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2006 ibm annual

2006 ibm annual

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Published by anon-244575
2006 IBM financial report
2006 IBM financial report

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Published by: anon-244575 on Mar 07, 2007
Copyright:Attribution Non-commercial

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01/01/2013

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Dear 
 IBM 
Investor 
:
 
I am happy to report to you on a very strong year or our company 
.
In my letter last year
,
I said that webelieved we had positioned ourselves to capture the most attractivegrowth and proft opportunities in our industry 
.
In
2006
we did just that
,
setting new records in proft
,
earnings per share andcash perormance
.
  What our numbers do not reveal
and what is perhaps
IBM
smost notable accomplishment during this period
is that weachieved these results while undamentally reshaping our company 
.
  Whether you look at our technolog
,
strategy 
,
business model
,
 processes or culture
,
 
IBM
is a very dierent enterprise today thanit was at the beginning o the decade
.
We have prepared the company or growth and leadership in a
radically different future
 
whilecontinuing to deliver steady results
.
 
Chairman’s Letter
IBM
’s gross prot margin rose or the third consecutive year
to
41.9
percent, an increase o 
1.8
points in
2006
, upmore than ve points since
2003
. Our pretax income marginrose to
14.6
percent, an increase o 
1.2
points. Both marginsare at their highest in the past
10
years. Signicantly, asI will discuss, they were achieved primarily by remixing ourbusiness to higher-value segments and by driving eciency through global integration.In many respects,
IBM
is a “higher-torque” engine today. With revenue growth that matches our segments o theindustry, we have been able to generate strong prot andcash. In
2006
we generated net cash rom operations,excluding a year-to-year change in Global Financingreceivables, o 
$
15.3
billion — an increase o 
$
2.2
billionrom last year and our highest on record. In addition, netcash generated rom every dollar o revenue has increased
18
percent since
2003
.
IBM
ended
2006
with
$
10.7
billiono cash and marketable securities. And o course, strongerearnings and cash give us more fexibility to increase returnsto you and to invest in uture sources o growth.Our net
2006
cash investment o 
$
3.8
billion or
13
acquisitions
nine o them in key strategic areas o sotware
was up
$
2.3
billion year to year. Ater investing
$
6.1
billion in
R&D
and
$
4.7
billion in net capitalexpenditures, we were able to return a record o nearly 
$
9.8
billion to you
$
8.1
billion through share repurchaseand
$
1.7
billion through dividends — or more than
100
percento our net earnings. In April
2006
we announced a
50
-percentincrease in our quarterly dividend
,
the largest percentageincrease in
IBM
history and the
362
nd
consecutive dividendpaid by 
IBM
. This was the
11
th
year in a row in which wehave increased our dividend. Our balance sheet remainsstrong, and the company is well positioned to take advantageo new strategic opportunities.
IBM
had a strong year in
2006
.
Revenue as reported was
$
91.4
billion
,
up
4
percent
,
excluding
PC
s rom our
2005
results
.
 Pretax earnings rom continuing operations were
$
13
.
3
billion
,
 an increase o 9 percent
.
Diluted earnings per share romcontinuing operations were
$
6
.
06
,
up
23
percent
,
marking
16
straight quarters o growth.
IBM
has consistently generatedreturn on invested capital signicantly above the average or the
S&P
 
500
over the past several years
,
and we did so again in
2006
,
  with
ROIC
o 
34
percent
,
excluding our Global Financing business
.
 

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