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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
ANNUAL REPORT
pursuant to SectionPURSUANT TO SECTION 13 orOR 15 (d) of the
Securities Exchange Act of(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 19982000
1-2360
(COMMISSION FILE NUMBER)
------------------------(Commission file number)
INTERNATIONAL BUSINESS MACHINES CORPORATION
(Exact name of registrant as specified in its charter)
NEW YORK 13-0871985
(State of incorporation) (IRS employer identification
number)
NEW YORK 13-0871985
(State of Incorporation) (IRS Employer Identification Number)
ARMONK, NEW YORK 10504
(Address of principal executive offices) (Zip Code)
914-499-1900
(Registrant's telephone number)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
VOTING SHARES OUTSTANDING AT NAME OF EACH EXCHANGE
TITLE OF EACH CLASS AT MARCH 1, 19992001 ON WHICH REGISTERED
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Capital stock, par value $.50$.20 per share 920,650,8471,760,803,872 New York Stock Exchange
Chicago Stock Exchange
Pacific Stock Exchange
Depositary shares each representing one-fourth of a New York Stock Exchange
share of 7 1/2% New York Stock Exchange preferred stock, par value $.01 per
share
6.375% Notes due 2000 New York Stock Exchange
7.25% Notes due 2002 New York Stock Exchange
6.45% Notes due 2007 New York Stock Exchange
5.375% Notes due 2009 New York Stock Exchange
7.50% Debentures due 2013 New York Stock Exchange
8.375% Debentures due 2019 New York Stock Exchange
7.00% Debentures due 2025 New York Stock Exchange
6.22% Debentures due 2027 New York Stock Exchange
6.50% Debentures due 2028 New York Stock Exchange
7.00% Debentures due 2045 New York Stock Exchange
7.125% Debentures due 2096 New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /
The aggregate market value of the voting stock held by non-affiliates of the
registrant at March 1, 1999,2001 was $155.0$186.7 billion.
Documents incorporated by reference:
Portions of IBM's Annual Report to Stockholders for the year ended
December 31, 1998,2000 into Parts I, II and IV of Form 10-K.
Portions of IBM's definitive Proxy Statement dated March 23, 1999,12, 2001 into
Part III of Form 10-K.
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PART I
ITEM 1. BUSINESS:
IBMInternational Business Machines Corporation (IBM) was incorporated in the
State of New York on June 15, 1911, as the Computer-Tabulating-RecordingComputing-Tabulating-Recording Co.(C-T-R), a consolidation of the Computing Scale Co. of America, the Tabulating
Machine Co., and The International Time Recording Co. of New York. In 1924,
C-T-R adopted the name International Business Machines Corporation.
IBM is in the business of providing customer solutions through the use ofuses advanced information technology.technology to provide customer solutions. The
company operates primarily in a single industry utilizingusing several segments that
create value by offering a variety of solutions that include, either singularly
or in some combination, technologies, systems, products, services, software and
financing.
Organizationally, the company's major operations consist ofcomprise three hardware
segments: Technology,product segments--Technology, Personal Systems and Server;Enterprise Systems; a Global
Services segment; a Software segment; a Global Financing segment and a seriesan
Enterprise Investments segment. The segments are determined based on several
factors, including customer base, homogeneity of Enterprise
Investments.products, technology and
delivery channels.
IBM offers its products through its global sales and distribution
organization.organizations. The sales and distribution organization hasorganizations have both a geographic
focus (in the Americas, Europe/Middle East/Africa, and Asia Pacific) and a
specialized and global industry focus. In addition, this organization includesthese organizations include
a global sales and distribution organizationeffort devoted exclusively to small and medium
businesses. IBM also offers its products and services through a variety of
third partythird-party business partners, including distributors and resellers.resellers, as well as
through its on-line channels.
While IBM'sthe company's various proprietary intellectual property rights are
important to its success, IBM believes its business as a whole is not materially
dependent uponon any particular patent or license, or any particular group of
patents or licenses. IBM owns or is licensed under a number of patents, which
vary in duration, relating to its products. Licenses under patents owned by IBM
have been and are being granted to others under reasonable terms and conditions. IBM protects its intellectual
property rights in a variety of ways.
These protections may not prevent competitors from independently developing
products and services similar to or duplicative of the company's nor can there
be any assurance that these protections will adequately deter misappropriation
or improper use of the company's technology. ThereAlso, there can also be no assurances
that IBM will be able to obtain from third parties the licenses it needs in the
future.
IBM's businesses employ a wide variety of components, supplies and raw
materials from a substantial number of suppliers around the world. To date, the
company has found that the components, supplies and raw materials necessary for
the manufacture, production and delivery of its products and services have been
available in the quantities required. Certain of
the company's businesses may rely on a single or limited number of suppliers,
although the company makes every effort to assure thethat alternative sources are
available if the need arises. The failure of the company's suppliers to deliver
components, supplies and raw materialmaterials in sufficient quantities and in a timely
manner could adversely affect the company's business. The company's Technology
segment results were affected by supply constraints of wafers and ceramic
substrates in the second half of 2000. In both cases, strong demand for these
items from internal users and external original equipment manufacturer (OEM)
customers exceeded the company's ability to supply these components. The company
improved its ability to manage this challenge toward the end of the year through
short-term and strategic actions.
IBM's revenues are affected by such factors as the introduction of new
products, the length of the sales cycles and the seasonality of technology
purchases. As a result, the company's results are difficult to predict and the
seasonality of technology purchasespredict. These
factors historically have historically resulted in lower revenue in the first quarter revenues lower than revenues forin
the immediately preceding fourth quarter.
The value of unfilled orders is not a meaningful indicator of future
revenues from the company's product offerings due to the significant proportion
of revenue from services, the volume of products
2
delivered from shelf inventories, and the shortening of product delivery
schedules. Therefore,With respect to the company's Global Services segment, in 2000 the
company believes thatsigned contracts totaling $55 billion, which contributed to a services
backlog information is
not material to an understandingat December 31, 2000 of its business.$85 billion, compared with $60 billion at the
end of 1999.
The company operates in businesses that are subject to intense competitive
pressures. The company's businesses face a significant number of competitors,
ranging from Fortune 50 companies to an increasing number of relatively small,
rapidly growing and highly specialized organizations. The company believes 2
that
its combination of technology, performance, quality, reliability, price and the
breadth of its products and service offerings are important competitive factors.
Intense competitive pressures could affect prices or demand for IBM'sthe
company's products and services, resulting in reduced profit margins and/or loss
of market opportunity. Unlike many of its competitors, IBMthe company has a
portfolio of businesses and must allocate resources across these businesses
while competing with companies that specialize in one or more of these product
lines. As a result, IBMthe company may not fund or invest in certain of its
businesses to the same degree that its competitors do and these companiescompetitors may
have greater financial, technical and marketing resources available to them than
the company businesses of IBM against which they compete.
IBMThe company operates in more than 150 countries worldwide and derives more
than half of its revenues from sales outside the United States. Changes in the
laws or policies of the countries in which IBMthe company operates could affect itsthe
company's business in that countrythose countries and itsthe company's results of operations.
