IBM 2014 Annual Meeting of Stockholders
IBM's 2014 Annual Meeting of Stockholders was held on Tuesday, April 29, 2014 at 10 a.m. in the Prime F. Osborn III Convention Center, 1000 Water Street, Jacksonville, Florida.
International Business Machines Corporation held its Annual Meeting of Stockholders on April 29, 2014. For more information on the following proposals, see the company's proxy statement dated March 10, 2014. Below are the final voting results.
|IBM stockholders elected each of the thirteen nominees to the Board of Directors for a one-year term by a majority of the votes cast.|
|IBM stockholders ratified the appointment of PricewaterhouseCoopers LLP as the Independent Registered Public Accounting Firm for the company:|
|Advisory Vote on Executive Compensation:|
|Long-term Incentive Performance for Certain Executives Pursuant to Section 162(m) of the Internal Revenue Code:|
|Approved the IBM 2014 Employees Stock Purchase Plan:|
|Three stockholder proposals were presented at the meeting.|
|Stockholder Proposal for Disclosure of Lobbying Policies and Practices:|
|Stockholder Proposal on the Right to Act by Written Consent:|
|Stockholder Proposal to Limit Accelerated Executive Pay:|
Chairman, President and Chief Executive Officer, IBM
2014 IBM Annual Meeting of Stockholders
April 29, 2014
I will now provide a report on your company.
On the cover of this year's annual report, we ask a question: “What will we make of this moment?” This question is not a simple one. It captures a number of other questions, which all enterprises today must confront:
- What will we make with unprecedented amounts of data?
- How will we make use of powerful business and technology services available through the cloud?
- What will we create with global networks of consumers, workers, citizens, students, patients?
- How will we engage with an emerging global culture that's not defined by age or geography?
To capture the potential of this moment, we are executing a bold agenda around the shifts of data, cloud and engagement. It is reshaping your company, and, we believe, our industry.
I will describe the actions we have taken and are taking, and the changed company that is emerging from this transformation. I believe that if you understand our strategy, you will share our confidence in IBM's prospects — for the near term and beyond.
Let me start with our first strategic shift — data.
Today, every discussion about changes in the world begins with data. Exponentially increasing in volume, velocity and variety, data is becoming a new natural resource. It promises to be for the 21st century what steam was for the 18th, electricity for the 19th and hydrocarbons for the 20th.
This is the driver of IBM's first strategic imperative: To make markets by transforming industries and professions with data.
The market for data and analytics is expected to reach approximately $200 billion by 2015. To capture this growth potential, we have built the world's broadest set of capabilities in Big Data and analytics, with investments of more than $24 billion, including $17 billion on over 30 acquisitions.
This portfolio also includes the foundation for the next major era in computing — cognitive systems. Traditional computing systems only do what they are programmed to do and simply cannot keep up with Big Data. For that, we need a new paradigm. Cognitive systems learn from the vast quantities of information they ingest, from their own experiences, and from their interactions with people.
IBM launched the cognitive era three years ago, when our Watson system defeated the two all-time champions on the quiz show Jeopardy! Watson has since matured from a research grand challenge into a commercial business platform, accessed via the cloud. We believe Watson will change the face of healthcare, retail, travel, banking and more.
Since just the start of 2014, to further shift our portfolio, we have:
- Launched the IBM Watson Group. It will comprise 2,000 professionals, a $1 billion investment and an ecosystem of partners and developers that we expect to scale rapidly.
- Brought Watson to Africa in a 10-year, $50 million strategic initiative — dubbed 'Project Lucy.'
- Announced a collaboration with the New York Genome Center to tackle brain cancer.
- Launched a new analytics portfolio to address fraud and financial crime.
- And last week launched Power 8 servers, built for the era of cloud and Big Data.
In 2013 our Big Data and analytics revenue rose 9 percent — creating a $16 billion business for us. Revenue grew 5 percent in the first quarter of 2014. We have raised our long-term expectations for this area.
Let me now talk about the second shift — cloud.
Our strategic imperative in cloud is: To remake enterprise IT for the era of cloud.
IBM today is the leader in enterprise cloud. We have invested $7 billion on more than 15 acquisitions — most notably SoftLayer, the market's premier enterprise public cloud platform. We provide the full spectrum of cloud delivery models — infrastructure-as-a-service, platform-as-a-service, software-as-a-service and business-process-as-a-service.
Eighty percent of Fortune 500 companies use IBM's cloud capabilities. IBM's software-as-a-service offerings today support 24 of the top 25 companies in the Fortune 500.
Again, we have accelerated our cloud strategy in 2014, as we pursue a market for cloud solutions that is expected to reach approximately $250 billion by 2015:
- We announced a $1.2B investment to double cloud datacenter capacity and expand our global cloud footprint.
- We launched BlueMix, which provides cloud-delivered tools and services for the world's enterprise developers.
