IBM Analysis - mcsystems.files.wordpress.com · Assets Turnover ... Operative fixed asset turnover...

IIBBMM AAnnaallyyssiiss

POLITECNICO DI MILANO

Master of Science in Management, Economics and Industrial Engineering

Management Control Systems

Prof. Paolo Maccarrone

First Assignment: IBM Analysis

Group Ferrario Andrea

Rognoni Susanna Taiana Marco

Trifonov Angel

A.Y. 2007/2008


IInnddeexx

Company profile ......................................................................................................... - 3 -

Logos................................................................................................................................... - 4 -

IBM strategies and evolution ............................................................................................... - 4 -

Subsidiaries ................................................................................................................ - 5 -

Market and Industry.................................................................................................... - 7 -

Accounting principles.................................................................................................. - 9 -

Profitability analysis: first level .................................................................................. - 10 -

ROE................................................................................................................................... - 10 -

Profitability analysis: second level ............................................................................ - 11 -

ROA................................................................................................................................... - 11 -

Financial Leverage (TL/E) ................................................................................................. - 11 -

Average Net Cost of financing activities (f)........................................................................ - 12 -

Return of fiscal and discontinued operations (s)................................................................ - 12 -

Profitability analysis: third level................................................................................. - 13 -

ROS (Return on sales) ...................................................................................................... - 13 -

Assets Turnover................................................................................................................. - 13 -

Average cost of third party capital (r)................................................................................. - 13 -

Return on financial assets (p) ............................................................................................ - 13 -

FA/TL................................................................................................................................. - 13 -

Tax incidence (t) ................................................................................................................ - 14 -

Incidence of discontinued operations (d) ........................................................................... - 14 -

Profitability analysis: fourth level............................................................................... - 14 -

Inventories Turnover.......................................................................................................... - 14 -

Average collection period for receivables .......................................................................... - 14 -

Operative fixed asset turnover........................................................................................... - 14 -

Liquidity Analysis ...................................................................................................... - 15 -

Short term.......................................................................................................................... - 15 -

Long term........................................................................................................................... - 15 -

Financial Structure Analysis ..................................................................................... - 16 -

Benchmarking........................................................................................................... - 17 -

ROE................................................................................................................................... - 17 -

ROA................................................................................................................................... - 17 -

Average Net Cost of financing activities (f)........................................................................ - 17 -


Financial Leverage ............................................................................................................ - 18 -

Return of fiscal and discontinued operations (s)................................................................ - 18 -

Liquidity analysis................................................................................................................ - 18 -

Annexes.................................................................................................................... - 19 -

IBM Data............................................................................................................................ - 19 -

IBM Calculations................................................................................................................ - 22 -

Microsoft Data.................................................................................................................... - 24 -

Microsoft Calculations........................................................................................................ - 27 -

HP Data ............................................................................................................................. - 29 -

HP Calculations ................................................................................................................. - 32 -

EDS Data........................................................................................................................... - 34 -

EDS Calculations............................................................................................................... - 37 -

Sun Data............................................................................................................................ - 39 -

Sun Calculations................................................................................................................ - 42 -

Comparisons of data for benchmarking............................................................................. - 44 -


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CCoommppaannyy pprrooffiillee International Business Machines Corporation, abbreviated IBM is a multinational computer technology and consulting corporation headquartered in Armonk, New York, USA. The company is one of the few information technology companies with a continuous history dating back to the 19th century. IBM manufactures and sells computer hardware and software, and offers infrastructure services, hosting services, and consulting services in areas ranging from mainframe computers to nanotechnology. History of IBM The company which became IBM was founded in 1888 as the Tabulating Machine Company by Herman Hollerith, in Broome County, New York. It was incorporated as Computing Tabulating Recording Corporation (CTR) on June 16, 1911, and was listed on the New York Stock Exchange in 1916. IBM adopted its current name in 1924, when it became a Fortune 500 company. In the 1950s, IBM became the dominant vendor in the emerging computer industry with the release of the IBM 701 and other models in the IBM 700/7000 series of mainframes. The company's dominance became even more pronounced in the 1960s and 1970s with the IBM System/360 and IBM System/370 mainframes, however antitrust actions by the United States Department of Justice, the rise of minicomputer companies like Digital Equipment Corporation and Data General, and the introduction of the microprocessor all contributed to dilution of IBM's position in the industry, eventually leading the company to diversify into other areas including personal computers, software, and services. In 1981 IBM introduced the IBM Personal Computer which is the original version and progenitor of the IBM PC compatible hardware platform. Descendants of the IBM PC compatibles make up the majority of microcomputers on the market today, though IBM sold its PC division to the Chinese company Lenovo on May 1, 2005 for $655 million in cash and $600 million in Lenovo stock. Nowadays IBM is very active in different sectors: from servers provided with different operating systems (AIX, Linux, Windows), to software, to information technology services, to microprocessors (for example the PowerPC used into Xbox360 or Nintendo Wii and Multimedia Cell processor developed together with Sony and Toshiba used into PlayStation 3), to printers and so on. On January 25, 2007, Ricoh announced purchase of IBM Printing Systems Division for $725 million and investment in 3-year joint venture to form a new Ricoh subsidiary, InfoPrint Solutions Company; Ricoh will own a 51% share, and IBM will own a 49% share in InfoPrint.


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LLooggooss

The logo that was used from 1924 to 1946.The

logo is in a form intended to suggest a globe, girdled by the word "International".

The logo that was used from 1947 to 1956. The

familiar "globe" was replaced with the simple

letters "IBM" in a typeface called "Beton

Bold."

The logo that was used from 1956 to 1972. The letters

"IBM" took on a more solid, grounded and balanced

appearance.

In 1972, the horizontal stripes now replaced

the solid letters to suggest "speed and

dynamism."

IIBBMM ssttrraatteeggiieess aanndd eevvoolluuttiioonn “As you know, we have dramatically changed our mix of products, services, skills and technologies. We exited businesses like PCs and hard disk drives — businesses that we had invented.”

Samuel J. Palmisano

IBM Chairman, President and Executive Officer During the years, strategies of business had changed very much in order to maintain and increase the competitiveness of the company. The company had to confront with continuous and fundamental changes in the markets and like the reality of global integration, a new computing model and new ways for business and institutions to apply technology to create value. One of the main efforts used by IBM during the last years has been a continuous repositioning on the different markets (hardware, software, financing and services) with the purpose to focus on the most profitable businesses and to exit the markets becoming less profitable.


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Another effort used to improve IBM capabilities has been the integration by acquisition of other companies in order to drive at two main targets:

- To get a jump-start into emerging markets. - To fill gaps in our existing technology, round out key aspects of our portfolio and quickly

move into new markets to further differentiate ourselves from the competition.