IBM'sThe company's results of operations also could
also be affected by economic and
political changes in those countries and by macroeconomic changes, including
recessions and inflation. For example, weakness in the Asian and Latin American
economies has had an adverse impacteffect on IBM'sthe company's business in 1998.
The following information is included in IBM's 19982000 Annual Report to
Stockholders and is incorporated herein by reference:
Segment information and revenue by classes of similar products or
services--Pages 8489 through 89.93.
Financial information by geographic areas--Page 89.93.
Amount spent during each of the last three years on research and development
activities--Page 78.82.
Financial information regarding environmental activities--Page 76.78.
The number of persons employed by the registrant--Page 62.63.
The management discussion overview--Page 54.52.
Forward-looking and Cautionary Statements: Certain statements contained in
this Annual Report may constitute "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995 ("Reform Act").
The company may also make forward-looking statements in other reports filed with
the Securities and Exchange Commission, in materials delivered to stockholders
and in press releases. In addition, the company's representatives may from time
to time make oral forward-looking statements. Forward-looking statements provide
current expectations of future events based on certain assumptions and include
any statement that does not directly relate to any historical or current fact.
Words such as "anticipates," "believes," "expects," "estimates," "intends,"
"plans," "projects," and similar expressions, may identify such forward-looking
statements. The company assumes no obligation to update or revise any
forward-looking statements. In accordance with the Reform Act, set forth below
are cautionary statements that accompany those forward-looking statements.
Readers should carefully review these cautionary statements as they identify
certain important factors that could cause actual results to differ materially
from those in the forward-looking statements and from historical trends. The
following cautionary statements are not exclusive and are in addition to other
factors discussed
3
elsewhere in this Annual Report, in the company's filings with the Securities
and Exchange Commission or in materials incorporated herein or therein by reference.
New Products and the Pace of Technological Change: The company's results of
operations depend uponon the continued successful development and marketing of new
and innovative products and services. The development of new products and
services requires significant capital investments by the company's various
businesses and the success of these products and services depends on their
acceptance by customers and business partners. Further, the company's businesses
are characterized by rapid technological changes and corresponding shifts in
customer demand, resulting in unpredictable product transitions and shortened
life cycles and an increasing emphasis on being first to market with new products
and services.
3
There can be no assurance that the company will successfully introduce new
products and services, that these products and services will be accepted by
customers, or that the company's businesses will recoup or realize a return on
their capital investments. In addition, from time to time the company may
experience difficulties or delays in the development, production or marketing of
new products and services.
Volatility of Stock Prices: The company's stock price is affected by a
number of factors, including quarterly variations in results, the competitive
landscape, general economic and market conditions and estimates and projections
by the investment community. As a result, like other technology companies, the
company's stock price is subject to significant volatility.
Dependence on and Compensation of Key Personnel: Much of the future success
of the company depends on the continued service and availability of skilled
personnel, including technical, marketing and staff positions. Experienced
personnel in the information technology industry are in high demand and
competition for their talents is intense. There can be no assurance that the
company will be able to successfully retain and attract the key personnel it
needs. Many of the company's key personnel receive a total compensation package
that includes stock options and other equity awards. New regulations, volatility
in the stock market and other factors could diminish the value of the company's
equity awards, putting the company at a competitive disadvantage or forcing the
company to use more cash compensation.
Currency and Customer Financing Risks: The company derives a significant
percentage of its non-U.S. revenues from its affiliates operating in local
currency environments and its results are affected by changes in the relative
values of non-U.S. currencies and the U.S. dollar. Further, inherent in the
company's customer financing business are risks related to the concentration of
credit risk and the creditworthiness of the customer, interest rate and currency
fluctuations on the associated debt and liabilities and the determination of
residual values. The company employs a number of strategies to manage these
risks, including the use of derivative financial instruments. Derivatives
involve the risk of non-performance by the counterparty. In addition, there can
be no assurance that the company's efforts to manage these risks will be
successful.
Distribution Channels: The company offers its products directly and through
a variety of thirdthird- party business partners, including distributors and
resellers. Changes in the financial or business condition of these distributors
and resellers could subject the company to losses and affect its ability to
bring its products to market.
Acquisitions and Alliances: The company has made and expects to continue to
make acquisitions or enter into alliances from time to time. Acquisitions and
alliances present significant challenges and risks relating to the integration
of the business into the company, and there can be no assurances that the
company will manage acquisitions and alliances successfully.
4
ITEM 2. PROPERTIES:
At December 31, 1998,2000, IBM's manufacturing and development facilities in the
United States had aggregate floor space of 41.740.3 million square feet, of which
34.031.5 million werewas owned and 7.78.8 million werewas leased. Of these amounts,
3.11.5 million square feet werewas vacant and 1.92.2 million square feet werewas being leased
to non-IBM businesses. Similar facilities in 1715 other countries totaled
18.015.0 million square feet, of which 13.710.9 million werewas owned and 4.34.1 million werewas
leased. Of these amounts, .90.3 million square feet werewas vacant and .60.6 million
square feet werewas being leased to non-IBM businesses.
Although improved production techniques, productivity gains and
infrastructure reduction actions have resulted in reduced manufacturing floor
space, continuous upgrading of facilities is essential to maintain technological
leadership, improve productivity, and meet customer demand. For additional
information on expenditures for plant, rental machines and other property, refer
to "Investments" on page 5960 of IBM's 19982000 Annual Report to Stockholders which is
incorporated herein by reference.
4
EXECUTIVE OFFICERS OF THE REGISTRANT (AT MARCH 29, 1999)12, 2001):
OFFICER
AGE SINCE
--- ------------------- --------
Chairman of the Board of Directors and Chief Executive
Officer
Louis V. Gerstner, Jr.(1)........................................................................ 57.................................. 59 1993
Vice Chairman of the Board
John M. Thompson (1)........................................ 58 1989
President and Chief Operating Officer
Samuel J. Palmisano (1)..................................... 49 1997
Senior Vice Presidents
J. Thomas Bouchard, Human Resources.............................................................. 58 1994Presidents:
Nicholas M. Donofrio, Group Executive............................................................ 53Executive....................... 55 1995
Douglas T. Elix, Group Executive............................ 52 1999
William A. Etherington, Group Executive.......................................................... 57Executive..................... 59 1998
J. Bruce Harreld, Strategy....................................................................... 48Strategy.................................. 50 1995
Paul M. Horn, Research........................................................................... 52Research...................................... 54 1996
John R. Joyce, Chief Financial Officer...................... 47 1999
David B. Kalis, Communications.............................. 53 2000
John E. Kelly III, Group Executive.......................... 47 2000
Abby F. Kohnstamm, Marketing..................................................................... 45Marketing................................ 47 1998
Douglas L. Maine, Chief Financial Officer........................................................ 50 1998
Samuel J. Palmisano,Randall MacDonald, Human Resources....................... 52 2000
Steven A. Mills, Group Executive............................................................. 47 1997Executive............................ 49 2000
Lawrence R. Ricciardi, General Counsel........................................................... 58 1995
Robert M. Stephenson, Group Executive............................................................Counsel...................... 60 1995
DavidLinda S. Sanford, Group Executive........................... 48 2000
William M. Thomas,Zeitler, Group Executive................................................................. 49 1998
John M. Thompson, Group Executive................................................................ 56 1989
James T. Vanderslice, Group Executive............................................................ 58 1998Executive......................... 53 2000
Vice PresidentsPresidents:
Mark Loughridge, Controller...................................................................... 45Controller................................. 47 1998
Daniel E. O'Donnell, Secretary................................................................... 51Secretary.............................. 53 1998
Jeffrey D. Serkes, Treasurer..................................................................... 40 1994Robert F. Woods, Treasurer.................................. 45 2000
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(1) Member of the Board of Directors.
