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: November 13, 2002
(Date of earliest event reported)
INTERNATIONAL BUSINESS MACHINES CORPORATION
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(Exact name of registrant as specified in its charter)
New York 1-2360 13-0871985
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(State of Incorporation) (Commission File Number) (IRS employer
Identification No.)
ARMONK, NEW YORK 10504
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(Address of principal executive offices) (Zip Code)
914-499-1900
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(Registrant's telephone number)
Item 5. Other Events
Attachments I and II of this Form 8-K are certain remarks delivered by
IBM's Chief Financial Officer, John R. Joyce, at IBM's Fall 2002 Securities
Analysts meeting on Wednesday, November 13, 2002. Attachments III through VI
are the charts for presentations at that meeting by (i) John R. Joyce,
(ii) Ginni Rometty, GM, IBM Business Consulting Services and (iii) Dr. John E.
Kelly III, Senior Vice President and Group Executive, Technology Group.
IBM's web site (www.ibm.com) contains a significant amount of information
about IBM, including financial and other information for investors
(www.ibm.com/investor/). IBM encourages investors to visit its various web sites
from time to time, as information is updated and new information is posted.
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: November 13, 2002
By: /s/ Robert F. Woods
-------------------------------
(Robert F. Woods)
Vice President and Controller
Attachment I
John Joyce's remarks included the following comments:
"Now, as promised, 2003. The street's current average for revenue
expectations sees us getting back to some growth next year. And in light of the
current GDP estimates we think this is a reasonable objective.
And based on that revenue growth and coupled with all that we discussed
here today the street's average estimate for growth and earnings per share for
2003 is also reasonable.
So we are going into 2003 based on all the things that you heard today
in a very, very good position to gain share regardless of the opportunity. But,
when this industry does turn around, we are going to be the one company that can
do all of this."
ATTACHMENT II
The Q&A session included the following comments:
QUESTION: "Just want to follow up on a question that was asked about the pension
issue. Some people were surprised recently when you filed to contribute shares
into the pension fund to cover your liability.
And given that IBM's been generally a purchaser of your own shares as opposed to
an issuer, two things. One, can you tell us what's the message that you were
trying to convey there? I mean, you haven't issued shares; you just have the
option of doing it.
And two, does this prevent you from doing your own share repurchase or any other
things like acquisitions? And on my second question, why don't you address that
first?"
ANSWER FROM JOHN JOYCE: "First, the consideration to use stock was simply to
give us flexibility. We decided that as I stated in our October meeting, that we
would fund our pension plans and we were considering contributing $1.5 billion a
year until the US plan is fully funded by 2005. That's what I said.
You know, and I had different options. We have different options. One of those
options is to use stock. And so that's what we thought. But it was simply for
the flexibility. And we'll make that decision as we go through time.
Now, the decision on the amount and timing, we still have...we have not decided
yet. I'm telling you where we are at this point in time. And any decision is
obviously dependent on many variables, and there are a number of alternatives on
timing and on the amount. And so that's where we are today relative to the
pension.
Now, to your second point, $21 billion of free cash flow over the last couple of
years. We think that we have a strong balance sheet and that we will be able to
deal with any of these issues as we go forward."
ATTACHMENT III
[IBM LOGO]
Fall Security Analyst Meeting
JOHN R. JOYCE
SENIOR VICE PRESIDENT & CHIEF FINANCIAL OFFICER
IBM Fall Security Analyst Meeting / November 13, 2002 (C) 2002 IBM Corporation
Certain comments made in this presentation may be characterized as forward
looking under the Private Securities Litigation Reform Act of 1995.
Those statements involve a number of factors that could cause actual results to
differ materially.
Additional information concerning these factors is contained in the Company's
filing with the SEC. Copies are available from the SEC, from the IBM Web site,
or from IBM Investor Relations.
