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Analysis of IBM’s 1999 Annual Report and IBM Global Services Results

IGS: The Only IBM Star

IBM Global Services Profits Soar as Revenue Growth Slows

W. AUSTRALIA, Apr. 6 – IBM Global Services (IGS) is the only real IBM star, the Big Blue’s 1999 Annual Report has reaffirmed.  And even that star lost some of its luster last year.  Its 15% revenue growth is the lowest in the last 10 years that we have been analyzing this IBM unit’s business results (excluding 1994, when IBM got rid of its Federal Systems Division, which skewed the annual growth figures).

But IGS more than made up for the lack of top-of-the-line growth with improvements in profitability and productivity.  We estimate that its net profit was up 35% from last year; its pretax profit up 44%, and its gross profit up 23% - making it a shoe-in for our 2000 IT Services Hexathlon “gold” medal in these categories (see the Annex Research 1999 “IT Services Hexathlon”).

As for the rest of the company, awaiting the release of the IBM Annual Report used to be a big deal in the pre-Internet days.  It’s a non-event now.  Besides the financial details of the kind that only auditors and accountants care about, the only really “new news” was the letter to the shareholders by the chairman and CEO, Lou Gerstner, and the marketing spin that the Annual Report’s designers tried to put on it.


Our report then goes on to comment:  

At the time when the .COM’s were multiplying like amoebas, and starting to eat the giant corporations’ lunches (back in 1995-1996), the IBM leader dismissed that phenomenon (see “Louis XIX of Armonk,” Annex Bulletin 96-42, Aug. 21, 1996). 

 Here’s an excerpt:

“Some of Gerstner's faux pas were trivial. Others were shocking. We'd put his arrogance among the trivial. We'd rate his ignorance as shocking. In the end, Gerstner demonstrated that he may be on a personal power trip at the expense of the IBM shareholders.

For instance, (the) "PC revolution was driven by individuals," Gerstner asserted. "Network computing is about... enterprises. It's about transformation of the way institutions do business."

Pardon me? That's like saying MTV is about senior citizens!”


Here are some of the sub-headings from the rest of this Annex Bulletin:

Geographic Segments

Market Shares (Global, U.S., Europe, A/P)


"That's all she wrote," we're afraid, for those of you who are NOT Annex Research clients, and who are now reading the complete Annex Bulletin, along with 8 charts and 2 tables which back up our analysis in the 8-page print edition of this particular report.

To find our how you can become one of our clients, and read the rest of this and other Annex Bulletins, click on . Thank you.

Happy bargain hunting!

Bob Djurdjevic

NOTE: The print edition of this report, of course, contains additional charts and tables not included here.

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Volume XVI, No. 2000-10
April 6, 2000

Editor: Bob Djurdjevic
Published by Annex Research;

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