8-K 1 a16-7644_18k.htm 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: March 31, 2016

(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)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

o  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 


 

Item 8.01 (Other Events)

 

On March 31, 2016, IBM posted information on its Investor Relations website (www.ibm.com/investor/) providing historical financial information regarding previously announced updates to the company’s reporting segments. Attachment I of this Form 8-K contains the information that was posted on IBM’s Investor Relations website.

 

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.

 

2


 

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: March 31, 2016

 

 

 

 

 

 

 

 

 

By:

/s/ Stanley J. Sutula III

 

 

Stanley J. Sutula III

 

 

Vice President and Controller

 

 

(Chief Accounting Officer)

 

3


 

ATTACHMENT I

 

IBM provides historical data in preparation for 2016 segment reporting change
IBM Emerging as a Cognitive Solutions and Cloud Platform Company

 

31 March 2016

 

During IBM’s investor briefing on February 25, 2016, senior management discussed a number of changes to its management system and organizational structure as IBM evolves into a cognitive solutions and cloud platform company.  With the changes, the company is updating its reported segments.  There is no change to IBM consolidated results.

 

The company will implement the new segment structure starting with first quarter 2016 results, which will be reported in mid-April.  Today, the company is providing a view of the segment results on the new basis for the last 2 years, to allow investors to update their historical financial models in advance of the first quarter earnings report.  The two attached exhibits provide data for 2014 and 2015 under the new segment structure:

 

Exhibit 1:  Reclassified Management System Segment View

Exhibit 2:  Additional Revenue and Gross Profit Information

 

A description of the segment reporting changes was provided in an article posted to IBM’s investor website on February 25.  The posting also references additional information to be provided going forward, including information on the company’s strategic imperatives by segment.  The February 25 article is attached below, and also available on IBM’s investor website, along with a replay of IBM’s Investor Briefing.

 


 

IBM Updates Reporting Segments
IBM Emerging as a Cognitive Solutions and Cloud Platform Company

 

25 February 2016

 

IBM has been transforming its business, addressing the evolving needs of its clients, while continuing to support their most critical business processes.  During IBM’s investor briefing on February 25, Ginni Rometty and the senior management team discussed the progress of the company’s transformation, and described how IBM is becoming more than a hardware, software and services company; it is emerging as a cognitive solutions and cloud platform company.  Information on the event is available on IBM’s investor website at http://www.ibm.com/investor/events/investor0216.html

 

To support this transformation, the company has made a number of changes to its management system and organizational structure.  Segment reporting reflects the way the company analyzes business results and allocates resources.  With the management system and organizational changes, IBM is updating its reported segments, effective January 1, 2016.  To be clear, there is no change to IBM consolidated results.

 

Primary Changes

 

The primary changes are driven by realignment of IBM’s software portfolio, as software value shifts to new areas.

 

·     The company has created a cognitive solutions business.  This encompasses the solutions units addressing many of the strategic areas, including analytics, commerce and security, several of the new initiatives around Watson, Watson Health, Watson IoT, and Transaction Processing software. Many of these are new opportunity areas, opening up incremental revenue and profit pools.

·     Integration software, including WebSphere, has been brought together with IBM’s cloud infrastructure and platform capabilities and Global Technology Services business, reflecting the importance of integration software to enterprise-grade hybrid clouds.

·     Operating systems software has been more closely aligned with the underlying hardware platforms.

 

The company has also realigned a portion of the software support revenue, which was previously reported in the Integrated Technology Services line of Global Technology Services, to the underlying software product areas.  In addition, the company has also changed the allocation of some expenses between segments to better reflect the current portfolio structure.

 


 

The company has also evolved the management system within some of its businesses, as it addresses the changing business environment.

 

Summary of Segment Changes

 

2015 Reporting Structure

 

 

 

2016 Reporting Structure

 

 

 

 

 

Software

 

Software Value Shifting

 

Cognitive Solutions

· Key Branded Middleware

 

· Solutions SW

 

· Solutions Software

· Other Middleware

 

· Transaction Processing SW

 

· Transaction Processing Software

· Operating Systems

 

· Integration SW

 

 

· Other Software & Services

 

· Operating Systems SW

 

 

 

 

 

 

 

Global Business Services

 

 

 

Global Business Services

· Consulting & Systems Integration

 

 

 

· Consulting

· GBS Outsourcing (AMS SO & GPS)

 

 

 

· Global Process Services

 

 

 

 

· Application Management

 

 

 

 

 

Global Technology Services

 

 

 

Technology Services &

 

 

 

 

Cloud Platforms

· Strategic Outsourcing

 

 

 

· Infrastructure Services

· Integrated Technology Services

 

 

 

· Technical Support Services

· Maintenance

 

 

 

· Integration Software

 

 

 

 

 

Systems Hardware

 

 

 

Systems

· Systems Hardware

 

 

 

· Systems Hardware

 

 

 

 

· Operating Systems Software

 

 

 

 

 

Global Financing

 

 

 

Global Financing

 

The company will report revenue and pre-tax income for each segment.  Revenue will be reported by the line items noted in the table above.  This better reflects the way the business is managed today, and is a more contemporary presentation of results.