All executive officers are elected by the Board of Directors and serve until
the next election of officers in conjunction with the annual meeting of the
stockholders as provided in the By-laws. Each executive officer named above,
with the exception of J. Thomas Bouchard, J. Bruce Harreld, Douglas L. Maine, Lawrence R. RicciardiRandall MacDonald and Jeffery D. Serkes,Robert F. Woods, has been an
executive of IBM or its subsidiaries during the past five years.
5
Mr. BouchardMacDonald was senior vice president, human resources, of U.S. West, Inc.with GTE (now Verizon Communications), a
telecommunications company, from 1989as executive vice president of human resources and
administration until joining IBM in 1994. Prior to
1989, he spent 152000. He was with GTE for 17 years holding
positions of increasing responsibility. Before joining GTE, Mr. MacDonald held
human resources positions at Ingersoll-Rand Corporation and Sterling Drug, Inc.
Mr. Woods was with United Technologies Corporation inE.I. du Pont de Nemours and Company, a variety of
executive positions, including senior vice president of human resources.
Mr. Harreld was president of Boston Chicken, Inc., aglobal science
company which operatesfocused on chemical and franchises foodservice stores,material and biological sciences, as Vice
President and Managing Director--DuPont Asia Pacific Ltd. from 1993 until joining IBM in 1995. Prior to
that he was senior vice president, marketing and information services, at Kraft
General Foods, Inc. where he also served as the company's chief information
officer from 1989 to 1992.
Mr. Maine was chief financial officer and executive vice president of MCI
Communications, a long-distance telecommunications company, from 1992 until
joining IBM in 1998. Prior to that he also served in several executive
positions, including controller, senior vice president-finance and president of
a 14 state operating division.
Mr. Ricciardi was president of RJR Nabisco, Inc., an international consumer
products company, from 19931994 until
joining IBM in 1995. From 1992 to 1994, he was Director--Industrial Films--U.S.
and prior to that from 1989 to 1993,1992 he also served as executive vice president and general counsel at RJR Nabisco, Inc.
Priorwas Vice President-Finance, DuPont
Mexico. From 1979 to 1989 he was executive vice president and general counselheld a number of American
Express Travel Related Services Company, Inc.
Mr. Serkes was vice president and deputy treasurer at RJR Nabisco, Inc., an
international consumer products company, from 1993 until joining IBM in 1994.
From 1987 to 1993, he also served as vice president and assistant treasurer,
corporate finance; director, capital markets; and manager, foreign exchange at
RJR Nabisco, Inc.
5
financial positions with DuPont.
ITEM 3. LEGAL PROCEEDINGS:
Refer to note PN "Contingencies" on page 7779 of IBM's 19982000 Annual Report to
Stockholders which is incorporated herein by reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
Not applicable.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS:
Refer to pages 9094 and 9195 of IBM's 19982000 Annual Report to Stockholders which
are incorporated herein by reference solely as they relate to this item.
IBM common stock is listed on the New York Stock Exchange, Chicago Stock
Exchange and Pacific Stock Exchange. There were 618,962673,270 common stockholders of
record at March 1, 1999.2001.
ITEM 6. SELECTED FINANCIAL DATA:
Refer to page 9094 of IBM's 19982000 Annual Report to Stockholders which is
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS:
Refer to pages 5452 through 63 of IBM's 19982000 Annual Report to Stockholders
which are incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS:
Refer to the section titled "Market Risk" on pages 6061 and 6162 of IBM's 1998IBM'S 2000
Annual Report to Stockholders which is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA:
Refer to pages 5250 and 53,51 and 64 through 8993 of IBM's 19982000 Annual Report to
Stockholders which are incorporated herein by reference. Also refer to the
Financial Statement Schedule on page S-1 of this Form.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE:
Not applicable.
6
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT:
Refer to pages 5 through 78 of IBM's definitive Proxy Statement dated
March 23, 1999,12, 2001, which are incorporated herein by reference. Also refer to Item 2
entitled "Executive Officers of the Registrant" in Part I of this Form.
ITEM 11. EXECUTIVE COMPENSATION:
Refer to pages 1213 through 2021 of IBM's definitive Proxy Statement dated
March 23, 1999,12, 2001, which are incorporated herein by reference.
6
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT:
(a) Security Ownership of Certain Beneficial Owners:
Not applicable.
(b) Security Ownership of Management:
Refer to the section entitled "Ownership of Securities--Common Stock and
Total Stock-Based Holdings" appearing on pages 1011 and 1112 of IBM's
definitive Proxy Statement dated March 23, 1999,12, 2001, which are incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS:
Refer to the section entitled "Other Relationships" appearing on page 910 of
IBM's definitive Proxy Statement dated March 23, 1999,12, 2001, which is incorporated
herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K:
(a) The following documents are filed as part of this report:
1. Financial statements from IBM's 19982000 Annual Report to Stockholders
which are incorporated herein by reference:
Report of Independent Accountants (page 53)51).
Consolidated Statement of Earnings for the years ended December 31,
1998, 19972000, 1999 and 19961998 (page 64).
Consolidated Statement of Financial Position at December 31, 19982000 and
19971999 (page 65).
Consolidated Statement of Stockholders' Equity for the years endedat December 31, 1998, 19972000,
1999 and 19961998 (pages 66 and 67).
Consolidated Statement of Cash Flows for the years ended
December 31, 1998, 19972000, 1999 and 19961998 (page 68).
Notes to Consolidated Financial Statements (pages 69 through 89)93).
2. Financial statement schedules required to be filed by Item 8 of this
Form:
SCHEDULE
PAGE NUMBER
- ---- ----------- -------------
11 Report of Independent Accountants on Financial
Statement ScheduleSchedules.
S-1 II Valuation and Qualifying Accounts and Reserves.
All other schedules are omitted as the required matter is not present, the
amounts are not significant or the information is shown in the consolidated
financial statements or the notes thereto.
7
3. Exhibits:
Included in this Form 10-K:
I-- Computation of Ratio of Earnings to Fixed Charges and Earnings
to Combined Fixed Charges and Preferred Stock Dividends.
II-- Parents and Subsidiaries.
III-- Consent of Independent Accountants.
IV-- Additional Exhibits (a) Quarterly Consolidated Statement of
Earnings--Restated 1998.
V-- IBM's 1998 Annual Report to Stockholders, certain sections of
which have been incorporated herein by reference.
VI--
I -- Computation of Ratio of Earnings to Fixed Charges and
Earnings to Combined Fixed Charges and Preferred Stock
Dividends.
