2,208 26,192 2,711 10.4%
% change -4.7% -16.4% -5.8% -24.6%
Eliminations / Other 198 (2,208) (2,010) 274
TOTAL IBM $24,182 $0 $24,182 $2,985 12.3%
% change -3.8% -3.8% -9.6%
FOURTH QUARTER 1998
------------------------------------------------
Pre-tax
(Dollars in millions) -------- Revenue ------- Pre-tax Income
External Internal Total Income Margin
-------- -------- ------- ------- -------
SEGMENTS
Technology $3,521 $1,272 $4,793 $299 6.2%
Personal Systems 4,441 8 4,449 24 0.5%
Server 3,465 147 3,612 1,052 29.1%
Global Services 8,560 714 9,274 1,231 13.3%
Software 3,545 197 3,742 814 21.8%
Global Financing 807 288 1,095 315 28.8%
Enterprise Investments 825 16 841 (141) -16.8%
TOTAL SEGMENTS 25,164 2,642 27,806 3,594 12.9%
Eliminations / Other (33) (2,642) (2,675) (292)
TOTAL IBM $25,131 $0 $ 25,131 $3,302 13.1%
NM = Not Meaningful
