International Business Machines Corporation at a Glance

Uppers

  • Excellent benefits
  • Telecommute and flexible work options are available

Downers

  • Not one of the top payers in the tech industry
  • Size can mean individuals can get "lost in the crowd" and find it difficult to stand out

The Bottom Line

  • While no longer the top name in the tech field, IBM remains a well-respected technology company known for reliability both as an employer and for its products.

About International Business Machines Corporation

International Business Machines (IBM) bets that cognition is the ignition for growth. The company, the world's top provider of computer products and services, is increasingly investing in its cognitive computing system, Watson. The artificial intelligence system helps customers in a wide range of businesses analyze massive amounts of data to make better decisions. The company's information technology, business services, and software units are among the largest in the world. While it has moved from hardware to a large degree, the company maintains enterprise server and data storage product lines that are among industry leaders. IBM is moving to transform its operations as it deals with a rapidly changing technology environment.

Operations

IBM manages its sprawling operations in five segments.

Technology Services and Cloud Platforms, about 45% of revenue, provides a portfolio of cloud, outsourcing, and other managed services focused on clients' enterprise IT infrastructure. Offerings include maintenance for IBM products and other technology platforms, as well as support.

Cognitive Solutions, which provides about a quarter of revenue, includes Watson, IBM's cognitive computing project. Major Watson initiatives are Watson Platform, Watson Health, and Watson Internet of Things. Another part of the unit is the company's security platform, which provides detection and protection against cyber threats across a customer's operations.

Global Business Services, about 20% of revenue, provides consulting, application management services, and global process services to help customers move their businesses to digital platforms.

Systems, about 10% of revenue, is IBM's hardware business. It provides technologies for hybrid cloud and cognitive workloads. The unit sells servers, storage systems, and operating systems software.

Global Financing provides credit arrangements for customers to buy IBM products. It accounts for about 2% of revenue.

Geographic Reach

The international in IBM has become increasingly important to its bottom line. With clients in about 175 countries, sales outside the US account for more than 60% of revenue. Customers in Europe, the Middle East, and Africa (EMEA) generate about 30% of sales and Asia/Pacific, about 20%.

Sales and Marketing

IBM operates country-based units where consultants, product specialists, and other workers (most hired locally), facilitate the adoption and fulfillment of its products and services. It serves clients across most industries; leading industry groups include financial services, industrial, and communications.

Financial Performance

As IBM works to reposition itself to capitalize on data, analytics, and cloud computing (all parts of its cognitive initiatives), among other areas, its revenue has dropped for five straight years.

Revenue dipped 2% to $80 billion in 2016 from $82 billion in 2015. The businesses the company depends on for growth, Global Technology and Cloud Services and Cognitive Solutions, managed to increase sales 2% and 1%, respectively. Within the Cognitive unit, Solutions Software revenue rose about 5% in 2016 from security and analytics, which includes Watson products and services. Other segments, however, brought in significantly less money in 2016. Revenue from Z Systems, Power Systems, and Storage Systems dropped about 30%. Sales fell in all regions, but the company reported higher sales in some countries including Japan and India.

IBM posted about $12 billion in net income in 2016, about a billion less than in 2015. The company had higher expenses including a doubling of costs for workforce rebalancing.

Cash generated by operating activities was about $17 billion in 2016, about $50 million less than the 2015 figure. The drop was due to lower net income, which was somewhat offset by lower cash income tax payments.

Strategy

IBM is trying to bridge its operations from the days of high margin hardware and long-term service contracts to the lower margin model of selling subscription-based use of software stored in the cloud. The company has developed a broad strategy around the trends of big data and analytics, cloud computing, and social and mobile applications. It sees these areas as major growth opportunities and brings to bear homegrown initiatives and acquisitions to cultivate them.

A key element in IBM's plans is its Watson cognitive computing system, which can assimilate and process complex information and deliver answers to questions across a range of industries. It is one of the initiatives in which IBM is investing about $4 billion over several years. The company has established Watson units focused on health and the Internet of Things. IBM has made Watson more widely available through a series of application programming interfaces for a number of uses.

The Watson Health group has partnered with health and medical institutions and companies to collect, analyze, and find patterns in health-related data from cancer to exercise. Partners include Memorial Sloan-Kettering, the American Heart Association, Under Armour, Novo Nordisk, and Teva Pharmaceuticals.

The company also is investing in cloud computing. It's trying to compete with Amazon, Google (a unit of Alphabet), and Microsoft in offering cloud-based computing infrastructure services. The company focuses on hybrid cloud, the mixture of keeping data on IBM computers and the customer's own systems. Other areas IBM has identified are security and mobility. In 2017, the company introduced a Z series mainframe with encryption capabilities.

In addition, IBM is focused on emerging markets where the populations and companies that serve them are embracing mobile, social, cloud, and big data at faster rates, in some cases, than mature countries.

Mergers and Acquisitions

IBM continues to use an aggressive acquisition strategy to augment its own R&D as it expands and refines its mix of business software and IT services. Many of the acquisitions have been made to provide data and services for the Watson system. IBM has earmarked $100 million to acquire startups that could expand Watson's capabilities.

In 2016 the company made nearly 15 acquisitions and continued at a somewhat slower pace with two purchases in the first half of 2017. The biggest acquisition of 2017 was of Truven Health Analytics, which provides data and analysis technologies, for $2.6 billion. IBM seeks to put data and analysis together with Watson's cognitive capabilities to help health care professionals accomplish better patient outcomes.

In another Watson-related acquisition that closed in 2016 was of the Weather Company. IBM bought the company's business-to-business, mobile and cloud-based web-properties, weather.com, Weather Underground, The Weather Company brand and WSI, its global business-to-business brand. The transaction did not include the Weather Channel, but it licenses weather forecast data and analytics from IBM under a long-term contract. The deal provides a wealth of data for processing through Watson to help companies make better decisions that are affected by the weather.

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International Business Machines Corporation

1 New Orchard Rd
Armonk, NY 10504-1722
Phone: 1 (914) 499-1900
Fax: 1 (914) 765-7382

Stats

  • Employer Type: Public
  • Stock Symbol: IBM
  • Stock Exchange: NYSE
  • Chairman, President and CEO: Virginia M. Rometty
  • Chairman, President and CEO: Virginia M. Rometty
  • SVP and CFO: Martin J. Schroeter
  • 2016 Employees: 380,300

Major Office Locations

  • Armonk, NY

Other Locations

  • Hoover, AL
  • Huntsville, AL
  • Bentonville, AR
  • Tempe, AZ
  • Tucson, AZ
  • Agoura Hills, CA
  • Costa Mesa, CA
  • Emeryville, CA
  • Foster City, CA
  • Los Angeles, CA
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  • San Ramon, CA
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  • Santa Clarita, CA
  • Boulder, CO
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  • Koramangala, Bangalore - 56009, India
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  • Akita, Japan
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  • Zürich, Switzerland
  • Eindhoven, The Netherlands
  • Da Nang, Vietnam
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