Financial Statement Analysis of IBM
I. Company Facts
IBM – International Business Machines Corporation
The home office of IBM is located in Armonk, Town of North Castle, New York, United States. IBM was founded in 1911 as the Computing Tabulating Recording Company (CTR) through a merger of three companies: the Tabulating Machine Company, the International Time Recording Company, and the Computing Scale Company. CTR adopted the name International Business Machines in 1924, using a name previously designated to CTR's subsidiary in Canada and later South America. Standard Industrial Classification Codes are 7379 which are mainly on computer and relative stuff. Chief Executive Officer (CEO) of IBM now is Virginia M. Rometty. Chairman of the Board of IBM now is Samuel J. Palmisano.
The end date of recent fiscal year of IBM is Dec. 31st 2011. Main services IBM provides include business consulting, IT related services, outsourcing service and training. Main products IBM provides include mainframe, software, system and storage. IBM’s major operations consist of five business segments: Global Technology Services, Global Business Services, Software, Systems and Technology and Global Financing. In the latest fiscal year, IBM has an amount of 433,362 wholly owned employees all over the world. PricewaterhouseCoopers LLP (PwC) is the independent auditor retained to audit IBM’s consolidated financial Statements and the effectiveness of the company's internal control over financial reporting. The stock ticker symbol is IBM. IBM common stock is listed on the New York Stock Exchange, the Chicago Stock Exchange, and outside the United States. And the latest stock price was $188.32 on Nov. 14th 2012 on NYSE. II. Business and Strategy Analysis
1. Industry Description and Competitive Anlysis
Since IBM is a highly diversified company, it concentrates on several industries at the same time. So let’s say IBM mainly concentrates on the computer related hardware and software manufacturing industries. As we all know, these two industries supplement each other and depend on each other while the most competitive companies always work on both industries at the same time. The computer related software and hardware manufacturing industry is characterized by significant research and development activity and rapid technological change. The rapid pace of innovation in this sector creates a constant demand for newer and faster products and applications. While the sector has grown faster than most other industries over the past several decades, it faces challenges from rising costs, global market share, and the rapid pace of innovation. The main competitors for IBM now are Hewlett-Packard, Dell and Microsoft. Here I will use the Porter five forces analysis to give a competitive analysis among these four companies. Threat of new competition: The market of this industry is profitable in some parts like high-level software and frames, not too profitable in some other parts like PCs. So we can say the market is still profitable and is attracting the new entrants, which has the possibility to decrease profitability for all firms in this industry. While in this industry, because of the existence of several big companies, the barriers to entry are relatively high which are non-profitable for the new entry firms. The several big companies have held very high brand equity, customer loyalty, efficient distribution methods and scale effect to decrease the costs and increase the profits. There is not too much threat from the new firms to compete with IBM, there are high possibility for other main competitors like HP, Dell and Microsoft to enter the markets where IBM is making high profit, well they have the R&D capabilities. But to make the biggest profits, although IBM's main competitors are Hewlett-Packard, Dell and Microsoft, each of these companies has a different focus area. Dell makes most of its money...