who-owns-ibm

Who Owns IBM?

IBM is primarily owned by institutional investors like Vanguard Group (8.86%), BlackRock (8%), and State Street (5.93%). Top individual investors comprise Arvind Krishna, CEO of IBM; senior vice president Michelle H. Browdy; James J. Kavanaugh, responsible for the company’s financial operations; and Alex Gorsky (board member) and Gary Cohn (former vice chairman).

Top institutional sharedholres

  • The Vanguard Group is the largest institutional shareholder, holding 80,144,196 shares, which represents 8.86% ownership.
  • BlackRock Inc. is the second-largest institutional shareholder with 72,337,762 shares, amounting to an 8.0% ownership stake.
  • State Street Corporation ranks third among institutional shareholders, owning 53,576,165 shares and holding a 5.93% ownership stake.

Top individual shareholders

  • The top shareholder is Arvind Krishna, with 205,578 common stocks and a value of $28,963,884 at the fiscal year end.
  • Michelle H. Browdy holds the second-highest number of common stocks (103,913), with a fiscal year-end value of $14,640,303.
  • James J. Kavanaugh ranks third in terms of common stocks (112,968), amounting to a value of $15,916,062 at the fiscal year end.
  • Alex Gorsky and Gary Cohn hold significantly fewer common stocks (4,445 and 32,552, respectively) compared to the top three shareholders.
  • Despite having fewer common stocks, the fiscal year-end values for Alex Gorsky and Gary Cohn are still substantial at $4,008,321 and $4,586,251, respectively.

Background

IBM is a multinational corporation that is also the largest industrial research organization in the world. Today, the company’s core focus is on software, hardware, and middleware products as well as consultancy and hosting services.

IBM is synonymous with innovation and has a long and successful history. Some of this history is explained below.

Founding and early years

IBM was founded in 1911 as the Computing-Tabulating-Recording Company (CTR). CTR was in fact a holding company of four separate manufacturers that were amalgamated via stock acquisition by Charles R Flint. 

The four companies included:

  1. International Time Recording Company – a producer of time-keeping systems.
  2. Computing Scale Company – a producer of scales and other mechanical equipment.
  3. Tabulating Machine Company – this firm produced punch card tabulating machines used to process data, and
  4. Bundy Manufacturing Company – a manufacturer of time clocks and various other time-keeping devices.

CTR was renamed International Business Machines Corporation in 1924 and was headed by Thomas Watson. By this time, IBM’s business had expanded both functionally and geographically after three new factories were constructed in Europe. 

Product expansion and evolution

Under Watson’s leadership, IBM became the primary supplier of punch card tabulation systems. But what made the company stand out was a skilled and disciplined marketing department that could adapt the system to the particular needs of the customer. 

IBM expanded into electric typewriters in 1933 and later produced electromechanical calculators for the war effort that were the precursors to computers. However, it was not until Thomas Watson Jr. took over the company in 1952 that IBM decided to focus its efforts on this new and exciting field.

That same year, it released the IBM 701, the first large computer built with vacuum tubes. With the ability to execute 17,000 instructions per second, the 701 was used for government and research purposes but was later used by businesses for payroll and inventory management

Computer market dominance

By the 1960s, IBM produced 70% of the world’s computers and as many as 80% of those used in the United States. IBM achieved this dominant position because it was a large company that could afford to invest in research and development. It also utilized its prior marketing expertise and made a commitment to service and repair its own equipment. 

The System/360 was introduced in 1964, a “family” of computers with interchangeable software and equipment that was a bold departure from existing one-size-fits-all mainframes. In 1969, IBM started selling its components individually instead of in packages. 

IBM and the PC market

Despite its success to date, IBM was unable to use its size and credentials to dominate the PC market. The company entered in 1981 with the IBM Personal Computer, but new semiconductor chip technology meant smaller companies could enter and exploit advances in computer networks, graphics, and workstations. 

Over the 1990s and 2000s, IBM lost market dominance and started to downsize its operations. The company sold its magnetic hard drive business to Hitachi in 2002 and its PC division to Lenovo in 2005. It also purchased software manufacturers Lotus Development Corp. in 1995 and Tivoli Systems in 1996.

In the process, IBM moved away from commodity product manufacturing to focus on computer services, software, supercomputers, and scientific research. The company’s services segment quickly became a cash cow with growth of 20% per year, but new CEO Louis V. Gerstner resisted calls to split IBM into separate, independent companies. 

In 1997, IBM’s reputation as a supercomputer developer was cemented when its Deep Blue computer beat chess champion Garry Kasparov in a match. The company’s supercomputer heritage, proven track record in research and innovation, and focus on integrated services continue to be hallmarks today. 

Key takeaways:

  • IBM is a multinational corporation that is also the largest industrial research organization in the world. Today, the company’s core focus is on software, hardware, and middle products as well as consultancy and hosting services.
  • By the 1960s, IBM produced 70% of the world’s computers and as many as 80% of those used in the United States. The company reached this position with a significant investment in R&D, marketing expertise, and a commitment to repair its own products.
  • Despite its prior success, IBM was unable to use its size and credentials to dominate the PC market. In response, the company sold off some businesses, acquired others, and transitioned from a commodity product manufacturer to one with a focus on computer services, software, supercomputers, and scientific research.

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IBM Business Model

IBM Revenue

ibm-revenue
In 2018, revenue was $80 billion. Revenue decreased to $77 billion in 2019. In 2020, revenue dropped further to $73.62 billion. The revenue saw a significant decline in 2021, reaching $57.35 billion. In 2022, revenue experienced a slight increase, amounting to $60.53 billion.

IBM Profits

ibm-profits
2019: Net income increased from $8.73 billion in 2018 to $9 billion, resulting in a 3.09% increase year over year. 2020: Net income decreased to $5.59 billion, reflecting a -37.89% change compared to 2019. 2021: Net income slightly increased to $5.74 billion, indicating a 2.68% increase year over year compared to 2020. 2022: Net income decreased significantly to $1.64 billion, showing a -71.43% change compared to 2021.

IBM Revenue Breakdown

ibm-revenue-breakdown
Software revenue increased from $23.42 billion in 2021 to $25 billion in 2022, resulting in a 6.73% growth year over year. Consulting revenue grew from $17.84 billion in 2021 to $19.1 billion in 2022, reflecting a 7.08% growth year over year. Infrastructure revenue rose from $14.2 billion in 2021 to $15.3 billion in 2022, indicating a 7.75% growth year over year. Financing revenue declined from $0.774 billion in 2021 to $0.645 billion in 2022, showing a -16.67% decrease year over year. Other revenue experienced a significant drop from $1.12 billion in 2021 to $0.453 billion in 2022, resulting in a -59.55% decrease year over year.

IBM Cost Structure

ibm-cost-structure
Software: Generated $25 billion in revenue. Contributed $19.94 billion in gross profit. Consulting: Produced $19.1 billion in revenue. Accounted for $4.86 billion in gross profit. Infrastructure: Brought in $15.3 billion in revenue. Generated $8 billion in gross profit.

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