SSuubbssiiddiiaarriieess Analyzing the IBM Group merge that some of its geographical divisions are subsidiaries of the company:

• IBM China/Hong Kong that provides IBM products and services to customers in Hong Kong and China; it is also a leading provider of enterprise computing and data storage systems. IBM established its presence in Hong Kong in 1957

• IBM Australia incorporated in 1932 • IBM Canada encompasses research and development, manufacturing, sales, marketing,

and service operations. Major divisions include a software research and development lab in Ontario that is one of the largest IBM R&D centre in the world. Its semiconductor packaging plant in Quebec provides test and assembly services to its parent company as well as other manufacturers. Additionally, IBM Canada provides IT consulting through subsidiary LGS Group which also operates in Europe. IBM established operations in Canada in 1917.

• IBM India is the Indian subsidiary of IBM. It has facilities in Bangalore, Delhi, Kolkata, Chennai, Pune, Gurgaon, Noida and Hyderabad. Since 2006, IBM has been the multinational with the largest number of employees in India.

IBM count a large number of subsidiaries spread all over the world, here are listed some of those companies:

• ADSTAR was a hardware storage division of IBM. ADSTAR was sold to Tivoli Systems, Inc., but later Tivoli was purchased by IBM. ADSTAR is primarily known for a backup and recovery product named ADSTAR Distributed Storage Manager.

• Cognos (formerly Cognos Incorporated) is an Ottawa, Ontario based company which makes business intelligence (BI) and performance management software. Founded in 1969, Cognos employed almost 3,500 people and served more than 23,000 customers in


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over 135 countries. Cognos was originally known as Quasar and adopted its current name in 1982. On January 31, 2008, Cognos was officially acquired by IBM. Cognos 8 BI, which was launched in September 2005, combines the features of several previous products: ReportNet, PowerPlay, Metrics Manager, Noticecast, and Decision Stream.

• DataPower was recognized early as an innovator in XML processing. XML messaging is now considered a critical element to service-oriented architecture (SOA). DataPower was a Cambridge, Massachusetts-based manufacturer of network devices acquired by IBM in 2005.

• Dehomag was a German business, effectively a franchisee and subcompany of IBM. • FileNet, a company now owned and assimilated by IBM, developed software to help

enterprises manage their content and business processes. The FileNet P8 platform, their flagship system, is a framework for developing custom enterprise systems, offering much functionality out of the box and capable of being customized to manage a specific business process.

• Holosofx was a privately held company based in El-Segundo, CA that worked in the field of Business Process Management (BPM). IBM acquired Holosofx in 2002. The software department of Holosofx was based in Cairo, Egypt.

• IBM Internet Security Systems is a security software provider which was founded in 1994 as Internet Security Systems, and is often known simply as ISS or ISSX (after its former NASDAQ ticker symbol). The company was acquired by IBM in 2006.

• Lotus Software (called Lotus Development Corporation before its acquisition by IBM) is a software company with headquarters in Westford, Massachusetts. Lotus also released a groupware and email system, Lotus Notes. IBM purchased the company in 1995 for $3.5 billion, primarily to acquire Lotus Notes and to eMRO Software, Inc. - formerly known as PSDI, was a software firm based in Bedford, Massachusetts, which published Maximo, the top-selling Enterprise Asset Management system in the market. On August 3, 2006 the company was acquired by IBM for cash consideration of $739 million. On April 1st 2007, MRO Software ceased to exist as the Transfer of Trade to IBM took place.

• Rational Machines was founded by Paul Levy and Mike Devlin in 1981 to provide tools to expand the use of modern software engineering practices, particularly explicit modular architecture and iterative development. Rational was sold for US$2.1 billion to IBM on February 20, 2003.

• Tivoli Software is the systems management brand of the IBM Software Group. IBM purchased Austin-based Tivoli Systems, Inc. in 1996[1] and allowed it to operate as a wholly owned subsidiary for a few years before forming the Software Group. In addition to Tivoli this IBM division includes WebSphere, Information Management, Lotus Software and Rational Software. In August 2006, IBM acquired MRO Software, intending to add them to the Tivoli division. In March 2008 IBM added Ecentuate to Tivoli. The Storage portfolio contains Tivoli Storage Manager, which is one of the most widely used applications for backup, disaster recovery and information lifecycle management. It is notable for its use of a relational database that allows for progressive back up forever, reclamation and collocation functionalities. Tivoli products are handled by IBM offices around the world. Major offices for Tivoli sales, development and support are located in Austin, TX; Raleigh, North Carolina; San Jose, CA; Tucson, AZ; Atlanta, GA; Markham, ON; Greenville, SC; Staines, Great Britain; Kraków, Poland; Rome, Italy; and Pune, India.

• IIG, IBM International Group

In Italy IBM count other subsidiaries as Global Value-Intesa, Proxima S.p.a which became the Business Unit Oracle Application of IBM and IBM Sap Services.


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MMaarrkkeett aanndd IInndduussttrryy Being IBM a so large and diversified company, it is very difficult to define its competitors in a complete and exhaustive way; moreover, the different competitors can be considered direct ones only in some businesses. So we decided to consider two different taxonomies, both obtained by authoritative sources. Hoovers, in fact, one of the leaders in financial and business information providing, sustains that IBM competitors are primarily in the Information Technology Services industry. According to the same source, IBM also mainly competes in the Computer Networking Equipment, Computer Peripherals, and Mass Storage Systems sectors. There are a number of smaller sectors but the classification made in this way finds in EDS (Electronic Data Systems Corporation), Hewlett-Packard Company, and Microsoft Corporation the main companies competing with IBM. On the other side Yahoo Finance puts IBM in the macro-sector called “Technology”, in the industry called “Diversified Computer Systems”; this second way of considering IBM competitors is very different from the one briefly described before, essentially because in this case the biggest contenders are essentially identified, beyond the already considered Hewlett-Packard Company, in Sun Microsystems Inc. and Scientific Games Corporation. Giants such as Microsoft Corporation and EDS (even if present on this market) wouldn’t be considered anymore between the direct competitors, because this wide industry is still too reductive for these companies. However, since the number of businesses in which IBM and Microsoft compete worldwide is really relevant, the degree of interdependency in the strategies of the two corporations is very high. In addition, we have to consider that the main trend of the past years in informatics field was to pass from hardware production to a complete offering of solutions. That was because hardware can be considered a commodity, while services and packages of products and services can be more differentiable and so far more profitable. From these considerations, it seems reasonable to take in consideration, also when we will briefly benchmark IBM performances with those of its competitors, the main names that emerge from both the classifications. However among the “diversified computer systems” industry, IBM is the leader in market capitalization with 170,39 $billions against the 49,13 $billions and the 13,04 $billions of HP and Sun Microsytems. Considering also Microsoft and EDS and a larger view on “Information technology services” industry, the leader in capitalization is Microsoft with 273,72 $billions and EDS is the third actor with 9,48 $billions. We perfectly know that market capitalization is only one of a number of indicators to describe the dimensions and the characteristics of a market but a deeper analysis will be conducted at the end of this report. It is of these days the news about the takeover of EDS by HP, that shows how the market of IT services is the real key to read the situation and the competition between the giants before named, thanks to the high profitability and the future scenarios of strong further developing. The total sector amounted in 2007 for 748 $billion, an amount that is doomed to grow at a 6-8% a year till 2011. Company 2007

