Generating Higher Value at IBM (A)

Instructions and Questions

Reports must be delivered electronically to gaspar@essec.edu in Word, PowerPoint, or PDF

format. Please name your files as Group#_<Name> where # stands for your group
number and <Name> is the name of the case. For example if you are delivering a .pdf file
from group 5 and the report concerns the ACME case, name your file Group5_ACME.pdf.
The date and hour of delivery for each case is given in the course schedule and late filing
is not accepted. Originality of thinking and clear, professional reports will be rewarded. The
first page of the report should be an executive summary of the analysis and the
recommendations proposed by the students. The remainder of the text should be no more
than 6 pages long in Word format or 8 PowerPoint slides. Tables, figures, graphs etc. that
support the analysis can be added without limit. Each case will be discussed on the class their
delivery is due. WARNING: copying and/or plagiarism from any source without
acknowledgement are not tolerated and are penalized severely.

Questions:

1. Why did IBM create and publicly announce the 2010 EPS Roadmap in May 2007?

2. How would you assess IBM’s financial performance both before (from 2004-2006) and after
(from 2007-2009) announcing the 2010 Roadmap? Analyze case Exhibits 1, 2, and 3 for
levels, trends, and changes. Hint: what happened to IBM’s ROE (return on equity) and cash-
flow over 10 years?

3. Was the 2010 roadmap successful?

4. How does the 2015 Roadmap differ from the 2010 Roadmap? Has the 2015 Roadmap been
successful so far (up to May 2014)?

5. What should CEO Rometty and CFO Schroeter do as of May 2014: affirm the 2015 EPS
Roadmap (and the $20 target), adjust it, or abandon it? What should Sofia Johnson
recommend to the clients  buy, hold, or sell IBM shares?