II -- Parents and Subsidiaries.
III -- Consent of Independent Accountants.
IV -- IBM's 2000 Annual Report to Stockholders, certain sections
of which have been incorporated herein by reference.
V -- Powers of Attorney.
VII-- Financial Data Schedule.
Not included in this Form 10-K:
-- The Certificate of Incorporation of IBM is Exhibit (3)(i) to Form
8-K dated April 29, 1997, and is hereby incorporated by reference.
-- The By-laws of IBM as amended through October 27, 1998, is
Exhibit 3 to Form 10-Q for the quarter ended September 30, 1998,
and is hereby incorporated by reference.
-- The IBM 1997 Long-Term Performance plan, a compensatory plan, is
contained in Registration Statement No. 333-31305 on Form S-8,
filed on July 15, 1997, and is hereby incorporated by reference.
-- The IBM 1994 Long-Term Performance Plan, a management
compensatory plan, is contained in Registration Statement No.
33-53777 on Form S-8, filed on May 24, 1994, and is hereby
incorporated by reference.
-- Board of Directors compensatory plans, as described under
"Directors' Compensation" on pages 9 and 10 of IBM's definitive
Proxy Statement dated March 23,
-- The Certificate of Incorporation of IBM is Exhibit (3)(i) to
Form 8-K filed April 28, 1999, and is hereby incorporated by
reference.
-- The By-laws of IBM as amended through January 1, 2001, is
Attachment III to Form 8-K dated January 17, 2001, and is
hereby incorporated by reference.
-- The IBM 1999 Long-Term Performance Plan, a compensatory
plan, is contained in Registration Statement No. 333-30424
on Form S-8, filed on February 15, 2000, and is hereby
incorporated by reference.
-- The IBM 1997 Long-Term Performance Plan, a compensatory
plan, is contained in Registration Statement No. 333-31305
on Form S-8, filed on July 15, 1997, and is hereby
incorporated by reference.
-- Board of Directors compensatory plans, as described under
"Directors' Compensation" on pages 10 and 11 of IBM's
definitive Proxy Statement dated March 12, 2001, which is
incorporated herein by reference.
-- IBM Board of Directors Deferred Compensation and Equity
Award Plan is Exhibit X to Form 10-K for the year ended
December 31, 1996, and is hereby incorporated by reference.
-- The IBM Non-Employee Directors Stock Option Plan is Appendix
B to IBM's definitive Proxy Statement dated March 14, 1995,
and is hereby incorporated by reference.
-- The IBM Executive Deferred Compensation Plan is contained in
Registration Statement No. 333-33692 as Exhibit 4 on
Form S-8, filed March 31, 2000, and is hereby incorporated
by reference.
-- The IBM Supplemental Executive Retention Plan is
Exhibit VII to Form 10-K for the year ended December 31,
1999, and is hereby incorporated by reference.
-- The IBM Extended Tax Deferred Savings Plan is Exhibit X to
Form 10-K for the year ended December 31, 1994, and is
hereby incorporated by reference.
-- The Employment Agreement for L.V. Gerstner, Jr. is
Exhibit 19 to Form 10-Q dated March 31, 1993, and is hereby
incorporated by reference.
-- Amendment to Employment Agreement for L.V. Gerstner, Jr. dated as
of January 1, 1996, is Exhibit XI to Form 10-K for the year ended
December 31, 1996, and is hereby incorporated by reference.
-- Second Amendment to Employment Agreement for L.V. Gerstner, Jr.
dated as of November 17, 1997, is Exhibit VI to Form 10-K for the
year ended December 31, 1997, and is hereby incorporated by
reference.
-- The instruments defining the rights of the holders of the 7.25%
Notes due 2002 are Exhibits 4(a) through 4(l) to Registration
Statement No. 33-33590 on Form S-3, filed on February 22, 1990,
and are hereby incorporated by reference.
8
-- The instruments defining the rights of the holders of the 6.375%
Notes due 2000 and the 7.50% Debentures due 2013 are Exhibits 4(a)
through 4(l) to Registration Statement No. 33-49475(1) on Form
S-3, filed May 24, 1993, and are hereby incorporated by reference.
-- The instruments defining the rights of holders of the 8.375%
Debentures due 2019 are Exhibits 4(a)(b)(c) and (d) to
Registration Statement 33-31732 on Form S-3, filed on October 24,
1989, and are hereby incorporated by reference.
-- The instruments defining the rights of holders of the 7.00%
Debentures due 2025 and the 7.00% Debentures due 2045
-- Amendment to Employment Agreement for L.V. Gerstner, Jr.
dated as of January 1, 1996, is Exhibit XI to Form 10-K for
the year ended December 31, 1995, and is hereby
incorporated by reference.
-- Second Amendment to Employment Agreement for L.V. Gerstner,
Jr. dated as of November 17, 1997, is Exhibit VI to
Form 10-K for the year ended December 31, 1997, and is
hereby incorporated by reference.
-- The instruments defining the rights of the holders of the
7.25% Notes due 2002 are Exhibits 4(a) through 4(l) to
Registration Statement No. 33-33590 on Form S-3, filed on
February 22, 1990, and are hereby incorporated by reference.
-- The instruments defining the rights of the holders of the
7.50% Debentures due 2013 are Exhibits 4(a) through 4(l) to
Registration Statement No. 33-49475(1) on Form S-3, filed
May 24, 1993, and are hereby incorporated by reference.
-- The instruments defining the rights of holders of the 8.375%
Debentures due 2019 are Exhibits 4(a)(b)(c) and (d) to
Registration Statement 33-31732 on Form S-3, filed on
October 24, 1989, and are hereby incorporated by reference.
-- The instruments defining the rights of holders of the 7.00%
Debentures due 2025 and the 7.00% Debentures due 2045 are
Exhibit 2 and 3 to Form 8-K, filed on October 30, 1995, and
are hereby incorporated by reference.
-- The instrument defining the rights of holders of the 7.125%
Debentures due 2096 is Exhibit 2 to Form 8-K/A, filed on
December 6, 1996, and is hereby incorporated by reference.
-- The instruments defining the rights of the holders of the
6.45% Notes due 2007 and the 6.22% Debentures due 2027 are
Exhibits 2 and 3 to Form 8-K, filed on August 1, 1997, and
is hereby incorporated by reference.
-- The instruments defining the rights of the holders of the
6.50% Debentures due 2028 is Exhibit 2 to Form 8-K, filed on
January 8, 1998, and is hereby incorporated by reference.
-- The instruments defining the rights of the holders of the 6.45%
Notes due 2007 and the 6.22% Debentures due 2027 are Exhibits 2
and 3 to Form 8-K, filed on August 1, 1997, and is hereby
incorporated by reference.
-- The instruments defining the rights of the holders of the 6.50%
Debentures due 2028 is Exhibit 2 to Form 8-K, filed on January 8,
1998, and is hereby incorporated by reference.
-- The instrument defining the rights of the holders of the
5.375% Notes due 2009 is Exhibit 2 to Form 8-K, filed on
January 29,
1999, and is hereby incorporated by reference.
