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2002 Annual Stockholder Meeting
Louisville, Kentucky, USA - Not far from the banks of the Ohio River, IBM's officers and 397 of its shareholders gathered today in the Kentucky International Convention Center. They met to conduct business and to hear President and CEO Sam Palmisano report on our race to gain market share and increase revenue in a crowded field of IT companies. IBM held its annual meeting this year in Louisville, a city otherwise concerned with an upcoming contest of another sort: the historic Kentucky Derby. The meeting was opened at 10 a.m. by Lou Gerstner, who, as chairman of the company's board of directors,has chaired this meeting every year since he arrived at IBM in 1993. In his introductory remarks, Lou reported that the board, at its meeting earlier this morning, approved a dividend increase of 7 percent, from 14 cents to 15 cents per common share. This was the seventh dividend increase in seven years, and dividend payments have been raised by 140 percent since 1996. Following the formal notice of meeting and a report on a quorum, a vote was held on the following six proposals:
After the vote, Lou turned the lectern over to Sam Palmisano, who delivered the report on the company. In his remarks, Sam pointed out that while the economy - and IT companies in particular - suffered economically in 2001, IBM managed to gain market share in virtually every high-priority business segment, out-performing our industry as a whole and especially our major competitors. "No company," Sam said, "is going to stand on the sidelines, shielded from the impact of a protracted economic downturn." While IBM made it through 2001 relatively well, he said, the first quarter of this year demonstrated what happens when our customers, looking to cut costs and expenses, reduce or delay their orders of all but the most critical technologies and services. Some of the bright spots of this past quarter, as Sam had said on April 24 in a conversation with employees (broadcast here on w3 and on IBM-TV, and available as an on-demand replay), included our generating $1.7 billion in pre-tax income; more than $15 billion in services signing, the best first quarter in our history of services offerings; and continued gains in share, or holding share, in the most strategic areas of our services, software, and hardware portfolio. Looking beyond the effects of the current economic downturn, Sam described for the company's owners how its employees see the emerging IT landscape and are aligning themselves to address its opportunities, both in areas of technical infrastructure and in the kind of business insight our customers need to set their own strategies for competitive advantage. Breaking it down further, Sam described what many customers tell our sales force when they find themselves looking to networked technology to make their own businesses more competitive. He described the requirement of the technology that is emerging, which must host an explosion of digital traffic, transactions and data across the Internet and requires a completely different computing infrastructure, built on open, industry-accepted standards. To build and maintain this new open infrastructure of networked advantage will require unprecedented levels of security, reliability and integration. Integration, he said, will include both integration of the technologies themselves and the ability of those technologies to integrate with core business processes. Sam said this emerging IT topology is "IBM's franchise," and the opportunity that exists here is ours to lose. " Here's why:
Sam noted, however, that before making substantial investments to build out infrastructure, customers are finding they must first ask what the business value is for such an investment. What had once been purely a technology decision is increasingly based on industry and business insight, and our growth in the areas of business and technology consulting to become the world's largest such organization is in answer to that customer requirement. He also described our growth in other areas of IBM Global Services, reporting a 2001 revenue increase of six percent for services associated with strategic outsourcing, and a 35 percent increase in revenues from Web hosting. As he had in his broadcast to employees, he pointed to the $100 billion IBM Global Services backlog as further evidence of our leadership in that field. Turning to the area of technical innovation, Sam described Project eLiza our initiative to develop self-managing systems and computers that monitor their own performance,and fix and upgrade themselves without human intervention. He also explained the concept of "grid computing," where we turn the Internet into a computer itself, spreading resources out and linking them together with high-bandwidth connections. Sam said there were three reasons why IBM's business model has never seemed stronger nor its strategies more correct. First, our customers validate our strategies every day when they buy our world-class products and hire IBM Global Services to integrate them and "make all the pieces work together." Second, e-business which we proclaimed first and made tough decisions and realigned our portfolio around has proved to be the area of strategic and technical importance, delivering the highest value to our customers. Third, he said, and the reason he remains confident about our future, is our people. Reminding his listeners that he has "grown up" in IBM, he said, "I can honestly admit that we have never had such an impressive workforce - 320,000 relentless people focused on making it happen." In addition to working hard throughout 2001, IBM employees also exhibited great compassion, Sam said, in the wake of the attacks in the U.S. on September 11 "Two IBMers lost their lives," he said, "and dozens of others lost family members in the attack." And not far from many of our minds were the more than 1200 customers within a three-block radius of the World Trade Center, he said, who began calling us for help soon after the attacks. Within ten days, IBM had shipped out 12,000 laptops, 5000 workstations and hundreds of servers. In addition to the hardware provided, however, Sam said, "What makes IBM great is the people who work for IBM. And what I will always remember is the way our colleagues responded spontaneously, instinctively, immediately. They wanted to help, however they could." And they did, whether they gave money, blood or offered to drive thousands of miles to reach Manhattan or Washington. Sam closed with a video that had been prepared "It captures the essence of what makes IBM great." which showed IBMers who responded with help in the aftermath of the attacks, reflecting on IBM's role during that difficult time. After applause from shareholders, Sam closed his remarks expressing gratitude for the opportunity to lead IBM at one of the most exciting moments of the IT industry's history. "I could not be more excited about working for the best company in the world with the smartest, most dedicated people in our industry, to take IBM to even greater heights." After the report of results of shareholder ballotting, the business meeting was adjourned, at which time Lou and Sam took questions from the audience before closing the meeting at 11:36 a.m. IBM & The Bluegrass State In his remarks to shareholders, Sam Palmisano made mention of several ties IBM has to Kentucky, the state where this year's annual meeting was hosted:
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