IBM Farewell Hardware company: Software and services profit 16 billion USD

On September 9, IBM presented a set of slides to the Securities and Exchange Commission to introduce the growth trend of the company's software and services business. So far, IBM has a total of four major sources of profit, of which hardware and financial business has brought about 3 billion U.S. dollars pre-tax profit, and software and services each bring nearly 8 billion U.S. dollars pre-tax profit, a total of 16 billion U.S. dollars.

Between 1995 and 2000, IBM's gross profit margin dropped from about 42% to 38%. But after entering 2000, the gross profit margin from 2001 to 2009 Rose, now more than 45%.

The following is a review article by TechCrunch:

Note: IBM's pre-tax profit Margin trend chart, which fell to a minimum of 7.2% in 02, has been rising from 02 to 09.

In many people's minds, IBM is a company that sells "big steel Computers" and enterprise servers. Of course, a long time ago, IBM's profit motive had shifted to consulting and software. Yesterday, IBM submitted a 8-k document to the Securities and Exchange Commission (SEC), with one set of slide reports noteworthy, a summary of IBM's transition over the past 8 years.

The report shows: Software and service industry has become a strong profit growth belt! As shown in the picture, IBM's pre-tax revenue margin rose from 7.2% to 16.1% from 2002 to 2008. And, as you can see from the chart, IBM is going to get the growth done. of the top standard and Poor's 500 companies, only 30% of technology companies have pre-tax earnings margins of more than 20%. IBM now has an annual income of $90 billion trillion, profit margin of 1%, and an increase of nearly 1 billion dollars in revenue.

Why is IBM able to maintain such impressive performance?

Note: IBM's four major sources of profit, in which the software and services industry on pre-tax profit contribution is increasing, and maintain double-digit growth. The software industry increased from $2.8 billion in 2000 to $7.1 billion in 2008, to $8 billion trillion this year. The service sector increased from $4.5 billion trillion in 2000 to $7.3 billion last year.

The answer is that the software and services business is profitable and it keeps double-digit growth rates. In 2009, each of the two sectors would bring a pre-tax profit of $8 billion trillion, compared with 1.5 billion dollars for the hardware business. 8 years ago, the software business only 2.8 billion U.S. dollars, service business 4.5 billion dollars.

In addition, IBM has invested heavily in middleware, data services, software technology, cloud computing and Business Analytics, which are just a few examples.

Figure Note: From 1995 to 2001, gross margin declined year by year. From 2002 to 2004, stability was maintained at around 36%. From 2005 to 2009, it rose to about 45%.

Compare IBM's financial situation today with the 90 's. In the 90 's, despite the company's continued spending cuts, gross profit margins have been declining. Today, IBM's spending is actually on the rise in total revenue as it invests heavily in research and development. Over the past 5 years, IBM's research and development investment amounted to $30 billion, after Microsoft's 36 billion dollars. Google has invested 7 billion of dollars in research and development, lower than Cisco, HP and Oracle.