Revenue 2007

Market Share (%) 2006

Revenue 2006

Market Share (%) Growth

(%) IBM 54,148 7.2 48,247 7.1 12.2 EDS 22,130 3.0 21,396 3.2 3.4 Accenture 20,616 2.8 17,228 2.5 19.7 Fujitsu 18,620 2.5 17,918 2.6 3.9 HP 17,252 2.3 15,963 2.4 8.1 CSC 16,306 2.2 15,136 2.2 7.7 The acquisition of EDS by HP builds the second player of this flourish market and the situation of market share will see some modifications even if IBM leadership seems not to be in discussion in the short-medium period. Moreover, this sees the entrance of Hp in the outsourcing of


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technological services, a market that will further grow at a double digit in the next years and that will become another battle field between the two giants. One of the main differences is that IBM essentially targets the business market while the giant HP-EDS is really diversified and in the consumer market has a cash-cow in the printing consumables that accounts for huge cash amounts that are reinvested in other businesses. On the hardware front, while IBM passed to Lenovo its hardware production, except for servers, HP is the largest world manufacturer, since the turbulent acquisition of Compaq. We will see in the following paragraphs how IBM is preparing itself for the tough competition of next years. In some points in the analysis we will see how the fact of being a public company is really important to sustain the financial position of IBM. It is known as one of the largest companies which pay every year for higher dividends. The actual stock price is around the 123,50$ and this is the situation of some available ratings given by the main analysts in the last year (which forecast a considerable growth in stock price):

UPGRADES & DOWNGRADES HISTORY

Date Research Firm Action From To

22-Apr-08 Lehman Brothers Initiated Overweight

17-Apr-08 Canaccord Adams Upgrade Hold Buy

7-Jan-08 UBS Downgrade Buy Neutral

16-Oct-07 AmTech Research Initiated Buy

4-Oct-07 Wachovia Initiated Mkt Perform

6-Aug-07 Davenport Initiated Strong Buy

2-Aug-07 Banc of America Sec Initiated Neutral

23-Apr-07 Lehman Brothers Upgrade Equal-weight Overweight

18-Apr-07 Goldman Sachs Downgrade Buy Neutral

18-Apr-07 Credit Suisse Downgrade Outperform Neutral These are the forecast of the analysts regarding the proceeding of stock price:

PRICE TARGET SUMMARY

Mean Target: 137.86

Median Target: 137.50

High Target: 157.00

Low Target: 125.00

No. of Brokers: 14


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AAccccoouunnttiinngg pprriinncciipplleess Traditionally for an US company IBM has also accepted the “Generally Accepted Accounting Principles” (GAAP) framework. A particular thing in the GAAP is the freedom it provides to the company to be described from a preferred point of view. In the case of IBM it can be observed in the managerial decision in 2007 to change the presentation of revenue and cost in the Consolidated Statement of Earnings to reflect the categories of Services, Sales and Financing. Previously, the presentation included Global Services, Hardware, Software, Global Financing and an Other category. In the past, these categories were aligned with the company’s reportable segment presentation of external revenue and cost. However, as the company moves toward delivering solutions which bring integrated software and services capabilities to its clients, the alignment between segments and categories will diverge. Therefore, there are situations where the Global Services segments could include software revenue, and conversely, the Software segment may have services revenue. GAAP is really based on the simplest principles of accounting and on these it mostly aligns with the framework proposed by IFRS. The same can be said about the principles of consolidation which are totally referent except for some aspects of the accounts of variable interest entities. GAAP and IFRS basically differ in some major points. Generally speaking the first one is more “rule-specific” with more specific application guidance. The second ones are more “principles based” and with limited application guidance. If we look at the differences point by point and refer it to the regarded case the most significant differences are:

• GAAP does not require and yearly financial report. Obviously because of the necessities of the stock market IBM prefer to do one as stated by the ISFR

• GAAP does not require statement of changes in equity and this is replaced by a grand total of “Comprehensive income”. In the case of IBM a stamen of changes in equity could have been very useful regarding the structural changes and the M&A it underwent the past few years.

• GAAP requires that the interests received and paid must be classified as an operating activity. In the case of IBM this is interesting regarding the adoption of services and finance as core businesses.

• Classification of deferred tax is split to current and non-current. • GAAP provides as basis for evaluation of property, plant, equipment – the historical cost

with depreciation and impairment losses. Revaluated amount is not recommended. • In GAAP the revenue recognition is according to a more industry specific recognition

guidance. Still IFRS is consistent with it. • In GAAP it is the management of the company that is expected to make financial

estimates and assumptions that affect the amount of assets, liabilities, etc. As most of the companies prefer to deliver their accounting policies in IFRS, GAAP and IFRS has come up with an memorandum of alignments which is supposedly going to be completed in 2008 in order to align the USA preferred GAAP to the ISFR. The changes mentioned in the memorandum do not affect deeply any of the reporting principles that are applied by IBM or its subsidiaries.


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PPrrooffiittaabbiilliittyy aannaallyyssiiss:: ffiirrsstt lleevveell ROE defines the overall result of the ordinary and extraordinary activities: in fact it indicates the rate of return on equity.

RROOEE The IBM’s ROE increased from 2006 (33,298%) to 2007 (36,593%) thanks mainly to an increase in profits. The increase in profit before income taxes was primarily due to:

• Revenue growth thanks to : o the strong performance from Global Technology Services and Global Business

Services with growth in all business lines; o the continued strong demand in the Software business, driven by Key Branded

Middleware1 products, with positive contributions from strategic acquisitions; o the continued growth in emerging countries (Brazil2, Russia, India and China: up 26

percent) and solid performance in all geographies, led by Asia Pacific.