Agenda
John Joyce - Introduction
Mike Lawrie - Customer-Driven Go-to-Market Strategy
Ginni Rometty - Creating Value with Business Consulting Services
Linda Sanford - IBM e-business On Demand Transformation
Bob Moffat - Supply Chain Management across IBM
John Kelly - Technology Group: The New Business Model
John Joyce - Closing Remarks
ATTACHMENT IV
[IBM LOGO]
CREATING VALUE WITH
BUSINESS CONSULTING SERVICES
GINNI ROMETTY
GENERAL MANAGER
IBM BUSINESS CONSULTING SERVICES
IBM Fall Security Analyst Meeting / November 13, 2002 (c) 2002 IBM Corporation
What Distinguishes IBM Business Consulting Services
RAPID, GREATER
INNOVATIVE + EFFECTIVE + REDUCED = CLIENT
THINKING EXECUTION RISK VALUE
- IDEAS TO BENEFITS -- A SINGLE, TRUSTED PARTNER ACCOUNTABLE FOR RESULTS
- UNMATCHED BREADTH OF CAPABILITIES AND PROCESS SKILLS TO LEAD CLIENTS TO ON
DEMAND
- NEW CATEGORY FOR GROWTH -- BUSINESS TRANSFORMATION OUTSOURCING
- GLOBAL, INDUSTRY-FOCUSED OPERATING AND GO-TO-MARKET MODEL
- ON TRACK, RAPID INTEGRATION OF PWC CONSULTING
Leading Clients to the On Demand Era
ON DEMAND
BUSINESS
RESPONSIVE
VARIABLE [AVENTIS LOGO] [BP LOGO]
RESLILENT
[EMPIRE BLUECROSS BLUESHIELD LOGO]
FOCUSED
A New Category: Business Transformation Outsourcing
PROCESS & INTEGRATION APPLICATIONS IT OUTSOURCING
BUSINESS TRANSFORMATION OUTSOURCING
--------------------------------------------------------------------------------
PROCESS TRANSFORMATION
--------------------------
APPLICATION OUTSOURCING
----------------------------------------------
INFRASTRUCTURE OUTSOURCING
------------------------------
VALUE BUSINESS PROCESS OUTSOURCING
ADD ---------------------------------------------------
Strong Market Opportunity Is Emerging
[GRAPH]
"Omitted graphic is available on IBM's website (www.IBM.com)."
The global market for BPO is forecast to grow 10% annually from $124B in 2000 to
$179B in 2005
SOURCE: Gartner Dataquest, "Outsourcing Forecast Update: Feeling the Pain,"
July 2002
Our Global Operating Model
IBM Business Consulting Services
"Omitted graphic is available on IBM's website (www.IBM.com)."
Unrivaled Depth in 18 Industries: Pharmaceuticals Industry-leading intellectual
property
[PICTURES]
"Omitted graphic is available on IBM's website (www.IBM.com)."
Unrivaled Depth in 18 Industries: Pharmaceuticals Specialized practitioners
[MAP]
"Omitted graphic is available on IBM's website (www.IBM.com)."
Unrivaled Depth in 18 Industries: Pharmaceuticals Solutions that fuse business
insight & technology
- GXPHARMA
- DISCOVERYLINK
- CLINICAL INFORMATION EXCHANGE
- DRUG DISCOVERY FACTORY
- SPEEDTRIAL (E-CLINICAL)
- KNOWLEDGE MANAGEMENT
- REGULATORY COMPLIANCE
Unrivaled Depth in 18 Industries: Pharmaceuticals
Marquee clients
[LOGOS]
"Omitted graphics are available on IBM's website (www.IBM.com)."
UNRIVALED DEPTH IN 18 INDUSTRIES...