 

External gross profit and gross profit margin will continue to be reported by segment.  In the case of Technology Services & Cloud Platforms, the company will also provide a view of the services and software gross margins.  Similarly, for the Systems segment, the company will report hardware and software gross margins.

 


 

While the Software segment will no longer exist as a stand-alone unit, the software revenue is clearly visible within the Technology Services & Cloud Platforms, Cognitive Solutions, and Systems segments.  Given the current focus on IBM’s software revenue performance, the company will continue to report total software revenue performance throughout 2016.

 

In addition, the company plans to provide additional information on its strategic imperatives by segment.

 

The net effect is alignment with IBM’s current management system, and provides investors with additional transparency on the drivers of our business.

 

What to Expect Over the Next 2 Months

 

Today, the company is providing an overview of the new reported segments, and how they relate to the prior segments.  Before the end of March, the company will provide a view of the segment results for 2014 and 2015 by quarter, so that investors may update their historical models.  The company will report on the new reporting basis starting with first quarter 2016 results in April.

 


 

Exhibit 1: Reclassified Management System Segment View (Unaudited)

March 31, 2016

 

International Business Machines Corporation

Management System Segment View

 

 

 

Cognitive Solutions &
Industry Services

 

 

 

 

 

 

 

 

 

($M)

 

Cognitive
Solutions 

 

Global Business
Services

 

Technology
Services & Cloud
Platforms

 

Systems

 

Global Financing

 

Total Segments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1Q14

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Revenue

 

4,956

 

5,105

 

9,805

 

2,970

 

1,129

 

23,966

 

External Revenue

 

4,355

 

4,964

 

9,589

 

2,709

 

512

 

22,128

 

Internal Revenue

 

602

 

141

 

216

 

261

 

617

 

1,838

 

Pre-tax Income

 

1,518

 

742

 

1,365

 

-201

 

596

 

4,020

 

Pre-tax Income Margin

 

31

%

15

%

14

%

-7

%

53

%

17

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2Q14

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Revenue

 

5,589

 

5,078

 

10,086

 

3,887

 

1,189

 

25,828

 

External Revenue

 

5,056

 

4,938

 

9,864

 

3,593

 

504

 

23,955

 

Internal Revenue

 

532

 

140

 

222

 

294

 

685

 

1,874

 

Pre-tax Income

 

2,108

 

990

 

1,894

 

560

 

593

 

6,145

 

Pre-tax Income Margin

 

38

%

19

%

19

%

14

%

50

%

24

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3Q14

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Revenue

 

4,987

 

4,975

 

9,744

 

3,284

 

1,084

 

24,074

 

External Revenue

 

4,464

 

4,840

 

9,517

 

2,997

 

487

 

22,305

 

Internal Revenue

 

523

 

135

 

226

 

287

 

598

 

1,769

 

Pre-tax Income

 

1,778

 

849

 

1,840

 

247

 

475

 

5,190

 

Pre-tax Income Margin

 

36

%

17

%

19

%

8

%

44

%

22

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4Q14

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Revenue

 

6,374

 

4,897

 

10,094

 

3,160

 

1,119

 

25,644

 

External Revenue

 

5,815

 

4,771

 

9,919

 

2,995

 

532

 

24,031

 

Internal Revenue

 

559

 

127

 

175

 

164

 

588

 

1,613

 

Pre-tax Income

 

2,811

 

766

 

1,985

 

777

 

526

 

6,865

 

Pre-tax Income Margin

 

44

%

16

%

20

%

25

%

47

%

27

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2014

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Revenue

 

21,906

 

20,055

 

39,729

 

13,300

 

4,522

 

99,512

 

External Revenue

 

19,689

 

19,512

 

38,889

 

12,294

 

2,034

 

92,418

 

Internal Revenue

 

2,216

 

543

 

840

 

1,006

 

2,488

 

7,093

 

Pre-tax Income

 

8,215

 

3,347

 

7,084

 

1,384

 

2,189

 

22,219

 

Pre-tax Income Margin

 