• Gross profit margin improvements in the Global services and Systems and Technology segments:

o the consolidated gross profit margin increase 0,4 points from 2006 due to an improvement in the Systems and Technology margin (2,0 points) contributed 0,5 points to the overall margin improvement

o the software margin that was flat at 85,2 percent, but contributed 0,2 points to the overall margin improvement due to the mix of revenue by segment

o The Global Technology Services and Global Business Services margins increased 0,1 points and 0,4 points respectively. Although gross profit margins improved for Global Services, the increased Global Services revenue content contributed to a 0,2 point decline in the consolidated gross margin due to the mix impact. The Global Financing margin declined 3,5 points versus 2006 to 46,7 percent, causing a 0,1 point decline in the overall company margin.

Stockholders’ equity 3of $28.470 million was essentially flat versus 2006. Increased Treasury stock ($17.649 million) from share repurchases, which included the ASR 4 , was largely offset by

1 Software Acquisitions – Fortifying IBM’s Middleware Platform - Since 2001, IBM has consistently pursued a strategy to grow and diversify its software portfolio organizally, through innovation, and with targeted acquisitions In 2006, IBM invested almost $5 billion on 13 acquisitions, including the following larger acquisitions: FileNet ($1.6 billion) Internet Security Systems ($1.4 billion) Micromuse ($0.9 billion) MRO Software ($0.7 billion) In the fourth quarter of 2006, revenue growth from 2006 acquisitions in total was up about 50% year-over-year, with the majority of acquisitions exceeding their business cases. 2 In October of 2003, a report from a prominent investment banking firm linked four developing powerhouse economies together with a fateful acronym — BRIC, for Brazil, Russia, India and China. The quartet of nations has huge economic potential in common, but one of them has garnered considerably less attention than the others: Brazil. Information technology spending in Brazil is growing at 10 % annually, and exports of hi-tech goods were expected(2004) to total 2 billion of dollars in 2007. 3 The authorized capital stock of IBM consists of 4,687,500,000 shares of common stock, $.20 par value, of which 1,385,234,138 shares were outstanding at December 31, 2007 and 150,000,000 shares of preferred stock, $.01 par value, none of which were outstanding at December 31, 2007. 4 May 29, 2007 IBM announced today that it has repurchased $12.5 billion of its outstanding common stock through accelerated share repurchase agreements (ASR). Under the agreements, the company repurchased 118.8 million shares, or 8 percent of the outstanding shares of common stock as of May 29, from three banks for an initial price of $105.18 per share. These repurchased shares will be classified as treasury shares.


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increased Retained earnings ($8.208 million) driven by Net income, increased Common stock ($3.917 million) related to stock options and a decline in Accumulated gains and (losses) not affecting retained earnings ($5.487 million) primarily due to the effects of pension re-measurements. ROE trend was a strong positive one as we can see from the data collected from 2002: anyway there was a significant step from 2002 to 2003, then a period of no substantial differences from 2003 to 2005 and then another “jump” from 2005 to 2006. ROE was in fact around the 15% in 2002 while it overcomes the 36% in 2007.

PPrrooffiittaabbiilliittyy aannaallyyssiiss:: sseeccoonndd lleevveell Analyzing the formula to calculate the ROE:

ROE = [ROA + TL\E * (ROA - f)] *s

It is possible to determinate the impact each index has on it.

RROOAA The IBM’s ROA decreases from 2006 (12,427%) to 2007 (12,016%). During the 2007 both the Net Operating Income and the Assets increased. Total assets increased $17.197 million ($12.957 million adjusted for currency) primarily due to increases in Cash and cash equivalents ($6.969 million), Pre-paid pension assets ($6.788 million), total financing receivables ($2.729 million) and Goodwill ($1.431 million). These increases were partially offset by decreases in long-term deferred tax assets ($2.367 million) and short-term marketable securities ($1.479 million). The result is not so bad considering that assets increased of a large percentage in a year thanks to acquisitions and the reasons explained before and some months (or a year at least) are requested to completely exploit them. Thus there was a loss of efficiency in the operating activities.

FFiinnaanncciiaall LLeevveerraaggee ((TTLL//EE)) It is the Financial Leverage; it increases from 2006 (2,6215) to 2007 (3,2301). The reason is an increase in the Total Liabilities while the stockholder’s equity remains substantially flat from 2006 to 2007. Total Liabilities increased $17.234 million ($13.642 million adjusted for currency) driven primarily by increases in total debt ($12.592 million), tax liabilities ($1.492 million) and total deferred income ($1.773 million). The loan of 10$ billion was necessary to cover the stock operations related to ASR projects and was the main responsible of this increase in liabilities, not corresponded by an increase in equity.

The banks are expected to purchase an equivalent number of shares in the open market during the next nine months. The initial price of the ASR is subject to an adjustment based on the volume weighted average price of the shares during this period. IBM does not plan to make any additional stock repurchases during this period.


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AAvveerraaggee NNeett CCoosstt ooff ffiinnaanncciinngg aaccttiivviittiieess ((ff)) The average cost of financing activities increased from 2006 (-0,653%) to 2007 (-0,016%). The Total Liabilities increased due to the Total Assets increase. At the numerator there is an increase in the Interest Expenses. The Interest Expenses increased $333 million primarily due to higher debt associated with the financing of the ASR. This means that the financing activities were less effective due to the increase of interest rates related to the higher level of liabilities.

RReettuurrnn ooff ffiissccaall aanndd ddiissccoonnttiinnuueedd ooppeerraattiioonnss ((ss)) The return of fiscal and discontinued operations was essentially flat in 2006 (0,7128 ) and 2007 (0,7190 ) having a 0,626 gap; this is due to extraordinary operations that have no relevance during this year. Calculating this index there are no minority interests, that’s common for the listed companies, because there are lots of small stockholders and it is not possible to keep track of the movements of their stock. Eventually, after the second level analysis, it’s possible to conclude that both the ROA and the Average Net Cost of financing activities contribute to decrease the ROE while the Return of fiscal and discontinued operations tried to keep the ROE flat. The only strong contribution to increase the ROE it is due to the increment of the financial leverage. This variation in the TL\E on one hand contributes to increase the ROE but on the other hand increases the rigidity of the company. IBM top management is quite sure to be able to increase the ROA in the next future, thanks to a physiological renewed efficiency in leveraging on assets and this is why we think they take a so potentially dangerous direction in increasing the debts.


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PPrrooffiittaabbiilliittyy aannaallyyssiiss:: tthhiirrdd lleevveell In this part we will analyze the determinants of ROA (ROA = ROS x Assets Turnover), Average Net Cost of financing activities (f = r – (p x FA/TL)), and of Return of fiscal and discontinued operations (s = t x d).

