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Ibm Corporation

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IBM Corporation
In the seven years (since 1994), that Lou Gerstner reigned over IBM, the company’s earnings per share increased an average of 27% per year. This remarkable increase in earnings did not go unnoticed by the securities markets. Indeed, the company’s market value grew from less than $30 billion to over $200 billion during the period.
Use the following financial statement data to:
1. Decompose IBM’s ROE (by quarter) and discuss the factors (and trends) that contribute to
Big Blue’s profitability
2. Evaluate IBM’s Revenue growth, Receivables, and Gross margins and over the period. Be sure to control for seasonality (e.g., compute the same quarter to same quarter change in these items). 3. Evaluate IBM’s Earnings per …show more content…

-97
Earings per Share of Common
Stock - Basic
Average Number of Common
Shares Outstanding - Basic
Average Price per Share
* All Data are Adjusted to Reflect stock splits

Jun-97

Mar-97

$

0.69

$

0.73

$

0.59

$

0.99

$

0.62

$

1,956.0
52.13

$

1,973.8
42.78

$

2,006.8
36.45

$

2,053.6
36.61

$

2,087.4
31.65

2 for 1 stock split 5/9/97

Mar-99

Dec-98

Sep-98

Jun-98

Mar-98

Dec-97

$

0.80

$

1.27

$

0.80

$

0.77

$

0.54

$

1.08

$

1,823.8
88.28

$

1,839.5
82.91

$

1,856.9
62.20

$

1,879.2
57.97

$

1,946.6
51.12

$

1,929.6
52.05

EXHIBIT 3

IBM
Consolidated Statements of Income
For the Quarters Ended:
Total Revenues
Cost of Sales
Gross Margin
Selling, General and Administrative Expenses
Research and Development
Total Operating Expenses
Operating Income
Other Income (Expense), net
Interest Expense
Income Before Taxes
Income Tax Expense
Net Income

$

$

Mar-00
19,348 $
12,337
7,011
3,706
1,172
4,878
2,133
189
152
2,170
651
1,519 $

Dec-99
24,182 $
15,299
8,883
4,445
1,416
5,861
3,022
134
171
2,985
896
2,089 $

Sep-99
21,144 $
13,580
7,564
3,501
1,383
4,884
2,680
134
185
2,629
867
1,762 $

Jun-99
21,905 $
13,681
8,224
2,846
1,293
4,139
4,085
155
197
4,043
1,652
2,391 $

Mar-99
20,317 $
13,059
7,258
3,937
1,181
5,118
2,140
134
174
2,100

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