37

%

17

%

18

%

10

%

48

%

22

%

 


 

Exhibit 1 (Continued): Reclassified Management System Segment View (Unaudited)

March 31, 2016

 

International Business Machines Corporation

Management System Segment View

 

 

 

Cognitive Solutions &
Industry Services

 

Technology

 

 

 

 

 

 

 

($M)

 

Cognitive
Solutions

 

Global Business
Services

 

Services & Cloud
Platforms

 

Systems

 

Global Financing

 

Total Segments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1Q15

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Revenue

 

4,682

 

4,449

 

8,720

 

2,314

 

1,048

 

21,213

 

External Revenue

 

4,047

 

4,318

 

8,554

 

2,142

 

461

 

19,523

 

Internal Revenue

 

635

 

131

 

166

 

173

 

586

 

1,690

 

Pre-tax Income

 

1,528

 

588

 

1,131

 

261

 

515

 

4,023

 

Pre-tax Income Margin

 

33

%

13

%

13

%

11

%

49

%

19

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2Q15

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Revenue

 

5,049

 

4,475

 

9,071

 

2,730

 

1,182

 

22,506

 

External Revenue

 

4,516

 

4,345

 

8,898

 

2,541

 

478

 

20,778

 

Internal Revenue

 

532

 

130

 

173

 

189

 

704

 

1,728

 

Pre-tax Income

 

1,825

 

643

 

1,414

 

538

 

613

 

5,033

 

Pre-tax Income Margin

 

36

%

14

%

16

%

20

%

52

%

22

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3Q15

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Revenue

 

4,580

 

4,326

 

8,702

 

2,182

 

1,031

 

20,821

 

External Revenue

 

4,052

 

4,206

 

8,541

 

1,973

 

447

 

19,219

 

Internal Revenue

 

528

 

120

 

161

 

209

 

584

 

1,601

 

Pre-tax Income

 

1,596

 

664

 

1,317

 

248

 

562

 

4,387

 

Pre-tax Income Margin

 

35

%

15

%

15

%

11

%

54

%

21

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4Q15

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Revenue

 

5,744

 

4,415

 

9,347

 

3,099

 

1,216

 

23,821

 

External Revenue

 

5,225

 

4,297

 

9,149

 

2,892

 

454

 

22,015

 

Internal Revenue

 

520

 

118

 

198

 

207

 

763

 

1,806

 

Pre-tax Income

 

2,296

 

707

 

1,808

 

674

 

674

 

6,158

 

Pre-tax Income Margin

 

40

%

16

%

19

%

22

%

55

%

26

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2015

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Revenue

 

20,055

 

17,664

 

35,840

 

10,325

 

4,477

 

88,361

 

External Revenue

 

17,841

 

17,166

 

35,142

 

9,547

 

1,840

 

81,535

 

Internal Revenue

 

2,215

 

499

 

698

 

778

 

2,637

 

6,826

 

Pre-tax Income

 

7,245

 

2,602

 

5,669

 

1,722

 

2,364

 

19,602

 

Pre-tax Income Margin

 

36

%

15

%

16

%

17

%

53

%

22

%

 


 

Exhibit 2: Additional Revenue and Gross Profit Information (Unaudited)

March 31, 2016

 

International Business Machines Corporation

 

Cognitive Solutions

 

1Q14

 

2Q14

 

3Q14

 

4Q14

 

FY14

 

1Q15

 

2Q15

 

3Q15

 

4Q15

 

FY15

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total External Revenue

 

4,355

 

5,056

 

4,464

 

5,815

 

19,689

 

4,047

 

4,516

 

4,052

 

5,225

 

17,841

 

Solutions Software

 

2,798

 

3,257

 

2,861

 

3,932

 

12,847

 

2,655

 

3,053

 

2,710

 

3,604

 

12,021

 

Transaction Processing Software

 

1,557

 

1,799

 

1,604

 

1,883

 

6,842

 

1,393

 

1,464

 

1,343

 

1,620

 

5,819

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Gross Profit $

 

3,724

 

4,399

 

3,829

 

5,133

 

17,085

 

3,418

 

3,873

 

3,418

 

4,479

 

15,189

 

Total Gross Profit %

 

85.5

%

87.0

%

85.8

%

88.3

%

86.8

%

84.5

%

85.7

%

84.4

%

85.7

%

85.1

%

 

Global Business Services

 

1Q14

 

2Q14

 

3Q14

 

4Q14

 

FY14

 

1Q15

 

2Q15

 

3Q15

 

4Q15

 

FY15

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total External Revenue

 

4,964

 

4,938

 