RROOSS ((RReettuurrnn oonn ssaalleess)) IBM’s ROS increased from 2006 (14,032%) to 2007 (14,649%). During the 2007 both the Net Operating Income and the Sales increased. The increase of ROS is due to the different rate of increase of the Net Operating Income and the Sales; the Net Operating Income increased of 12,799% while the Sales increased of 8,053%. This result means that there is a higher Income with sales being equal and this is better understandable analyzing the fourth level indicator (added value/sales) which indicates that there's an increase in the added value of the products. Considering that a larger part of the revenues come in 2007 from services, it is clear that this business is more profitable and allows for higher margins.

AAsssseettss TTuurrnnoovveerr The Assets Turnover decreased from 2006 (0,8856) to 2007 (0,8203). The reason is a big increase in the Assets (16,658%) with a lower increase in the Sales (8,053%). The large number of acquisitions made in the two years increased significantly the assets value, while probably the income has not yet increased as expected because it needs some time to completely integrate the new businesses and to fully join the synergies between IBM and the acquired companies. In the end we can say that the increase in used capital caused a decrease in assets turnover.

AAvveerraaggee ccoosstt ooff tthhiirrdd ppaarrttyy ccaappiittaall ((rr)) The average cost of third party capital increased from 2006 (0,372%) to 2007 (0,664%). The reason of this growth is a substantial increase of the financial interests: 119,8% from 2006 (278 M$) to 2007 (611 M$). This is the main negative consequence of the high value of liabilities and thus of financial leverage, that is passed from 2,6 to 3,2. In fact, the cost of money increases with the growth of the debts, because the loaners ask for higher interest rates to cover the higher risks.

RReettuurrnn oonn ffiinnaanncciiaall aasssseettss ((pp)) The Return on financial assets decreased from 2006 (4,234%) to 2007 (2,354%). The reason of this result is due to a big increase of the financial assets (+47,01%) from 2006 (18090 M$) to 2007 (26594 M$) with a decrease of the financial incomes (-18,28%) from 2006 (766 M$) to 2007 (626 M$). In the 2005-2006 period financial incomes had a severe decline: from 2006 to 2007 this process continued due to losses on derivatives instruments, only partially mitigated by the gains from printing business divestitures.

FFAA//TTLL The financial assets and liabilities ratio increased from 2006 (24,208%) to 2007 (28,919%). This increase is due to a big increase in the financial assets (+47,01%) from 2006 (18090 M$) to 2007 (26594 M$) with a lower increase in the total assets (+16,66%) from 2006 (103234 M$) to 2007 (120431 M$). In particular the increasing of long-term debt had a big weight on the value of financial assets in the framework provided by the ASR agreements: they were stipulated between IBM and some banks and forces IBM to buy part of its own stock for a period. IBM in this way hoped to realize an income by the selling of the same shares at a higher price to the same banks 9 months after and by the increase of dividends related to the same shares.


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TTaaxx iinncciiddeennccee ((tt)) The Tax incidence increased from 2006 (0,9634) to 2007 (0,9988). The reason of this very small increase is due to a bit higher increase of the net operating income (+12,8%) from 2006 (12829 M$) to 2007 (14471 M$) compared to the increase of the profit before tax (+8,801%) from 2006 (13317 M$) to 2007 (14489 M$).

IInncciiddeennccee ooff ddiissccoonnttiinnuueedd ooppeerraattiioonnss ((dd)) The incidence of discontinued operations decreased from 2006 (0,7399) to 2007 (0,7199). The cause of this result is the higher increase of the net operating income (+12,8%) from 2006 (12.829 M$) to 2007 (14.471 M$) compared to the growth of the profit (+9,756%) from 2006 (9.492 M$) to 2007 (10.418 M$).

PPrrooffiittaabbiilliittyy aannaallyyssiiss:: ffoouurrtthh lleevveell Inventories turnover, average collection period for receivable and operative fixed asset turnover are all determinants of the assets turnover

IInnvveennttoorriieess TTuurrnnoovveerr This indicator increases from 2006 (32,535) to 2007 (37,082) but this result is not very significant because it considers the amount of the total sales. To obtain a significant value of this indicator we have to consider only the amount of sales coming from the hardware/software units of the company without considering the sales coming from the financing and services units. With this method, we can see an increase of the Inventories turnover from 2006 (14,49) to 2007 (15,84) and this result is much more realistic than the other one.

AAvveerraaggee ccoolllleeccttiioonn ppeerriioodd ffoorr rreecceeiivvaabblleess This index decreased from 2006 (107,19) to 2007 (106,37). This result doesn't highlight a big difference between 2006 and 2007 and the ability of the company in collecting cash didn’t change: probably the average period of payment for hardware customers is shorter (that declared is between 30 and 60 days) but the large amount of financial receivables determined by financing and services increased this indicator.

OOppeerraattiivvee ffiixxeedd aasssseett ttuurrnnoovveerr The operative fixed asset turnover increased from 2006 (6,33) to 2007 (6,55) due to an higher increase of the sales (+8,053%) from 2006 (91424 M$) to 2007 (98786 M$) compared to the increase of the net value fixed assets (+4,439%) from 2006 (14440 M$) to 2007 (15081 M$). Probably the value of fixed assets was lowered by the divestitures in the hardware and printing equipment business.


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LLiiqquuiiddiittyy AAnnaallyyssiiss SShhoorrtt tteerrmm The short term liquidity analysis represents the ability of the company to meet its current debt obligations with short-term available liquidity. Indicators:

• Current ratio: The current ratio of 1,2 against 1,114 (an increase of 0,086) indicates an increased short-term financial health of the organization. Having in mind that the reasonable range for the ratio is 1,1-1,5 (can vary depending on the industry), we can say that in terms of liquidity the position of IBM is just a bit short. This however can be explained by the overall concept of the company focused on expansion by acquisitions. This ratio can also be indicating that the company is utilizing the current assets very well. If we consider the strong cash flow balance being supported by a long-term debt, almost half of which is with maturity after 2012, we can conclude that the position indicated by the index is reasonable.

• Working capital: For the period of one year IBM almost doubles the working capital from 4.569,00 $ to 8.867,00 $ (in millions). This is a strong reflection of the change in IBM’s business model. The restructuring of the business model, moving to new business areas and numerous acquisitions result in lower collectivity and increase in accounts receivable-trade and short-term financing receivables with at about $2 billion. This can be viewed more as a result of the greater scale of operations and IBM’s B2C policies. Probably as to manage this deficiency and as support for the necessary high cash-flow balance, a $2 billion increase in the short-term debt as commercial paper has been negotiated.

• Acid test (quick ratio): The acid test ratio comes to show some key points. First of all, the company is in good short-term liquidity position. Second, as the TA is 1,14, this indicates a very low liquidity dependence from inventories. This is consistent with the overall business strategy of IBM and the fact that there’s a strong difference between the CA ratios for 2006 vs. the one for 2007 – almost 0,1 again indicates the already stated financial support actions taken by the management, compared to the previous year.

