-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LtT8Z5iheNRRloZ69Vf+sv4JwvG53be3m1qkgsfq1qUI41HAgizS6xbnN/zITM6x 6ne4NrHcfVEnUFHp2r5y9Q== 0000912057-02-029172.txt : 20020730 0000912057-02-029172.hdr.sgml : 20020730 20020730171647 ACCESSION NUMBER: 0000912057-02-029172 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20020730 ITEM INFORMATION: Other events FILED AS OF DATE: 20020730 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERNATIONAL BUSINESS MACHINES CORP CENTRAL INDEX KEY: 0000051143 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER & OFFICE EQUIPMENT [3570] IRS NUMBER: 130871985 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-02360 FILM NUMBER: 02715078 BUSINESS ADDRESS: STREET 1: 1 NEW ORCHARD ROAD CITY: ARMONK STATE: NY ZIP: 10504- BUSINESS PHONE: 9144995138 MAIL ADDRESS: STREET 1: ONE NEW ORCHARD RD CITY: ARMONK STATE: NY ZIP: 10504 8-K 1 a2085602z8-k.txt 8-K 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: July 30, 2002 (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) Item 5. Other Events The registrant's press release dated July 30, 2002, regarding a definitive agreement between IBM and PricewaterhouseCoopers, whereby IBM will acquire PricewaterhouseCoopers' global business consulting and technology services unit for approximately $3.5 billion in cash and stock is Exhibit 99.1 of this Form 8-K. Exhibit 99.2 of this Form 8-K is IBM's Chief Financial Officer John R. Joyces' remarks to securities analysts on Tuesday, July 30, 2002, regarding the definitive agreement between IBM and PricewaterhouseCoopers, whereby IBM will acquire PwC Consulting. In addition, IBM's Senior Vice President and Group Executive Doug T. Elix's remarks to securities analysts and President and CEO of PwC Consulting Greg Brenneman's remarks to securities analysts regarding the definitive agreement between IBM and PricewaterhouseCoopers, whereby IBM will acquire PwC consulting are also included in Exhibit 99.2 of this Form 8-K. 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: July 30 , 2002 By: /s/ Robert F. Woods ------------------------- (Robert F. Woods) Vice President and Controller EX-99.1 3 a2085602zex-99_1.txt EXHIBIT 99.1 IMMEDIATE Contact: James Sciales IBM (914) 766-4664 sciales@us.ibm.com David Nestor or Sehra K. Eusufzai PricewaterhouseCoopers PwC Consulting (646) 394-4855 (646) 598-2470 dave.nestor@us.pwcglobal.com sehra.k.eusufzai@us.pwcglobal.com IBM TO ACQUIRE PwC CONSULTING Combining Business Insight and Technology to Help Clients Drive Greater Business Returns ARMONK, N.Y. AND NEW YORK, N.Y., July 30, 2002 . . . IBM and PricewaterhouseCoopers today announced that IBM would acquire PricewaterhouseCoopers' global business consulting and technology services unit, PwC Consulting. The combination of IBM and PwC Consulting will create a powerful, unmatched capability to help clients solve their business issues, exploiting world-class technology for improved business performance. The two companies have signed a definitive agreement approved by IBM's board of directors and PricewaterhouseCoopers' leadership board. Under the terms, IBM will pay PricewaterhouseCoopers an estimated purchase price of $3.5 billion in cash and stock. The transaction is subject to regulatory approvals and approval of local PwC firms through votes of their partners, and is expected to be concluded around the end of the third quarter. PwC Consulting will no longer pursue its planned initial public offering. "The client is the driving force behind today's announcement with PwC," said Samuel J. Palmisano, IBM president and chief executive officer. "Clients are not only looking for innovative ideas to improve their businesses, they are seeking a partner with deep business expertise and the ability to exploit leading, open standards-based technology to turn these ideas into bottom-line business benefits. This acquisition underscores our commitment to this strategy. "Our consulting and services professionals will provide a powerful capability, beginning with business innovation and extending through implementation, to help clients improve their competitiveness and drive sustained growth and profitability," Palmisano said. "Together with the world-class innovations of IBM Research and our business partner offerings, this new business unit will deliver comprehensive end-to-end business and technology solutions." Samuel A. DiPiazza, Jr., chief executive officer of PricewaterhouseCoopers, said, "This transaction fulfills our commitment to fully separate PwC Consulting from PwC. It will unleash the consulting unit from the regulatory restraints of our industry, and will allow the business to reach its full potential. Combining PwC Consulting with IBM not only fully achieves the goals we set for the separation, it provides clients and our professionals with greater opportunities and access to innovative solutions." - more - - 2 - PwC Consulting, with estimated fiscal-year 2002 consulting revenues of approximately $4.9 billion, excluding client reimbursables, and some 30,000 employees, will be combined with the Business Innovation Services unit of IBM Global Services, creating a new global unit. Ginni Rometty, currently general manager of IBM Global Services - Americas, will become general manager of the new