4,840

 

4,771

 

19,512

 

4,318

 

4,345

 

4,206

 

4,297

 

17,166

 

Consulting

 

2,305

 

2,323

 

2,253

 

2,177

 

9,057

 

1,946

 

1,955

 

1,863

 

1,915

 

7,678

 

Global Process Services

 

481

 

404

 

381

 

422

 

1,688

 

360

 

360

 

359

 

357

 

1,435

 

Application Management

 

2,178

 

2,211

 

2,206

 

2,172

 

8,767

 

2,012

 

2,034

 

1,981

 

2,025

 

8,053

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Gross Profit $

 

1,450

 

1,472

 

1,498

 

1,503

 

5,923

 

1,184

 

1,192

 

1,249

 

1,212

 

4,837

 

Total Gross Profit %

 

29.2

%

29.8

%

30.9

%

31.5

%

30.4

%

27.4

%

27.4

%

29.7

%

28.2

%

28.2

%

 

Technology Services and Cloud Platforms

 

1Q14

 

2Q14

 

3Q14

 

4Q14

 

FY14

 

1Q15

 

2Q15

 

3Q15

 

4Q15

 

FY15

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total External Revenue

 

9,589

 

9,864

 

9,517

 

9,919

 

38,889

 

8,554

 

8,898

 

8,541

 

9,149

 

35,142

 

Infrastructure Services

 

6,364

 

6,481

 

6,339

 

6,349

 

25,533

 

5,614

 

5,817

 

5,714

 

5,929

 

23,075

 

Technical Support Services

 

2,072

 

2,109

 

2,104

 

1,992

 

8,276

 

1,881

 

1,881

 

1,841

 

1,823

 

7,426

 

Integration Software

 

1,153

 

1,274

 

1,075

 

1,578

 

5,080

 

1,059

 

1,200

 

986

 

1,397

 

4,641

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Gross Profit $

 

4,167

 

4,354

 

4,126

 

4,565

 

17,213

 

3,597

 

3,754

 

3,607

 

4,056

 

15,014

 

Total Gross Profit %

 

43.5

%

44.1

%

43.4

%

46.0

%

44.3

%

42.1

%

42.2

%

42.2

%

44.3

%

42.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Global Technology Services GP$

 

3,176

 

3,243

 

3,205

 

3,169

 

12,793

 

2,699

 

2,717

 

2,774

 

2,819

 

11,008

 

Global Technology Services GP%

 

37.7

%

37.8

%

38.0

%

38.0

%

37.8

%

36.0

%

35.3

%

36.7

%

36.4

%

36.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Integration Software GP$

 

991

 

1,111

 

921

 

1,396

 

4,420

 

898

 

1,037

 

833

 

1,237

 

4,005

 

Integration Software GP%

 

86.0

%

87.2

%

85.7

%

88.5

%

87.0

%

84.8

%

86.4

%

84.5

%

88.6

%

86.3

%

 

Systems

 

1Q14

 

2Q14

 

3Q14

 

4Q14

 

FY14

 

1Q15

 

2Q15

 

3Q15

 

4Q15

 

FY15

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total External Revenue

 

2,709

 

3,593

 

2,997

 

2,995

 

12,294

 

2,142

 

2,541

 

1,973

 

2,892

 

9,547

 

Systems Hardware

 

2,142

 

3,014

 

2,432

 

2,404

 

9,991

 

1,657

 

2,056

 

1,491

 

2,370

 

7,574

 

Operating Systems Software

 

567

 

579

 

565

 

592

 

2,303

 

484

 

485

 

482

 

522

 

1,973

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Gross Profit $

 

1,226

 

1,709

 

1,321

 

1,733

 

5,988

 

1,174

 

1,434

 

1,103

 

1,615

 

5,326

 

Total Gross Profit %

 

45.2

%

47.6

%

44.1

%

57.8

%

48.7

%

54.8

%

56.5

%

55.9

%

55.8

%

55.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Systems Hardware GP$

 

729

 

1,197

 

827

 

1,193

 

3,947

 

739

 

992

 

668

 

1,137

 

3,536

 

Systems Hardware GP%

 

34.1

%

39.7

%

34.0

%

49.6

%

39.5

%

44.6

%

48.2

%

44.8

%

48.0

%

46.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Systems Software GP$

 

496

 

511

 

494

 

539

 

2,041

 

435

 

442

 

435

 

478

 

1,790

 

Operating Systems Software GP%

 

87.4

%

88.3

%

87.5

%

91.2

%

88.6

%

89.7

%

91.3

%

90.2

%

91.5

%

90.7

%