-- The IBM Supplemental Executive Retirement Plan is Exhibit IX to
Form 10-K for the year ended December 31, 1994, and is hereby
incorporated by reference.
-- The IBM Extended Tax Deferred Savings Plan is Exhibit X to Form
10-K for the year ended December 31, 1994, and is hereby
incorporated by reference.
-- IBM's definitive Proxy Statement dated March 23, 1999, and is hereby incorporated by reference.
-- IBM's definitive Proxy Statement dated March 12, 2001,
certain sections of which have been incorporated herein by
reference.
(b) Reports on Form 8-K:
AThe company filed Form 8-K datedon October 20, 1998, was filed17, 2000, with respect to the
company's financial results for the periods ended September 30, 1998,2000 and
included unaudited consolidated financial statementsConsolidated Statement of Earnings, Consolidated
Statement of Financial Position and Segment Data for the periodperiods ended
September 30, 1998.
A Form 8-K dated December 16, 1998,2000. In addition, IBM's Chief Financial Officer, John R.
Joyce's third-quarter earnings presentation to securities analysts on
Tuesday, October 17, 2000 was filed for the press
release announcing the execution of definitive agreements between
IBM and AT&T, pursuant to which, among other things, AT&T will
acquire the assetsas Attachment II of the IBM Global Network from IBM, is hereby
incorporated by reference.Form 8-K.
9
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
INTERNATIONAL BUSINESS MACHINES CORPORATION
(Registrant)
By: /s/ LOUIS V. GERSTNER, JR.
---------------------------------------------------------------------------------------------
(Louis V. Gerstner, Jr.)
CHAIRMAN OF THE BOARD OF DIRECTORS
AND CHIEF EXECUTIVE OFFICER)OFFICER
Date: March 12, 2001
Date: March 29, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
/s/ DOUGLAS L. MAINE Senior Vice President, March 29, 1999
- ------------------------------ Chief
(Douglas L. Maine)
SIGNATURE TITLE DATE
--------- ----- ----
/s/ JOHN R. JOYCE
------------------------------------------- Senior Vice President, Chief March 12, 2001
(John R. Joyce) Financial Officer
/s/ MARK LOUGHRIDGE
------------------------------------------- Vice President and March 29, 1999
- ------------------------------ Controller March 12, 2001
(Mark Loughridge)
CATHLEEN BLACK Director
KENNETH I. CHENAULT Director
JUERGEN DORMANN Director
NANNERL O. KEOHANE Director
CHARLES F. KNIGHTMINORU MAKIHARA Director
MINORU MAKIHARALUCIO A. NOTO Director
SAMUEL J. PALMISANO President and Chief
Operating Officer
JOHN B. SLAUGHTER Director By: /s/ DANIEL E. O'DONNELL
LUCIO A. NOTOSIDNEY TAUREL Director ------------------------------------------------------------------
JOHN B. SLAUGHTER DirectorM. THOMPSON Vice Chairman of the Board (Daniel E. O'Donnell)
ALEX TROTMAN Director ATTORNEY-IN-FACT
LODEWIJK C. vanVAN WACHEM Director
CHARLES M. VEST Director March 29, 199912, 2001
10
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULESCHEDULES
To the Stockholders and Board of Directors of
International Business Machines Corporation
Our audits of the consolidated financial statements referred to in our
report dated January 21, 1999,17, 2001, appearing on page 5351 of the 19982000 Annual Report to
Stockholders of International Business Machines Corporation, (which report and
consolidated financial statements are incorporated by reference in this Annual
Report on Form 10-K) also included an audit of the Financial Statement Schedule
listed in Item 14(a)(2)2 of this Form 10-K. In our opinion, thisthe Financial Statement
Schedule presents fairly, in all material respects, the information set forth
therein when read in conjunction with the related consolidated financial
statements.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
1301 Avenue of the Americas
New York, N.Y. 10019New York
January 21, 199917, 2001
11
SCHEDULE II
INTERNATIONAL BUSINESS MACHINES CORPORATION AND SUBSIDIARY COMPANIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
FOR THE YEARYEARS ENDED DECEMBER 31:
(DOLLARS IN MILLIONS)
ADDITIONS
BALANCE AT CHARGED BALANCE AT
BEGINNING NETTO COSTS END
DESCRIPTION OF PERIOD CHANGE(A)AND EXPENSES WRITE-OFFS OTHER (A) OF PERIOD
- ------------------------------------------------------------------------------ ------------- ----------- ------------------------------------------------------------- ---------- ------------ ---------- --------- ----------
ALLOWANCE FOR DOUBTFUL ACCOUNTS
2000
--Current................................... $854 $286 $247 $ (33) $860
==== ==== ==== ===== ====
--Noncurrent................................ $158 $(15) $ 45 $ (11) $ 87
==== ==== ==== ===== ====
1999
--Current................................... $794 $285 $202 $ (23) $854
==== ==== ==== ===== ====
--Noncurrent................................ $195 $ 34 $ 28 $ (43) $158
==== ==== ==== ===== ====
1998
Account deducted from assets:
Allowance for doubtful accounts
--Current.................................................................--Current................................... $775 $165 $188 $ 77542 $794
==== ==== ==== ===== ====
--Noncurrent................................ $164 $ 1942 $ 794
----- ----- -----
----- ----- -----
--Non-current.............................................................18 $ 1647 $195
==== ==== ==== ===== ====
ALLOWANCE FOR INVENTORY LOSSES
2000.......................................... $869 $527 $643 $ 31(58) $695
==== ==== ==== ===== ====
1999.......................................... $723 $644 $514 $ 195
----- ----- -----
----- ----- -----
1997
Account deducted from assets:
Allowance for doubtful accounts
--Current.................................................................16 $869
==== ==== ==== ===== ====
1998.......................................... $791 $761 $847 $ 787 $ (12) $ 775
----- ----- -----
----- ----- -----
--Non-current............................................................. $ 164 $ 0 $ 164
----- ----- -----
----- ----- -----
1996
Account deducted from assets:
Allowance for doubtful accounts
--Current................................................................. $ 790 $ (3) $ 787
----- ----- -----
----- ----- -----
--Non-current............................................................. $ 174 $ (10) $ 164
----- ----- -----
----- ----- -----18 $723
==== ==== ==== ===== ====
- ------------------------
(A) Includes additions charged to costs and expenses less accounts written off
andPrimarily comprises currency translation adjustments.
Note--
The receivables upon which the above allowances are based are highly
diversified by geography, industry and individual customer. The allowances for
receivable losses at year-end 1998 approximate less than three percent of the
company's current receivables and less than one and one-half percent the
company's non-current receivables. The allowances for receivable losses at
year-end 1997 approximate less than three and one-quarter percent of the
company's current receivables and less than one and one-half percent of the
company's non-current receivables. The allowances for receivable losses at
year-end 1996 approximate less than three and one-half percent of the company's
current receivables and one and one-half percent of the company's non-current
receivables.