unit, reporting to Doug Elix, senior vice president and group executive, IBM Global Services. This new global business unit will pull from the extensive portfolio of IBM capabilities to offer clients innovative, integrated solutions through business and technology consulting, industry insight and business process expertise together with the comprehensive services capabilities of the rest of IBM Global Services. "Creating a single capability that fuses business and process insight with information technology provides the unique advantage our clients are reaching out for," said Doug Elix, senior vice president and group executive, IBM Global Services. "This is an exceptionally good fit -- both strategically and culturally. Our businesses complement each other and we speak the same language." Greg Brenneman, president and chief executive officer of PwC Consulting, said, "I'd like to congratulate IBM for making this bold, strategic move. Everyone wins in this transaction -- our clients, our employees and IBM. When I came to PwC Consulting, I knew that aligning with a company such as IBM was in everyone's best interest. IBM has positioned itself to be the industry leader for many years to come." Throughout the process, IBM and PwC have been working with the SEC staff to establish procedures under a no-action letter to comply with SEC auditor independence rules. IBM is the world's largest information technology company, with more than 80 years of leadership in helping businesses innovate. IBM Global Services is the industry's largest business and information technology services provider, with approximately 150,000 professionals serving customers in 160 countries and annual revenue of $35 billion (2001). IBM Global Services integrates a broad range of capabilities -- services, consulting, hardware, software and research -- to help companies of all sizes realize the full value of information technology. PricewaterhouseCoopers is the world's largest professional services organization. Drawing on the knowledge and skills of more than 150,000 people in 150 countries, PricewaterhouseCoopers helps its clients solve complex business problems and measurably enhance their ability to build value, manage risk and improve performance in an Internet-enabled world. PricewaterhouseCoopers refers to the member firms of the worldwide PricewaterhouseCoopers organization. EDITORS: To hear IBM and PwC Consulting executives discuss this announcement, go to http://www.ibm.com/investor/events/ir0702/ at 5:00 p.m. EDT today. 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. # # # EX-99.2 4 a2085602zex-99_2.txt EXHIBIT 99.2 Exhibit 99.2 Thank you, Mandy. Good afternoon. This is Hervey Parke, Vice President of Investor Relations for IBM, and thank you all for joining us. Let me quickly give you a few pieces of information. The press release was sent out a while ago announcing that IBM would acquire PricewaterhouseCoopers' global business consulting and technology services unit, PwC Consulting. This press release is on our website at www.ibm.com. At this time, the opening page of the presentation should have automatically loaded, and you should be on Chart 1, the title page. In about 45 minutes, you will also be able to link to the prepared remarks using a link also found at the bottom of the presentation window. And finally, a replay of this webcast will be available on this website by this time tomorrow. Now, please click on the NEXT button and move to chart 2. Certain comments made by Doug Elix, John Joyce, Greg Brenneman or myself during this call 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 website, or from us in Investor Relations. Now, please click again on the NEXT button for chart 3. And at this time, let me turn the call over to John Joyce, IBM's Senior Vice President and Chief Financial Officer. Thanks, Hervey. Good afternoon, and welcome to our conference call announcing the acquisition of PwC Consulting. Joining me today are Doug Elix, Senior Vice President and Group Executive of IBM Global Services and Greg Brenneman, President and CEO of PwC Consulting. Back at our November and May Security Analysts meetings in New York City, Sam Palmisano spoke about an underlying change in the IT industry. To remain competitive in their own markets, and to invest in Information Technology wisely, our customers are looking for more than just hardware and software products. They want to know how an integrated technology plan can leverage their business plan, driving efficiencies through the transformation of their own business processes. And this is the focus of IBM's strategy, to deliver superior business value to clients through the integration of technology and business process insight. Today's announcement of the acquisition of PwC Consulting underscores IBM's commitment to this strategy -- accelerates it -- and uniquely positions IBM with capabilities to deliver superior business value and winning IT infrastructure solutions to our customers. The timing of this acquisition is excellent. o First, in the current environment, customers want to ensure their IT investments are consistent with their longer-term business objectives. And as this economy strengthens, they will begin to accelerate these investments towards those goals. o And