Another thing that should be considered about IBM is that being internationally present – ergo taking the risk of working in different currencies and also being a global borrower and lender - the company has accepted the use of some derivatives and hedging techniques to mitigate these risks. This at times can put it in a liquidity risks.

LLoonngg tteerrmm The long term liquidity rations measure the extent to which the capital employed in the business has been financed either by shareholders or by borrowing and long-term financing.

• NCF/LT Liabilities: The ratio indicates certain financial reorganizations in IBM. These are the new long-term borrowings of at about 9.5 $billion and the effect from adopting FIN 48 which accumulated tax reserves of at about 3 $billion. This brought a decrease of 0,096 in the ratio compared from last year. In relative terms we shouldn’t read this as an indicator of rigidity and dependence because first as mentioned before the tax is very well negotiated and second the part of the tax reserves that will eventually be recognized is certainly a source of flexibility.

• NCF/Debt: The ratio chosen reflects a quite strong long term position regarding the debt. Obviously the company is taking advantage of its traditionally high cash flow balance for the past few years in order to raise the level of the debt. Normally this would increase the financial rigidity of the company. In the case of IBM the debt is negotiated on a relatively


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good terms as the maturity of major parts of it are postponed in the far future (3.545 million $ for 2012-2013, 3.026 million $ for 2014-1018) with very good rates for the interests (5,34% and 5,69% respectively).

FFiinnaanncciiaall SSttrruuccttuurree AAnnaallyyssiiss The financial structure of IBM appears to be quite rigid in terms of financial dependence independence ratios. For the last 2 years the values are at about 0,76 vs. 0,24 which reflects the fact that the company is working mostly with borrowed capital. In this case it is possible due to the fact that the core businesses it operates are with high margins which results in a relatively high ROA and ROE. This results in high interest in IBMs’ shares and respectively in strong support from the stock market. The fact that a quite big part of the liabilities are non current gives IBM a relatively good financial and investment elasticity (0,37; 0,44). These are kept stable during the last years by the negotiation of a long term debt of 10 billion thus giving a strong support to the cash flow balance (a current asset). This is vital regarding the continuing policy of expansion. Nonetheless it should be noted that the company has a 28.789,00 $billion in receivables which can be a reference for a strong potential for improvement in the financial and investment elasticity.


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BBeenncchhmmaarrkkiinngg As we said in the brief market analysis, we chose 4 companies to do the benchmark. Between them, Hp could be considered the most important and the most similar competitor to IBM; if we would have done this analysis next year (or, better, in 2 years to appreciate all the results) the acquisition of EDS by Hp would have even minimized the difference between the businesses and the structure of Hp and IBM. In the comparison we put also Microsoft because for dimensions, ability to innovate and strong position in some markets it is really relevant to evaluate IBM performances. The reasons for considering EDS and Sun are totally different: EDS is focused on services and in this field is the strongest competitor of IBM and in particular of its strong and powerful Global Services division. Considering the acquisition by Hp and all the future expected synergies between the two companies, EDS will probably further reinforce its role as IBM main global competitors regarding services provision. Finally Sun Microsystems is relevant to the goals of benchmarking because of its leadership in network computing infrastructure products which granted it huge growth, with an important and increasing contribution from services provision and technological implementation of its products.

RROOEE Microsoft leads the challenge with an incredible 45% in return on equity that is the result of the monopoly position it has in many segments of operative systems and software design. However IBM results are outstanding and the appreciable difference with Hp is probably to be related to the larger impact services, and thus their higher profitability, have in the value creation for IBM, while Hp core business is still hardware. From this consideration is even more valuable the acquisition of EDS, that is expected to fully integrate Hp core competences with the service orientation. From a ROE perspective, exactly the economic performances of EDS and Sun show that they were not so relatively profitable and we will try to find the reasons for this kind of results in the continuation of the analysis. Anyway, we have to say that it would been of higher value the possibility to compare Global Services (division of IBM for services) results with that of EDS and Sun but the level of detail of the data at our disposal is not sufficient to allow such an analysis: we are nevertheless convinced (obviously supported by some assertive sources such as “Il sole 24 ore”) that the comparison would show the low profitability of EDS and Sun.

RROOAA The return on assets is the main responsible together with the Average Net Cost of financing activities for the results previous commented; Microsoft still leads the way with an outstanding 29,3% that is mainly due to the low value of assets compared to the huge market capitalization. This is because of the value of intangible assets that is not valorized but consists of the largest part of value given by the stock market and it is amplified by the software/operative systems vocation that is highly brain-intensive. Regarding the followers, in the IBM-Hp challenge the Big Blue wins again but with a much lower difference from the main competitor, underlining a very good Hp ability to leverage on assets more effectively and efficiently, also thanks to the by now consolidated acquisition of Compaq and the following possibility of large economies of scale. At the bottom of the standings, EDS is relatively much more able to leverage on assets than Sun which reported a very low value; however the company is emerging from a period of deep crisis and the analysts look positively at the actions taken by the management to solve the main problems linked to the low profitability of sales.

AAvveerraaggee NNeett CCoosstt ooff ffiinnaanncciinngg aaccttiivviittiieess ((ff)) As regarding financial activities, we can notice outstanding results by Microsoft and even Sun, that in this way almost cover the ROA problems to reach ROE results very closed to those of EDS, that on the contrary suffered from a higher contribution by financial interests, due to an increase in net foreign currency transaction losses of $24 million, interest rate swap revaluation losses and minority shareholding results. Both IBM and Hp reported moderate results with financing activities,


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even if Hp situation is declining in the last three years owing to higher interest expenses resulting from higher average debt balances that were partially offset in 2006 by a well-ended patent infringement trial with Intergraph.

FFiinnaanncciiaall LLeevveerraaggee The average value for the debt on equity ratio is very close to 1 for all the companies considered, except for IBM that as previously noted is quite rigid from this point of view. Till the stock market will continue to give its total trust to IBM the problem will remain a marginal one but with an increasing in competition, such as for example the acquisition of EDS by HP, it could represent a limit for IBM, even if a terrible advantage in case of good results on return on assets. In fact if we look at ROE the differences between IBM and Hp are in the order of 50% more in favor of IBM while IBM ROA is only 20% more than Hp’ s one. We can also consider some elements of the financial structure analysis to clarify the differences between the companies: IBM is the only one with a very low financial independence while for all the others financial dependence and independence are balanced; however this partially negative result is balanced by the fact that IBM financial elasticity is quite high thanks to a substantial balance between current and long-term liabilities. Almost the same is for Microsoft while Hp reported an outstanding value for financial elasticity thanks to a very virtuous low use of long-term liabilities.