S-1
EXHIBIT INDEX
REFERENCE
NUMBER PER
ITEM 601 OF EXHIBIT NUMBER
REGULATION NUMBER IN
S-KSK DESCRIPTION OF EXHIBITS IN THIS FORM 10-K
- ------------- ----------------------------------------------------------------------------------- ------------------------------------- ------------------------------------------------------------ ------------------
(2) Plan of acquisition, reorganization, arrangement,
liquidation or succession.succession................................... Not applicable
(3) Certificate of Incorporation and By-laws.By-laws....................
The Certificate of Incorporation of IBM is Exhibit (3)(i) to
Form 8-K datedfiled April 29, 1997,28, 1999, and is hereby incorporated by
reference.reference...................................................
The By-laws of IBM as amended through October 27, 1998,January 1, 2001, is
Exhibit 3Attachment III to Form 10-Q
for the quarter ended September 30, 1998,8-K dated January 17, 2001, and is
hereby incorporated by reference.reference............................
(4) Instruments defining the rights of security holders.holders.........
The instruments defining the rights of the holders of the
7.25% Notes due 2002 are Exhibits 4(a) through 4(l) to
Registration Statement No. 33-33590 on Form S-3, filed
February 22, 1990, and are hereby incorporated by
reference.reference...................................................
The instruments defining the rights of the holders of the 6.375% Notes due 2000 and the
7.50% Debentures due 2013 are Exhibits 4(a) through 4(l) to
Registration Statement No. 33-49475(1) on Form S-3, filed
on May 24, 1993, and are hereby incorporated by reference.reference......
The instruments defining the rights of the holders of the
8.375% Debentures due 2019 are Exhibits 4(a)(b)(c) and (d)
to Registration Statement No. 33-31732 on Form S-3, filed on
October 24, 1989, are hereby incorporated by reference.reference......
The instruments defining the rights of the holders of the
7.00% Debentures due 2025 and the 7.00% Debentures due 2045
are Exhibits 2 and 3 to Form 8-K, filed on October 30, 1995,
and are hereby incorporated by reference.reference....................
The instrument defining the rights of the holders of the
7.125% Debentures due 2096 is Exhibit 2 to Form 8-K/A, filed
on December 6, 1996, and is hereby incorporated by
reference.reference...................................................
The instruments defining the rights of the holders of the
6.5%6.45% Notes due 2007 and the 6.22% Debentures due 2027 are
ExhibitsExhibit 2 and 3 to Form 8-K, filed on August 1, 1997, and
is hereby incorporated by reference.reference.........................
The instrumentinstruments defining the rights of the holders of the
6.5%6.50% Debentures due 2028 is Exhibit 2 to Form 8-K, filed on
January 8, 1998, and is hereby incorporated by reference.reference....
The instrument defining the rights of the holders of the
5.375% Notes due 2009 is Exhibit 2 to Form 8-K, filed on
January 29, 1999, and is hereby incorporated by reference.reference...
(9) Voting trust agreement.agreement...................................... Not applicable
REFERENCE
NUMBER PER
ITEM 601 OF EXHIBIT NUMBER
REGULATION SK DESCRIPTION OF EXHIBITS IN THIS FORM 10-K
- --------------------- ------------------------------------------------------------ ------------------
(10) Material contracts.contracts..........................................
The IBM 19971999 Long-Term Performance plan,Plan, a compensatory
plan, is contained in Registration Statement No. 333-31305333-30424
on Form S-8, filed on February 15, 2000, and is hereby
incorporated by reference...................................
The IBM 1997 Long-Term Performance Plan, a compensatory
plan, is contained in Registration Statement No. 33-331305
on Form S-8, filed on July 15, 1997, and is hereby
incorporated by reference.
A copy of the IBM 1994 Long-Term Performance Plan is contained in Registration
Statement No. 33-53777 on Form S-8, filed on May 24, 1994, and is hereby
incorporated by reference.
REFERENCE
NUMBER
PER
ITEM 601 OF EXHIBIT
REGULATION NUMBER IN
S-K DESCRIPTION OF EXHIBITS THIS FORM 10-K
- ------------- ----------------------------------------------------------------------------------- ----------------
reference...................................
Board of Directors compensatory arrangements as described
under "Directors' Compensation" on pages 910 and 1011 of IBM's
definitive Proxy Statement dated March 23, 1999,12, 2001, and is
hereby incorporated by reference.reference............................
The IBM Supplemental Executive RetirementRetention Plan is Exhibit IXVII
to Form 10-K for the year ended December 31, 1994,1999, and is
hereby incorporated by reference.reference............................
The IBM Extended TaxExecutive Deferred SavingsCompensation Plan is contained in
Registration Statement No. 333-33692 as Exhibit X to4 on
Form 10-K for the year
ended DecemberS-8, filed March 31, 1994,2000, and is hereby incorporated
by reference.reference................................................
The IBM Board of Directors Deferred Compensation and Equity
Award Plan is Exhibit X to Form 10-K for the year ended
December 31, 1996, and is hereby incorporated by
reference.reference...................................................
The IBM Non-Employee Directors Stock Option Plan is Appendix
B to IBM's definitive Proxy Statement dated March 14, 1995,
and is hereby incorporated by reference.reference.....................
The IBM Extended Tax Deferred Savings Plan is Exhibit X to
Form 10-K for the year ended December 31, 1994, and is
hereby incorporated by reference............................
The Employment Agreement for L.V. Gerstner, Jr. is
Exhibit 19 to Form 10-Q dated March 31, 1993, and is hereby
incorporated by reference.reference...................................
Amendment to Employment Agreement for L.V. Gerstner, Jr.
dated as of January 1, 1996, is Exhibit XI to Form 10-K for
the year ended December 31, 1996,1995, and is hereby incorporated
by reference.reference................................................
Second Amendment to Employment Agreement for L.V. Gerstner,
Jr., dated as of November 17, 1997, is Exhibit VI to
Form 10-K for the year ended December 31, 1997, and is
hereby incorporated by reference.reference............................
(11) Statement re computation of per share earnings.earnings..............
The statement re computation of per share earnings is note TS
"Earnings Per Share of Common Stock" on page 7983 of IBM's
19982000 Annual Report to Stockholders, which is incorporated
herein by reference.reference.........................................