second, the market has set a good value for this acquisition. Now let me turn it over to Doug and Greg to share their views on today's announcement. After they have concluded their remarks, I will wrap it up with a brief financial summary. At the conclusion of today's prepared remarks, we will open it up to questions from our analysts. Now, please click again on the NEXT button for chart 4, and let me turn it over to Doug Elix. Thank you, John. Good Afternoon. Today is an exciting and historic day for PwC Consulting, IBM Global Services, and IBM as a whole. I wanted to speak to you personally, the investment community, and explain the underlying rationale for IBM's acquisition of PwC Consulting. First, let me say clearly that this is not just to grow our services business through an acquisition. IBM's acquisition of PwC Consulting will create a new and unique organization to assist clients in using information technology to improve business performance. Clients are looking for end-to-end solutions to today's business issues, from business innovation to implementation, and this new organization will be unmatched in its ability to deliver this value. Improving business efficiency and effectiveness today requires much more than just management consulting, solutions services or IT outsourcing. What's required is a capability to help clients leverage technology to improve their business performance. The combination of business insight, process change capability and information technology expertise is a unique advantage and one that clients are reaching out for. Clients have a wide range of needs in their organizations, from business process improvement, to more efficient use of information technology. And, above all, they value in-depth understanding of how to use technology to deal with today's business issues within their industry. They value people that can help them think through, develop and implement new ways to win and improve their business. So, in one bold move, IBM and PwC Consulting have combined to set a new standard of helping clients by forming the richest portfolio of business and technology services in the industry. Clients realize the advantages of applying technology to business problems. This acquisition uniquely positions IBM to help them do it. This acquisition supports IBM's strategy to deliver superior business value with open-architected, standards-based IT solutions. PwC Consulting provides deep industry knowledge, real world process and operations expertise, leading business solutions and strong business relationships that are critical for fusing business and IT: o They are number one for Enterprise Resource Planning (from IDC), o They are a leader in customer relationship management (from Gartner), o And they are a leader in Supply Chain Services (from IDC). IBM's strategy is to deliver superior business value through the fusion of business and technology. The PwC Consulting acquisition underscores IBM's commitment to this strategy and raises its capability to a new plateau. Before turning over to Greg, I wanted to speak a moment about the task ahead, the task of integrating PwC Consulting into IBM. We do intend to fully integrate PwC Consulting into IBM Global Services, under the IBM brand. Ginni Rometty, formerly the head of the Americas services business, will become the general manager of the new unit. Ginni will report directly to me. Teams of our people are already hard at work, in an unparalleled effort to prepare for a smooth transition for PwC Consulting clients and employees. In summary... Today, our strategy is clear. We have the right business model, and now, an even stronger team. Our acquisition of PwC Consulting has just raised the bar for what we can deliver to our customers. With that, I'll hand it off to Greg. He will discuss what this means to PwC Consulting clients and its employees. Good Afternoon, this is Greg Brenneman, President and CEO of PwC Consulting. I want to congratulate both John and Doug on the bold strategic move that they have made. In this transaction everyone wins, IBM, my colleagues at PwC Consulting and, most importantly, our collective clients. This transaction unleashes PwC Consulting from the independence constraints it operated under as part of an accounting firm. As we studied our options, it was always clear to us that the best option was to be acquired by IBM. This acquisition will not only allow the business to flourish, but will create a new and unique capability unmatched in the industry. It achieves the goals we set for the separation and goes much further by providing our clients and our professionals with greater opportunities and access to innovative solutions. PwC Consulting clients will be able to assess a broad range of capabilities including: o leading technology research and innovation, o the largest outsourcing and integration service provider in the world, o access to IBM global financing working capital for business change, o Extensive offshore operations and a new utility services model - e-business on demand. o IBM's own industry and solution capabilities. We are excited about what these capabilities will mean to our clients, and know with confidence that we will be unmatched in the marketplace. In addition, PwC Consulting employees