- INDUSTRY-LEADING INTELLECTUAL PROPERTY
- SPECIALIZED PRACTITIONERS
- SOLUTIONS THAT FUSE BUSINESS INSIGHT & TECHNOLOGY
- MARQUEE CLIENTS
. . . GLOBALLY
Integration of PwC Consulting Is on Track
- PHASE I: ONE FACE TO THE CLIENT
- Completed on target - October 2
- PHASE II: ONE TEAM
- On track - January 1
- INTEGRATION PRINCIPLES
1. Prioritize clients first
2. Adopt and go
3. Move with speed
Creating Value with Business Consulting Services
- KEY ACTIONS IN 4Q TO DRIVE BUSINESS PERFORMANCE
- Reestablish relationships with prior PwC audit clients
- Maintain objectivity and enhance channel relationships
- Restructure to capture synergies
- BCS WILL MATURE OVER 2003 & 2004
- Serve clients with deep industry expertise
- Build out industry solutions and derive full benefit from ISV
relationships
- Lead client migration to On Demand and BTO
- Leverage the breadth of IBM
- Exploit flexible labor sourcing
- BUSINESS MODEL OBJECTIVES
- Within two years:
- Double-digit revenue growth
- Pre-tax profit margins of 10%
ATTACHMENT V
[IBM logo]
IBM TECHNOLOGY GROUP
DR. JOHN E. KELLY III
SENIOR VICE PRESIDENT AND GROUP EXECUTIVE
TECHNOLOGY GROUP
IBM Fall Security Analyst Meeting/November 13, 2002 (c) 2002 IBM Corporation
TECHNOLOGY GROUP OBJECTIVES
- LEADERSHIP TECHNOLOGY
- SUPPORT IBM SYSTEMS DIVISIONS
- OEM BUSINESS FOR GROWTH AND SCALE
- MANAGE PORTFOLIO FOR PROFITABILITY
Power 4+ Processor
Increasing our lead:
Transistors 184M
Ground rules 130nm
Cache 1.5MB
GHz 1.45
8 CPUs
4 Chips
Brings together IBM advances in:
- Copper interconnects
- SOI
- Advanced packaging
- Advanced
architecture
- System-on-chip
- 130nm
TG OEM EVOLUTION
HIGH VOLUME HIGH VALUE
------ -----
COMMODITY PORTFOLIO SHIFT > (IP) CUSTOM
(PC DRIVEN) OFFERINGS
1993 2002
------------------------------------------------------------------------------>
LAUNCH AND GROW REFOCUS MD
GROW OEM - ASICS #1 - INCREASE ASICS LEAD
BUSINESS - CUSTOM LOGIC - POWERPC
- IP INCOME - HIGH PERFORMANCE FOUNDRY
EXIT ENGINEERING &
- DRAMS - DISPLAYS - HDDS TECHNOLOGY SERVICES
Driving to a Balanced OEM Portfolio
Segments
IT 77% IT 49% PVC 42%
PVC 19% NW 28% IT 34%
NW 4% PVC 23% NW 23%
[Pie Charts]
Offerings
STD PROD 74% STD PROD 57% ASIC/SOC 38%
FOUNDRY 18% ASIC/SOC 22% FOUNDRY 36%
ASIC 8% FOUNDRY 21% STD PROD 26%
[Pie Charts]
1996 2000 2004
Results Results Target
Intellectual Property (IP) Assets
Skills
Know How
Patents
2001 Patents* IBM 1126
MICRO
[Bar Chart] INTEL 809
TI 799
MOTOROLA 778
- IBM ranked #1 in U.S. patents from 1993 to 2001
- IBM generated over 3400 patents in 2001
*US Patent Office/IBM
Technology Know How
[Graph]
"Omitted graphic is available on IBM's website (www.IBM.com)."
Optimized High Performance / Low Power
Ramping the World's Most Advanced 300mm Fab
[Graph]
"Omitted graphic is available on IBM's website (www.IBM.com)."
POWERPC The World's Most Scalable Architecture
[Graphic]
"Omitted graphic is available on IBM's website (www.IBM.com)."
POWERPC The World's Most Scalable Architecture
[Graphic]
"Omitted graphic is available on IBM's website (www.IBM.com)."
Engineering & Technology Services (ETS)
Skills
Know How
Patents
ETS Portfolio of Practices
Chip Solutions
- SoC Design Services
- Custom Circuit Design Services
- Technology Optimization and Migration
Services
System Solutions
- System Architecture and Design Services
- High Performance Packaging Services
- Power and Mechanical Design Services
Business Solutions
- Manufacturing Process Consulting
- IP Management Consulting
- Verification and e-Design
Design Outsourcing Services
Strength of IBM's Global Resource Team
"Omitted graphic is available on IBM's website (www.IBM.com)."