- We acquired Cloudant, a leading database-as-a-service provider.
- And just yesterday, we announced the IBM Cloud marketplace, a broad portfolio of cloud capabilities and new third-party services that delivers a simple and easy experience for three key user groups within the enterprise — developers, IT managers and business leaders.
IBM's cloud business grew 69 percent in 2013, delivering $4.4 billion of revenue. Cloud revenue grew more than 50 percent in the first quarter of this year, and we doubled our cloud business delivered “as a service,” now with an annual run rate of $2.3 billion.
Let's now talk about IBM's third strategic imperative — engagement.
Engagement describes how clients reach their customers, employees, citizens and other stakeholders on an individual basis. To address this, we have built the leading portfolio of mobile and social technologies, underscored by security.
The way individuals expect to engage with organizations is changing. Nearly 80 percent of adult smartphone users keep their phones with them an average of 22 hours a day. And 70 percent of people who contact a company via social media expect a response within five minutes.
When these individuals use their mobile devices to engage with a company, they expect personalized service. Indeed, 80 percent of people are willing to trade their information for a customized offering. But two-thirds of U.S. adults say they would not return to a business that lost their confidential information.
This is why we launched IBM MobileFirst in 2013, and why we have made eight acquisitions to advance our mobile initiatives. IBM is also the market leader in both enterprise social software and in security.
In 2013, we achieved year over year growth of 69 percent in mobile, 19 percent in security and 45 percent in social business.
As you can see, we are pursuing a bold strategy around data, cloud and engagement. We are making investments and seeing strong results.
Now let's talk about our overall performance in 2013.
By many measures, 2013 was a successful year for IBM. Our diluted operating earnings per share were $16.28, a new record. This marked 11 straight years of operating EPS growth. We grew operating net income by 2 percent, to $18 billion.
We invested $3.1 billion for 10 acquisitions and invested $3.8 billion in net capital expenditures and $6.2 billion in R&D. IBM earned the most U.S. patents for the 21st straight year.
While making all these investments in IBM's future capabilities, we were able to return $17.9 billion to you in 2013: approximately $13.9 billion through gross share repurchases and $4.1 billion through dividends. Last year's dividend increase was 12 percent. As I announced earlier, we have increased the dividend again by 16 percent. This marks the 19th straight year in which we have raised our dividend, and the 99th in which we have paid one.
However, we must acknowledge that while 2013 was an important year of transformation, our performance did not meet our expectations.
Our operating pre-tax income was down 8 percent. Our revenue in 2013, at $99.8 billion, was down 5 percent as reported and 2 percent at constant currency.
So, while we remix to higher value, we must also address those parts of our business that are holding us back. We have two specific challenges, and we are taking steps to address both.
The first involves shifting the IBM hardware business — which as you know is less than 15 percent of IBM's total portfolio -- for new realities and opportunities.
For instance, this month, as I mentioned, we launched Power 8, the first chip designed for Big Data. We also announced, in January, an agreement to divest much of our Intel-based x86 server business to Lenovo. This is consistent with our continuing strategy of exiting lower-margin businesses — such as PCs, hard-disk drives and retail store solutions — thus resulting in a stronger business.
Including this Lenovo transaction, over the past several years we will have divested approximately $6 billion of annual revenue.
But let me be clear — we are not exiting hardware. IBM will remain a leader in high-performance and high-end systems, storage and cognitive computing, and we will continue to invest in R&D for advanced semiconductor technology.
The second challenge is the world's growth markets.
While IBM's growth last year in Latin America and Middle East and Africa was strong, enterprise spending slowed in other key growth markets. We are remixing to new growth opportunities, as the overall opportunity in the world's growth markets remains attractive for the long term.
These challenges also continued to impact us in our 1Q results. But we are working through them, and we have continued to make progress on our objectives.
Let me wrap up.
The progress we are making on our strategic imperatives is highly encouraging. No company in our industry is better positioned than 103-year-young IBM for the future that is now taking shape. We are confident in our vision, our strategy and our prospects.
You are seeing that strategy — and that confidence — in the way we are engaging with the world. The videos I have shown you today come from our new marketing platform, “Made with IBM,” which debuted earlier this month. It aims to establish IBM's leadership through a compelling body of evidence of what IBM clients are achieving with data, cloud, mobile, social and Watson.
Every generation of IBMers has the opportunity — and, I believe, the responsibility — to re-invent a new IBM. This is our time. We are working to make this not just a successful business, but an essential institution.
I am deeply proud of the global IBM team for bringing us here, and I am grateful to you, our shareholders, for your unwavering support.
Information about non-GAAP financial measures
This report includes selected references to certain non-GAAP financial measures that are made to facilitate a comparative view of the company's ongoing operational performance. For information about the company's financial results related to operating pre-tax income and operating earnings per share, which are in each case non-GAAP measures, see the company's Form 8-K dated January 21, 2014.