RReettuurrnn ooff ffiissccaall aanndd ddiissccoonnttiinnuueedd ooppeerraattiioonnss ((ss)) None of the companies relied on strong extraordinary results, that is a sign of solidity but, most important, of sustainability in time of the actual results.

LLiiqquuiiddiittyy aannaallyyssiiss None of the companies considered shows problem of liquidity in the short term; also the acid test that considers inventories as difficult to translate in cash has positive values for all the competitors. If we want to be very rigid on the data, the company which can have the most important problems is Hp and exactly for the very high values of final inventories which were evaluated in 2007 for more than 8$ billion. In a long term perspective Microsoft is by long the company which is more able to finance itself with the cash derived from the operating activities, while all the others has some more modest results.


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AAnnnneexxeess IIBBMM DDaattaa


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IIBBMM CCaallccuullaattiioonnss

index calculation (in millions of dollars) 2007 2006

profit $ 10.418,00 $ 9.492,00

equity $ 28.470,00 $ 28.506,00

net operating income $ 14.471,00 $ 12.829,00

assets $ 120.431,00 $ 103.234,00

financial debt $ 49.145,00 $ 32.855,00

profit before tax $ 14.489,00 $ 13.317,00

financial interests $ 611,00 $ 278,00

financial incomes $ 626,00 $ 766,00

other financial incomes $ - $ -

minority interest $ - $ -

sales $ 98.786,00 $ 91.424,00

financial assets $ 26.594,00 $ 18.090,00

cost of sales $ 57.057,00 $ 53.129,00

receivables $ 28.789,00 $ 26.848,00

net value fixed assets $ 15.081,00 $ 14.440,00

ratio analysis - profitability

2007 2006

ROE 36,593% 33,298%

ROA 12,016% 12,427%

ROI 18,645% 20,907%

f (financial activity) -0,016% -0,653%

s (discontinued operations) 0,7190 0,7128

financial leverage 3,2301 2,6215

ROE (formula) 36,585% 33,298%

ROS 14,649% 14,032%

assets turnover 0,8203 0,8856

r 0,664% 0,372%

p 2,354% 4,234%

FA/TL 28,919% 24,208%

t 0,9988 0,9634

d 0,7199 0,7399

% sales expenses 0,5776 0,5811

inventory turnover 37,0818 32,5352

inventory turnover MODIFIED 15,8416 14,4897

average collection period for receivables 106,3712 107,1876

fixed asset turnover 6,5504 6,3313


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index calculation

(in millions of dollars) 2007 2006

equity $ 28.470,00 $ 28.506,00 assets $ 120.431,00 $ 103.234,00 current assets $ 53.177,00 $ 44.660,00

current liabilities $ 44.310,00 $ 40.091,00

inventories $ 2.664,00 $ 2.810,00

net cash flow from operating activities $ 16.094,00 $ 15.019,00

ratio analysis - liquidity 2007 2006

Current Ratio (RC) 1,200 1,114Working Capital (WC) $ 8.867,00 $ 4.569,00 Acid Test (TA) 1,140 1,044

NCF/LT Liabilities 0,338 0,434NCF/LT Debt 0,7 0,65

ratio analysis – financial structure 2007 2006

FI (Financial indipendence) 0,24 0,28FD (Financial dipendence) 0,76 0,72FE (Financial elasticity) 0,37 0,39

IE (Investment elasticity) 0,44 0,43


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MMiiccrroossoofftt DDaattaa

INCOME STATEMENTS

(In millions, except per share amounts) Year Ended June 30 2007 2006 2005 Revenue $51,122 $44,282 $39,788Operating expenses:

Cost of revenue 10,693 7,650 6,031 Research and development 7,121 6,584 6,097 Sales and marketing 11,455 9,818 8,563 General and administrative 3,329 3,758 4,536

Total operating expenses 32,598 27,810 25,227

Operating income 18,524 16,472 14,561Investment income and other 1,577 1,790 2,067

Income before income taxes 20,101 18,262 16,628Provision for income taxes 6,036 5,663 4,374

Net income $14,065 $12,599 $12,254

Earnings per share:

Basic $ 1.44 $ 1.21 $ 1.13

Diluted $ 1.42 $ 1.20 $ 1.12

Weighted average shares outstanding:

Basic 9,742 10,438 10,839Diluted 9,886 10,531 10,906

Cash dividends declared per common share $ 0.40 $ 0.35 $ 3.40


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BALANCE SHEETS

(In millions) June 30 2007 2006Assets

Current assets:

Cash and equivalents $ 6,111 $ 6,714Short-term investments (including securities pledged as collateral of

$2,356 and $3,065) 17,300 27,447

Total cash and short-term investments 23,411 34,161Accounts receivable, net of allowance for doubtful accounts of $117 and $142 11,338 9,316 Inventories 1,127 1,478 Deferred income taxes 1,899 1,940 Other 2,393 2,115

Total current assets 40,168 49,010Property and equipment, net 4,350 3,044 Equity and other investments 10,117 9,232 Goodwill 4,760 3,866 Intangible assets, net 878 539 Deferred income taxes 1,389 2,611 Other long-term assets 1,509 1,295

Total assets $63,171 $69,597

Liabilities and stockholders’ equity

Current liabilities:

Accounts payable $ 3,247 $ 2,909Accrued compensation 2,325 1,938 Income taxes 1,040 1,557 Short-term unearned revenue 10,779 9,138 Securities lending payable 2,741 3,117 Other 3,622 3,783

Total current liabilities 23,754 22,442Long-term unearned revenue 1,867 1,764 Other long-term liabilities 6,453 5,287 Commitments and contingencies

Stockholders’ equity:

Common stock and paid-in capital – shares authorized 24,000; outstanding 9,380 and 10,062 60,557 59,005

Retained deficit, including accumulated other comprehensive income of $1,654 and $1,229 (29,460) (18,901)

Total stockholders’ equity 31,097 40,104

Total liabilities and stockholders’ equity $63,171 $69,597


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CASH FLOWS STATEMENTS

(In millions) Year Ended June 30 2007 2006 2005 Operations

Net income $ 14,065 $ 12,599 $ 12,254Depreciation, amortization, and other noncash items 1,440 903 855 Stock-based compensation 1,550 1,715 2,448 Net recognized gains on investments (292) (270) (527) Stock option income tax benefits – – 668 Excess tax benefits from stock-based payment arrangements (77) (89) –Deferred income taxes 421 219 (179) Unearned revenue 21,032 16,453 13,831Recognition of unearned revenue (19,382) (14,729) (12,919)Accounts receivable (1,764) (2,071) (1,243)Other current assets 232 (1,405) (245) Other long-term assets (435) (49) 21 Other current liabilities (552) (145) 396 Other long-term liabilities 1,558 1,273 1,245