TG CORE BUSINESS MODEL OBJECTIVES
- WE HAVE TAKEN THE NECESSARY ACTIONS TO POSITION THE
BUSINESS GOING FORWARD
- PORTFOLIO SHIFTED
- MICROELECTRONICS RESTRUCTURED / REFOCUSED
- LAUNCHED TECHNOLOGY-BASED SERVICES BUSINESS
- IMPROVING SHORT-TERM FINANCIAL PERFORMANCE
- 3Q IMPROVED SEQUENTIALLY AND YTY
- TARGETING 4Q PROFITABILITY
- EXPECT 2003 PROFITABILITY
- STEADY-STATE BUSINESS MODEL OBJECTIVES
- EXTERNAL REVENUE GROWTH >10% PER YEAR
- GROSS MARGINS >30%
- PRE-TAX MARGIN >10%
- POSITIVE CASH FLOW
IBM TECHNOLOGY
ATTACHMENT VI
[IBM LOGO]
Fall Security Analyst Meeting
John R. Joyce
Senior Vice President & Chief Financial Officer
IBM Fall Security Analyst Meeting / November 13, 2002 (c) 2002 IBM Corporation
Fundamentals of Financial Strength
- Industry attractiveness
- Leadership position
- Consistent superior returns
- Strategic investments
- Focus on improved profitability
- Ability to generate cash
IT Industry Remains Attractive
IT Industry Growth vs. WW GDP Growth
[Graph]
"Omitted graphic is available on IBM's website (www.IBM.com)."
Fundamentals of Financial Strength
- Industry attractiveness
- LEADERSHIP POSITION
- Consistent superior returns
- Strategic investments
- Focus on improved profitability
- Ability to generate cash
Well Positioned in the Industry
SECTOR LEADERSHIP INDUSTRY LEADERSHIP
#1 Financial Services #1 Strategic Outsourcing
#1 Communications #1 Integrated Technology Services
#1 Distribution #1 Business Consulting Services
#1 Public #1 Middleware
#2 Industrial #1 WebSphere
#3 Small & Medium Business #1 Data Management
#1 Servers
#1 ASIC
#2 Storage
#3 PCs
Fundamentals of Financial Strength
- Industry attractiveness
- Leadership position
- CONSISTENT SUPERIOR RETURNS
- Strategic investments
- Focus on improved profitability
- Ability to generate cash
Historical Return on Invested Capital
[Graph]
"Omitted graphic is available on IBM's website (www.IBM.com)."
Target Investments to High ROIC Segments
[Graph]
"Omitted graphic is available on IBM's website (www.IBM.com)."
Fundamentals of Financial Strength
- Industry attractiveness
- Leadership position
- Consistent superior returns
- STRATEGIC INVESTMENTS
- Focus on improved profitability
- Ability to generate cash
Focused Investment for Growth
Research & Development: Capital Expenditures: Acquisitions:
$5B $5B $5B
- Leading products - Technology - Services
- WebSphere - 300mm - PwCC
- DB2 - Services - Mainspring
- Servers - Strategic Outsourcing - Software
- Storage Systems - Global financing - Informix
- ASIC - ACCESS360
- Emerging growth areas - CrossWorlds
- e-Sourcing - Trellisoft
- Grid - Holosofx
- Autonomic - Metamerge
- Linux
- Life Sciences
Fundamentals of Financial Strength
- Industry attractiveness
- Leadership position
- Consistent superior returns
- Strategic investments
- FOCUS ON IMPROVED PROFITABILITY
- Ability to generate cash
Aggressive Cost and Expense Management
- Focus on end-to-end cost management
- Integrated Supply Chain initiative
- Global Services scale advantage
- Selective manufacturing outsourcing
- Continue to drive expense improvements
- Leverage RD&E across platforms
- Continuously improve productivity
- Generate IP income
- Divest non-strategic businesses
- HDD, DBU, Optical, Consumer PC Channel
Fundamentals of Financial Strength
- Industry attractiveness
- Leadership position
- Consistent superior returns
- Strategic investments
- Focus on improved profitability
- ABILITY TO GENERATE CASH
Summary
- IT industry to grow faster than WW GDP
- Positioned to outpace industry
- Leverage leadership positions and On Demand initiatives to grow
share
- Disciplined investment in faster growing, higher ROIC segments of
the market
- Research & development, capital expenditures, strategic
acquisitions
- Continue to drive down cost & expense
- Generate sustainable free cash flow
- $21B free cash flow from 1999-2001