IBM

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Oct 30, 2013 (4 years and 2 months ago)

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IBM Annual

Report


Chris LaSalle

Section 004

IBM: Executive Summary

Recognizing the shift in the field of information
technology, IBM’s Management team identified
the weaknesses and sought after solutions that
would keep them competitive. The result? Profit
margins up and losses down. IBM was once a
leader in the technological world and is working
hard to ensure they stay in the forefront of their
field.

Executive Summary (con’t)

IBM: Introduction


Who:



Samuel J. Palmisano



Where:


New Orchard Road




Armonk, New York 10504




914
-
499
-
1900










Worldwide with a major




focus in North America




Europe and Asia



When:



December 31, 2005


IBM: Focus


Principal products and services:


Systems and Financing:


Storage , servers, personal systems,
printing systems, and retail store solutions


Software:


Specializing in connecting operating
systems, business processes, and
applications seamlessly


Services:


Including a comprehensive IT services
integrated with business insight to reduce
costs, improve productivity, and assert
competitive advantage

IBM: The Audit Report


PricewaterhouseCoopers LLP

New York, New York



PricewaterhouseCoopers LLP stated that to
the best of their knowledge, IBM’s
financial report was an accurate
representation of the current financial
situation. They audited all of the units,
minus one, and upheld the report from
another firm regarding that one unit.


IBM: Stock Market Information

As of 10/6/06 @ 16:00 pm:


Current
:



$83.14


12 Month Range
: 72.73 89.94


Dividend amount: $5.37/share


Recommendation
: This stock has a
continued growth rate and a solid
future: HOLD/BUY


IBM: Industry Situation


The information technology field is currently
a central component in all industries. In the
year 2006, few business can survive without
the services offered by companies such as
IBM. All businesses will benefit from better
research and development in this field.

IBM: Company Plans


Using the IBM investor guide and
the IBM Annual Report, IBM plans
to capitalize on their strengths
and focus on the three main areas
of their business. In addition, a
pledge to greater organizational
efficiency through reduced costs,
decreased inventory, and speedier
procurement.

IBM: Income Statement


Format: single
-
step

2004

2005


Gross
Profit

35,568

36,532

Operating
Income


7,994


7,497

Net
Income


7,934


7,479

Numbers shown in millions

IBM: Income Statement (con’t)


Although IBM reported a loss in
operating and net incomes just shy
of 1,000,000; the gross profit has
increased by 964,000. These loses
may be due to restructuring and/or
taxes and in future years could
possibly pave the way for the
company to show a more rotund
profit.

IBM: Balance Sheet


Assets=Liabilities + Stockholders’ Equity

2004

111.003 =

79,315 +

31,688

2005

105,748 =

72,650 +

33,098

IBM: Balance Sheet



While assets and liabilities
decreased, stockholders equity
increased. A possible explanation for
the increase in stockholder equity
could be due to the divesting of a
less profitable portion of the
company.


IBM: Statement of Cash
Flows


The net cash flows from operations for 2005
were more than 2003 but less than 2004.


The companies growth has come from their
attention and specialization of products and
services in their industry. They have recently
consolidated by divesting a significant part of
the company.


The company’s primary source of financing is
currently stock sales.


Cash has both increased and decreased over
the past two years.


IBM: Accounting Policies

Topics of the notes to the financial
statement


Significant Accounting Policies


Accounting changes


Acquisitions/Divestitures


Financial Instruments


Inventories


Financial Receivables


Plant, rental machines, and other property.


Investments and Sundry Assets


Intangible Assets Including Good Will


Securitization of Receivables


Borrowings



IBM: Accounting Policies

Topics of the notes to the financial
statement con’t


Derivations and Hedging Transactions


Other Liabilities


Stockholders’ Equity Activity


Contingencies and Commitments


Taxes


Research, Development and Engineering


2005 Actions


Earnings Per Share of Common Stock


Rental Expense and Lease Commitments


Stock
-
Based Compensation


Retirement
-
Related Benefits


Segment Information


Subsequent Events

IBM: Financial Analysis

Liquidity Ratios

2005


Working Capital: $7,858,000


Current Ratio: 2.66


Receivable turnover: 3.7


Average days’ sales uncollected: 98.6


Inventory turnover: 19.2


Average days’ inventory on hand: 19.01

IBM: Financial Analysis

Liquidity Ratios con’t

2004


Working Capital: $5,235,000


Current Ratio: 2.13


Receivable turnover: 2.46


Average days’ sales uncollected: 148.4


Inventory turnover: 18.3


Average days’ inventory on hand: 19.94


IBM: Financial Analysis

Liquidity Ratios con’t


When comparing the liquidity ratios from
2004 to 2005 the following results were
found:


Working Capitol increased considerably.


Current Ratio shows added strength and
an increased ability to pay debt.



Receivable Turnover increased indicating
a more effective credit policy.




IBM: Financial Analysis

Liquidity Ratios con’t


Average Day’s Sales Uncollected has
shown a significant decrease indicating a
smaller number of day’s till collection of
receivables.


Inventory turnover has increased equating
to a larger relative size of the companies
inventory.


Average days inventory on hand has
decreased indicating a lower number of
days taken to sell inventory.


IBM: Financial Analysis

Profitability Ratios


Profit margin: 2005= 8.7%, 2004=
7.7%


Asset turnover:2005= .86, 2004= .87


Return on assets:2005= 7.5%, 2004=
6.7%


Return on equity:2005= 23.9%,
2004= 23.6%

IBM: Financial Analysis

Profitability Ratios con’t.


The increase in Profit Margin is indicative
of an increase in efficiency with respect to
each dollar spent.


Asset turnover has remained relatively
unchanged.


An increase in the Return on Assets shows
the companies solid profitability.


A slight increase in the Return on Equity
shows the gain in profitability of
stockholders investments.



IBM: Financial Analysis

Solvency Ratio


Debt to equity: 2005= 3.19, 2004= 3.5


Although IBM’s stockholders own more
of the company than in the past, the
creditors still own a majority.



IBM: Financial Analysis

Market Strength Ratios


Price/earnings per share: 2005=
15.48, 2004= 16.4. Investor
confidence has declined.


Dividend yield: 2005= .07, 2004= 1.
This stocks current return to an
investor has declined.