will have better upside in their careers by joining the winning team at IBM. They will be able to assist IBM in delivering a very clear strategy. Now, please click again on the NEXT button for chart 5. John... Thanks, Greg. IBM first considered the acquisition of PwC Consulting over two years ago, for many reasons: o Their deep client relationships with access to senior customer executives, o A superb, experienced management team, o A cultural fit with an emphasis on entrepreneurial talent, o A shared delivery philosophy and vision, o And importantly, they had the business insight of a strategic consultant as well as their skills as an IT consultant, to add to our existing initiatives. But in 2000, we could not justify the valuation at that time. However, the current market has created a unique opportunity for both parties to come to mutually acceptable terms. Now, please click again on the NEXT button for chart 6, and we'll discuss the financial significance of this to IBM. For their 2002 fiscal-year just ended in June, PwC Consulting's projected financial results are: o Net Revenue, excluding client reimbursables, of approximately $4.9 billion, o Gross profit margins of approximately 29%, o Operating Profit Margins of approximately 4%, excluding charges, o And some 30,000 employees, including approximately 1,300 partners. With the estimated $3.5 billion purchase price at a multiple to revenue of 0.7, IBM is looking for several immediate benefits, including: o cost synergies derived from operating within IBM's infrastructure and corporate resources -- and from the changeover from the partnership model, o And new drivers of revenue across IBM. In addition, market concerns about auditor and consulting conflicts have recently impacted PwC's growth. Their joining IBM resolves this concern. With restructuring charges, we expect this transaction to reduce earnings per share by almost $0.30 in the 4th quarter of this year. We believe the acquisition will be accretive in the 4th quarter of 2003. So by year-end 2004, we anticipate that this unit will contribute double-digit revenue growth, at a profit margin comparable to the rest of IBM Global Services. The estimated $3.5 billion purchase price will be in the form of $2.7 billion dollars in cash, $400 million in a convertible note and $400 million in stock. This will be funded from our strong cash flow and strong balance sheet. Now, please click again on the NEXT button for chart 7. What we see in PwC Consulting is: o A leading management consulting firm, with key business insight and business process outsourcing capabilities. o A set of blue-chip clients, o Significant revenue and cost synergies, o Key services offerings around Customer Relationship Management, ERP, and Human Capital Solutions, as well as SAP-based applications. Overall, this is a great fit within IBM Global Services that anticipates the IT Services marketplace for years to come. The strategy is right, and the timing is right. Now Doug, Greg and I will take your questions. Thanks, John. Before I turn the call over to the operator to give you polling instructions, let me make my usual request that you refrain from multi-part questions, to give others some time. As always, we are on a tight schedule. OK Mandy, let's get started. - -1- - -------------------------------------------------------------------------------- IBM ACQUISITION OF PwC CONSULTING JULY 30, 2002 - -2- - -------------------------------------------------------------------------------- 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. - -3- INDUSTRY PROFIT IS MOVING TO BUSINESS INSIGHT - -------------------------------------------------------------------------------- Share of Industry Profits ------------------------------ 1995 2000 2005 Trend ---- ---- ---- ----- Business Insight 10% 13% 17% Up Infrastructure Services & Software 30% 29% 41% Up Server/Storage 18% 20% 12% Down Clients 13% 9% 6% Down Technology 29% 29% 24% Down - -------------------------------------------------------------------------------- Source: IBM Analysis 2002 - -4- [IBM LOGO] - -5- KEY ACQUISITION CRITERIA - -------------------------------------------------------------------------------- PwC Consulting - Deep client relationships X - Superb management team X - Cultural fit X - Shared vision and philosophy X - Leading business insight X ---------------------------------------- PwC Consulting represents a one-time opportunity to acquire needed skill sets ---------------------------------------- - -6- FINANCIAL PERFORMANCE - -------------------------------------------------------------------------------- PwC PROJECTED FISCAL YEAR 2002: - Net revenue of $4.9 billion - Gross Profit Margin of 29% - Operating Margin of 4%, excluding charges IBM'S FINANCIAL RETURN: - Estimated purchase price of $3.5 billion - Cost synergies - New revenue drivers - Resolution of auditor independence factor - Accretive to EPS by 4th Quarter of 2003 - -7- SUMMARY - -------------------------------------------------------------------------------- - Leading management consulting firm - Blue-chip clients - Significant revenue and cost synergies - Key services offerings - A great fit that defines the IT Services market for years to come - -8- [IBM LOGO] -----END PRIVACY-ENHANCED MESSAGE-----