(12) Statement re computation of ratios.ratios.......................... I
(13) Annual report to security holders. Vholders........................... IV
REFERENCE
NUMBER PER
ITEM 601 OF EXHIBIT NUMBER
REGULATION SK DESCRIPTION OF EXHIBITS IN THIS FORM 10-K
- --------------------- ------------------------------------------------------------ ------------------
(18) Letter re change in accounting principles.principles................... Not applicable
(19) Previously unfiled documents.documents................................ Not applicable
(21) Subsidiaries of the registrant.registrant.............................. II
(22) Published report regarding matters submitted to vote of
security holders.holders............................................ Not applicable
(23) Consents of experts and counsel.counsel............................. III
(24) Powers of attorney. VI
(27) Financial Data Schedule. VIIattorney.......................................... V
(28) Information from reports furnished to state insurance
regulatory authorities.authorities...................................... Not applicable
(99) Additional exhibits. IVexhibits......................................... Not applicable
EXHIBIT I
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND
EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(UNAUDITED)
YEAR ENDED DECEMBER 31:
-----------------------------------------------------
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
(DOLLARS IN MILLIONS)
Earnings before income taxes and change in accounting
principles(1).............................................. $ 8,997 $ 9,054 $ 8,599 $ 7,910 $ 5,253
Add:
Fixed charges, excluding capitalized interest.............. 2,036 2,000 1,942 1,972 2,450
--------- --------- --------- --------- ---------
Earnings as adjusted....................................... $ 11,033 $ 11,054 $ 10,541 $ 9,882 $ 7,703
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Fixed charges:
Interest expense........................................... $ 1,559 $ 1,573 $ 1,545 $ 1,591 $ 2,025
Capitalized interest....................................... 28 32 31 23 20
Portion of rental expense representative of interest....... 477 427 397 381 425
--------- --------- --------- --------- ---------
Total fixed charges.......................................... $ 2,064 $ 2,032 $ 1,973 $ 1,995 $ 2,470
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Preferred stock dividends(2)................................. 29 29 32 37 144
--------- --------- --------- --------- ---------
Combined fixed charges and preferred stock dividends......... $ 2,093 $ 2,061 $ 2,005 $ 2,032 $ 2,614
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Ratio of earnings to fixed charges........................... 5.3 5.4 5.3 5.0 3.1
Ratio of earnings to combined fixed charges and preferred
stock dividends............................................ 5.3 5.4 5.3 4.9 2.9
- ------------------------
(1) Earnings before income taxes and changes in accounting principle excludes
both amortization expense of capitalized interest as well as the company's
share in the income and losses of less-than-fifty-percent-owned affiliates.
(2) The company reported preferred stock dividends of $20 million for year-end
1998, 1997 and 1996, respectively. Excluded from the ratio computation for
the year end 1995 are transaction costs of $42 million relating to the
repurchase of Series A 7 1/2 percent preferred stock depositary shares.
Included are preferred stock dividends of $20 million, for 1998, 1997, and
1996, respectively, or $29 million for 1998 and 1997 and $32 million for
1996 representing the pre-tax income which would be required to cover such
dividend requirements based on the company's effective tax rate for year end
1998, 1997 and 1996, respectively. For the 1995 and 1994 year ends,
preferred stock dividends are also on a pre-tax basis.
EXHIBIT II
PARENTS AND SUBSIDIARIES
PARENTS AND SUBSIDIARIES
AS OF DECEMBER 31, 1998
PERCENTAGE OF
STATE OR COUNTRY VOTING SECURITIES
OF INCORPORATION OWNED BY ITS
OR ORGANIZATION IMMEDIATE PARENT
------------------------- -------------------
Registrant:
International Business Machines Corporation..................... New York
Subsidiaries:
IBM Credit Corporation.......................................... Delaware 100
Lotus Development Corporation................................... Massachusetts 100
Tivoli Systems Inc. ............................................ Delaware 100
IBM World Trade Corporation..................................... Delaware 100
IBM Asia Pacific Service Corporation.......................... Japan 100
IBM China/Hong Kong Corporation............................... Delaware 100
IBM World Trade Asia Corporation.............................. Delaware 100
WTC Insurance Corporation, Ltd. .............................. Bermuda 100
IBM Argentina, S.A. .......................................... Argentina 100(C)
IBM Australia Ltd. ........................................... Australia 100
IBM Bahamas Ltd. ............................................. Bahamas 100
IBM de Bolivia, S.A. ......................................... Bolivia 100
IBM Brasil-Industria, Maquinas e Servicos Ltda................ Brazil 100(C)
IBM Foreign Sales Corporation................................. Barbados 100
General Business Machines Corp. .............................. British V.I. 10
IBM Canada Credit Services Company............................ Canada 100
IBM Canada Limited--IBM Canada Limitee........................ Canada 100
IBM China Company Limited..................................... China 100
IBM de Chile, S.A.C........................................... Chile 100(C)
IBM de Colombia, S.A. ........................................ Colombia 90(C)
IBM Middle East FZE........................................... United Arab Emirates 100
IBM Middle East Dubai Airport Free Zone FZE................... United Arab Emirates 100
IBM del Ecuador, C.A.......................................... Ecuador 100
IBM Global Services India Pvt. Ltd............................ India 80(E)
Tata IBM Ltd. ................................................ India 50
IBM Japan, Ltd. .............................................. Japan 100
IBM Korea, Inc. .............................................. Korea (South) 100
Mesiniaga Berhad.............................................. Malaysia 10
Sunway Computer Services Sdn. Bhd............................. Malaysia 20
Arrendadora de Tecnologia e Informatica, S.A. de C.V.,
Organizacion Auxiliar del Credito........................... Mexico 86(C)
Financiera de Tecnologia e Informatica S.A. de C.A., Sociedad
Financiera del Objecto Limitado Filial...................... Mexico 100(C)
Grupo IBM Mexico, S.A. de C.V................................. Mexico 100(A)
IBM de Mexico, S.A. .......................................... Mexico 100(A)
IBM New Zealand Ltd. ......................................... New Zealand 100
IBM del Peru, S.A. ........................................... Peru 100
IBM World Trade Asia-Pacific Corp. ........................... Philippines 98(A)
IBM Philippines, Incorporated................................. Philippines 100(A)
PARENTS AND SUBSIDIARIES
PERCENTAGE OF
STATE OR COUNTRY VOTING SECURITIES
OF INCORPORATION OWNED BY ITS
OR ORGANIZATION IMMEDIATE PARENT
------------------------- -------------------
IBM Romania Srl............................................... Romania 100
IBM Taiwan Corporation........................................ Taiwan 100(A)
Thai Systems Corporation Ltd. ................................ Thailand 100
IBM Thailand Company Ltd. .................................... Thailand 100(A)
IBM del Uruguay, S.A. ........................................ Uruguay 100
IBM de Venezuela, S.A. ....................................... Venezuela 100
IBM Vietnam Company........................................... Vietnam 100
IBM Central Europe & Russia Inc. ............................. Delaware 100
IBM Oesterreich Internationale Bueromaschinen Gesellschaft
m.b.H. ..................................................... Austria 100
IBA (International Belarussia Alliance)....................... Belarus Republic 45
International Business Machines of Belgium S.A. .............. Belgium 100(C)
IBM Botswana (PTY) Limited.................................... Botswana 100
IBM Bulgaria Ltd. ............................................ Bulgaria 100
IBM Croatia Ltd./ IBM Hrvatska d.o.o. ........................ Croatia 100