Net cash from operations 17,796 14,404 16,605

Financing

Common stock issued 6,782 2,101 3,109 Common stock repurchased (27,575) (19,207) (8,057)Common stock cash dividends (3,805) (3,545) (36,112)Excess tax benefits from stock-based payment arrangements 77 89 –Other (23) – (18)

Net cash used in financing (24,544) (20,562) (41,078)

Investing

Additions to property and equipment (2,264) (1,578) (812) Acquisition of companies, net of cash acquired (1,150) (649) (207) Purchases of investments (36,308) (51,117) (68,045)Maturities of investments 4,736 3,877 29,153Sales of investments 41,451 54,353 54,938Securities lending payable (376) 3,117 –

Net cash from investing 6,089 8,003 15,027

Net change in cash and equivalents (659) 1,845 (9,446)Effect of exchange rates on cash and equivalents 56 18 (7) Cash and equivalents, beginning of period 6,714 4,851 14,304

Cash and equivalents, end of period $ 6,111 $ 6,714 $ 4,851


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MMiiccrroossoofftt CCaallccuullaattiioonnss


profit $ 14.065,00 $ 12.599,00

equity $ 31.097,00 $ 40.104,00


assets $ 63.171,00 $ 69.597,00

financial debt $ 12.400,00 $ 11.008,00



financial incomes $ 1.969,00 $ 1.889,00

other financial incomes

minority interest

sales $ 51.122,00 $ 44.282,00


ratio analysis - profitability 2007 2006

ROE 45,229% 31,416%

ROA 29,324% 23,668%

ROI 42,587% 32,227%




ROE (formula) 45,229% 31,416%

ROS 36,235% 37,198%


r 1,222% 0,336%

p 8,411% 5,530%

FA/TL 72,991% 115,827%

t 0,9215 0,9020

d 0,7593 0,7649


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inventories $ 1.127,00 $ 1.478,00




NCF/LT Liabilities 2,139 2,043





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HHPP DDaattaa


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HHPP CCaallccuullaattiioonnss


profit $ 7.264,00 $ 6.198,00

equity $ 38.526,00 $ 38.144,00


assets $ 88.699,00 $ 81.981,00

financial debt $ 27.882,00 $ 21.826,00


financial interests



minority interest

Sales $ 104.286,00 $ 91.658,00


ratio analysis -profitability 2007 2006

ROE 18,855% 16,249%

ROA 9,830% 8,002%

ROI 13,129% 10,939%




ROE (formula) 18,855% 16,249%

ROS 8,361% 7,157%


R 0,000% 0,000%

P 2,120% 2,473%

FA/TL 43,049% 58,195%

T 0,9501 0,9123

D 0,8331 0,9448


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inventories $ 8.033,00 $ 7.750,00


ratio analysis - liquidity

2007 2006







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EEDDSS DDaattaa


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EEDDSS CCaallccuullaattiioonnss


profit $ 716,00 $ 470,00

equity $ 9.691,00 $ 7.896,00

net operating income $ 1.132,00 $ 816,00

assets $ 19.224,00 $ 17.954,00

financial debt $ 5.993,00 $ 5.781,00

profit before tax $ 1.089,00 $ 756,00




minority interest

sales $ 22.134,00 $ 21.268,00



ROE 7,388% 5,952%

ROA 5,888% 4,545%

ROI 7,218% 5,966%

f (financial activity) 0,451% 0,597%



ROE (formula) 7,388% 5,952%

ROS 5,114% 3,837%


r 2,360% 2,376%

p 4,294% 4,961%

FA/TL 44,456% 35,872%

t 1,0395 1,0794

d 0,6325 0,5760


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equity $ 9.691,00 $ 7.896,00 assets $ 19.224,00 $ 17.954,00

current assets $ 8.445,00 $ 8.257,00




Current Ratio (RC) 1,718 1,578Working Capital (WC) $ 3.529,00 $ 3.023,00






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SSuunn DDaattaa


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SSuunn CCaallccuullaattiioonnss


profit $473,00 -$864,00

equity $7.179,00 $6.344,00

net operating income $309,00 -$870,00

assets $15.838,00 $15.082,00

financial debt $3.437,00 $3.760,00

profit before tax $583,00 -$675,00

financial interests

financial incomes $274,00 $195,00


minority interest

sales $13.873,00 $13.068,00

financial assets $7.670,00 $6.489,00


ROE 6,589% -13,619%

ROA 1,951% -5,768%

ROI 2,911% -8,610%




ROE (formula) 6,589% -13,619%

ROS 2,227% -6,657%


r 0,000% 0,000%

p 4,223% 3,005%

FA/TL 74,939% 74,262%

t 0,5300 1,2889

d 1,5307 0,9931


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inventories $ 524,00 $ 540,00

net cash flow from operating activities $ 958,00 $ 567,00








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CCoommppaarriissoonnss ooff ddaattaa ffoorr bbeenncchhmmaarrkkiinngg 2007 IBM MSFT HP EDS Sun

ROE 36,593% 45,229% 18,855% 7,388% 6,589%ROA 12,016% 29,324% 9,830% 5,888% 1,951%ROI 18,645% 42,587% 13,129% 7,218% 2,911%f (financial activity) ‐0,016% ‐4,917% ‐0,913% 0,451% ‐3,164%s (discontinued operations) 0,7190 0,6997 0,7915 0,6575 0,8113financial leverage 3,2301 1,0314 1,3023 0,9837 1,2062ROE (formula) 36,585% 45,229% 18,855% 7,388% 6,589%ROS 14,649% 36,235% 8,361% 5,114% 2,227%assets turnover 0,8203 0,8093 1,1757 1,1514 0,8759r 0,664% 1,222% 0,000% 2,360% 0,000%p 2,354% 8,411% 2,120% 4,294% 4,223%FA/TL 28,919% 72,991% 43,049% 44,456% 74,939%t 0,9988 0,9215 0,9501 1,0395 0,5300d 0,7199 0,7593 0,8331 0,6325 1,5307 Current Ratio (RC) 1,200 1,691 1,207 1,718 1,711Working Capital (WC) $ 8.867,00 $ 16.414,00 $ 8.142,00 $ 3.529,00 $ 3.877,00 Acid Test (TA) 1,140 1,644 1,003 ‐ 1,615NCF/LT Liabilities 0,338 2,139 0,881 0,442 0,299 FI (Financial indipendence) 0,24 0,49 0,43 0,50 0,45FD (Financial dipendence) 0,76 0,51 0,57 0,50 0,55FE (Financial elasticity) 0,37 0,38 0,44 0,26 0,34

IE (Investment elasticity) 0,44 0,64 0,53 0,44 0,59

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