IBM Ceska Republika spol. s.r.o. ............................. Czech Republic 100
IBM Eesti Osauhing (IBM Estonia Ou)........................... Estonia 100
Compagnie IBM France, S.A. ................................... France 100(A)
IBM Eurocoordination.......................................... France --(B)
IBM Europe Middle East Africa................................. France 100(C)
IBM Beteiligungs GmbH......................................... Germany 100
IBM Deutschland GmbH.......................................... Germany 82(C)
International Business Machines Corporation Magyarorszagi
Kft......................................................... Hungary 100
IBM International Treasury Services Company................... Ireland --(D)
IBM Ireland Ltd. ............................................. Ireland 100
IBM Italia S.p.A.............................................. Italy 96(C)
IBM Hellas Information Handling Systems S.A. ............... Greece 100(C)
IBM Israel Ltd. ............................................ Israel 100(C)
Companhia IBM Portuguesa, S.A. ............................. Portugal 100
IBM (International Business Machines) Turk Ltd. Sirketi..... Turkey 98(C)
IBM South Africa Group Ltd. ................................ South Africa 95(C)
IBM East Africa Limited....................................... Kenya 67(C)
Sabiedriba ar irobezotu IBM Latvija........................... Latvia 100
QuanTech S.A.L. .............................................. Lebanon 15
IBM Lietuva................................................... Lithuania 100
IBM Global Holdings B.V....................................... Netherlands 100
IBM International Centre for Asset Management N.V. ........... Netherlands 100
IBM Nederland N.V. ........................................... Netherlands 100
IBM Polska Sp. z.o.o. ........................................ Poland 100
International Business Machines A/S........................... Norway 60(C)
IBM East Europe/Asia Ltd. .................................... Russia 100
IBM Slovensko spol.s.r.o. .................................... Slovak Republic 100
IBM Slovenija d.o.o. ......................................... Slovenia 100
International Business Machines, S.A. ........................ Spain 100(C)
IBM Nordic Aktiebolag....................................... Sweden 100
IBM Danmark A/S............................................. Denmark 100
PARENTS AND SUBSIDIARIES
PERCENTAGE OF
STATE OR COUNTRY VOTING SECURITIES
OF INCORPORATION OWNED BY ITS
OR ORGANIZATION IMMEDIATE PARENT
------------------------- -------------------
Oy International Business Machines AB....................... Finland 100
IBM Svenska Aktiebolag...................................... Sweden 100
IBM International Centre for Asset Management A.G. ........... Switzerland 100
IBM (Schweiz)--IBM (Suisse)-- IBM (Svizzera)-- IBM
(Switzerland)............................................... Switzerland 100
IBM North Africa.............................................. Tunisia 99(C)
IBM United Kingdom Holdings Ltd. ............................. United Kingdom 100
International Business Machines Limited....................... United Kingdom 100
IBM Zimbabwe (Private) Ltd. .................................. Zimbabwe 100
- ------------------------
(A) Minor percentage held by other IBM shareholders, subject to repurchase
option.
(B) IBM Eurocoordination, is owned approximately 14% each by subsidiaries
located in France, Germany, Italy and the United Kingdom and approximately
4% each by subsidiaries located in Austria, Belgium, Denmark, Finland,
Ireland, Netherlands, Norway, Portugal, Spain, Sweden and Switzerland and by
four other minority shareholders.
(C) Remaining percentage owned by another wholly-owned IBM company.
(D) IBM France and IBM Finland each own 16.6% and IBM Denmark and IBM
Switzerland each own 33.3% of IBM International Treasury Services Company.
(E) Minor percentage held by another IBM shareholder.
EXHIBIT III
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 2-77235, 33-29022, 33-33458, 33-34406, 33-53777,
33-60225, 33-60227, 33-60237, 33-60815, 333-01411, 333-09055, 333-23315,
333-31305, 333-41813, 333-44981 and 333-48435) and the Prospectuses constituting
part of the Registration Statements on Form S-3 (Nos. 33-50537, 33-65119,
33-65119(1), 333-03763, 333-21073, 333-27669, 333-40669 and 333-70521) of
International Business Machines Corporation of our report dated January 21,
1999, appearing on page 53 of the 1998 Annual Report to Stockholders which is
incorporated in this Annual Report on Form 10-K. We also consent to the
incorporation by reference of our report on the Financial Statement Schedule,
which appears on page 11 of this Form 10-K.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
1301 Avenue of the Americas
New York, N.Y. 10019
March 26, 1999
EXHIBIT IV
INTERNATIONAL BUSINESS MACHINES CORPORATION
AND SUBSIDIARY COMPANIES
ADDITIONAL EXHIBITS
Effective December 31, 1998, the company adopted Statement of Financial
Accounting Standards 131, "Disclosures About Segments of an Enterprise and
Related Information." As a result of adopting this standard the company has
changed its revenue and cost lines in the Consolidated Statement of Earnings
generally aligning with the new segment information. The 1998 quarterly
Consolidated Statements of Earnings are restated in Exhibit IVa. Additional
information about the company's segments can be found in note Y, "Segment
Information," on pages 84 through 89 of the 1998 Annual Report to Stockholders.
EXHIBIT IV(A)
INTERNATIONAL BUSINESS MACHINES CORPORATION
AND SUBSIDIARY COMPANIES
QUARTERLY CONSOLIDATED STATEMENT OF EARNINGS-RESTATED*
1998
FIRST SECOND THIRD FOURTH
QUARTER+ QUARTER+ QUARTER+ QUARTER+ FULL YEAR
----------- ----------- ----------- ----------- ---------
(DOLLARS IN MILLIONS)
Revenue:
Hardware segments........................................ $ 7,318 $ 7,714 $ 8,920 $ 11,467 $ 35,419
Global Services segment.................................. 6,341 6,969 7,046 8,560 28,916
Software segment......................................... 2,644 2,866 2,808 3,545 11,863
Global Financing segment................................. 719 712 679 767 2,877
Enterprise Investments segment/Other..................... 596 562 642 792 2,592
----------- ----------- ----------- ----------- ---------
Total revenue............................................ 17,618 18,823 20,095 25,131 81,667
Cost:
Hardware segments........................................ $ 5,219 $ 5,347 $ 6,101 $ 7,547 24,214
Global Services segment.................................. 4,630 5,065 5,222 6,208 21,125
Software segment......................................... 540 548 544 628 2,260
Global Financing segment................................. 380 377 351 386 1,494
Enterprise Investments segment/Other..................... 399 340 410 553 1,702
----------- ----------- ----------- ----------- ---------
Total cost............................................... 11,168 11,677 12,628 15,322 50,795
Gross profit............................................. 6,450 7,146 7,467 9,809 30,872
Operating expenses:
Selling, general and administrative...................... 3,719 3,812 4,057 5,074 16,662
Research, development and engineering.................... 1,179 1,220 1,240 1,407 5,046
----------- ----------- ----------- ----------- ---------
Total operating expenses................................. 4,898 5,032 5,297 6,481 21,708
Operating income......................................... 1,552 2,114 2,170 3,328 9,164
Other income, principally interest....................... 150 130 122 187 589
Interest expense......................................... 179 161 160 213 713
----------- ----------- ----------- ----------- ---------
Income before income taxes............................... 1,523 2,083 2,132 3,302 9,040
Provision for income taxes............................... 487 631 638 956 2,712
----------- ----------- ----------- ----------- ---------
Net income............................................... 1,036 1,452 1,494 2,346 6,328
Preferred stock dividends................................ 5 5 5 5 20
----------- ----------- ----------- ----------- ---------
Net income applicable
to common shareholders................................... $ 1,031 $ 1,447 $ 1,489 $ 2,341 $ 6,308
----------- ----------- ----------- ----------- ---------
----------- ----------- ----------- ----------- ---------
* See text in Exhibit IV
+ Unaudited