| Segments |
NOTE E. SEGMENTS In the fourth quarter of 2021, immediately prior to the separation of Kyndryl, the company made a number of changes to its organizational structure and management system to align the company’s operating model to its platform-centric approach to hybrid cloud and AI. With these changes, the company revised its reportable segments, but did not impact its Consolidated Financial Statements. The following table displays the segment updates: | | | | | | | | | | Previous Segments | | Changes* | | New Segments | Cloud & Cognitive Software | | ● Revenue categories | | Software | Global Business Services | | ● Revenue categories | | Consulting | Global Technology Services | | - Separated managed infrastructure services** | | N/A | | | - Technology Support Services | | | | | - IBM Cloud IaaS | | | | | - Managed infrastructure services retained JVÈ | | | Systems | | ● Revenue categories | | Infrastructure | | | + Technology Support Services | | | | | + IBM Cloud IaaS | | | | | + Global asset recovery service | | | Global Financing | | - Global asset recovery service | | Financing | Other | | + Managed infrastructure services retained JVÈ | | Other | | | | | |
* | Does not include minor mission moves. |
** | IBM completed the separation of its managed infrastructure services business to Kyndryl on November 3, 2021. |
È | Represents a joint venture relationship that was historically managed by the managed infrastructure services business that was not transferred to Kyndryl as part of the separation. |
N/A–Not applicable The segments represent components of the company for which separate financial information is available that is utilized on a regular basis by the chief operating decision maker (the chief executive officer) in determining how to allocate resources and evaluate performance. The segments are determined based on several factors, including client base, homogeneity of products, technology, delivery channels and similar economic characteristics. With this organizational and management system change, the segments no longer include internal revenue. Certain transactions between the segments are recorded to other income and expense and are reflected in segment pre-tax income. After the Kyndryl separation, these transactions predominately represent loans between Financing and Infrastructure segments to facilitate the acquisition of equipment and software used in IBM IaaS services arrangements. The prior period revenue and pre-tax income presented in the tables below are reported on a comparable basis. The company utilizes globally integrated support organizations to realize economies of scale and efficient use of resources. As a result, a considerable amount of expense is shared by all of the segments. This shared expense includes sales coverage, certain marketing functions and support functions such as Accounting, Treasury, Procurement, Legal, Human Resources and Billing and Collections. Where practical, shared expenses are allocated based on measurable drivers of expense, e.g., headcount. When a clear and measurable driver cannot be identified, shared expenses are allocated on a financial basis that is consistent with the company’s management system, e.g., advertising expense is allocated based on the gross profits of the segments. A portion of the shared expenses, which are recorded in net income, are not allocated to the segments. These expenses are associated with the elimination of internal transactions and other miscellaneous items. The following tables reflect the results of continuing operations of the company’s segments consistent with the management and measurement system utilized within the company and have been recast for the prior-year periods due to the company’s segment changes in the fourth quarter of 2021. Performance measurement is based on pre-tax income from continuing operations, consistent with the company’s management and measurement system. These results are used, by the chief operating decision maker, both in evaluating the performance of, and in allocating resources to, each of the segments. Management System Segment View | | | | | | | | | | | | | | | | | ($ in millions) | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | For the year ended December 31: | | Software | | Consulting | | Infrastructure | | Financing | | Segments | | 2021 | | | | | | | | | | | | | | | | | Revenue | | $ | 24,141 | | $ | 17,844 | | $ | 14,188 | | $ | 774 | | $ | 56,946 | | Pre-tax income from continuing operations | | | 4,722 | | | 1,449 | | | 2,025 | | | 441 | | | 8,637 | | Revenue year-to-year change | | | 5.3 | % | | 9.8 | % | | (2.4) | % | | (20.6) | % | | 4.1 | % | Pre-tax income year-to-year change | | | 41.3 | % | | 40.1 | % | | 22.4 | % | | (1.8) | % | | 33.3 | % | Pre-tax income margin | | | 19.6 | % | | 8.1 | % | | 14.3 | % | | 57.0 | % | | 15.2 | % | 2020* | | | | | | | | | | | | | | | | | Revenue | | $ | 22,927 | | $ | 16,257 | | $ | 14,533 | | $ | 975 | | $ | 54,691 | | Pre-tax income from continuing operations** | | | 3,341 | | | 1,034 | | | 1,654 | | | 449 | | | 6,479 | | Revenue year-to-year change | | | 2.3 | % | | (4.0) | % | | (7.9) | % | | (19.8) | % | | (2.9) | % | Pre-tax income year-to-year change | | | (33.5) | % | | (23.0) | % | | (33.3) | % | | (31.2) | % | | (31.8) | % | Pre-tax income margin | | | 14.6 | % | | 6.4 | % | | 11.4 | % | | 46.1 | % | | 11.8 | % | 2019* | | | | | | | | | | | | | | | | | Revenue | | $ | 22,408 | | $ | 16,939 | | $ | 15,774 | | $ | 1,215 | | $ | 56,336 | | Pre-tax income from continuing operations | | | 5,025 | | | 1,344 | | | 2,481 | | | 652 | | | 9,502 | | | | | | | | | | | | | | | | | | |
* | Recast to conform to 2021 presentation. |
** | Includes the impact of a $1.5 billion pre-tax charge for structural actions in the fourth quarter of 2020. The impact by segment was as follows: Software ($0.7 billion), Consulting ($0.4 billion), Infrastructure ($0.4 billion). The impact to Financing was immaterial. |
Reconciliations of IBM as Reported | | | | | | | | | | | ($ in millions) | | | | | | | | | | | For the year ended December 31: | | 2021 | | 2020 | * | 2019 | * | Revenue | | | | | | | | | | | Total reportable segments | | $ | 56,946 | | $ | 54,691 | | $ | 56,336 | | Other—divested businesses | | | 70 | | | 101 | | | 1,010 | | Other revenue | | | 335 | | | 387 | | | 368 | | Total revenue | | $ | 57,350 | | $ | 55,179 | | $ | 57,714 | | | | | 0 | | | 0 | | | | |
| | | | | | | | | | | ($ in millions) | | | | | | | | | | | For the year ended December 31: | | 2021 | | 2020 | * | 2019 | * | Pre-tax income from continuing operations | | | | | | | | | | | Total reportable segments | | $ | 8,637 | | $ | 6,479 | ** | $ | 9,502 | | Amortization of acquired intangible assets | | | (1,838) | | | (1,832) | | | (1,271) | | Acquisition-related charges | | | (43) | | | (13) | | | (423) | | Non-operating retirement-related (costs)/income | | | (1,282) | | | (1,073) | | | (576) | | Kyndryl-related impacts | | | 118 | | | — | | | — | | Elimination of internal transactions | | | (7) | | | (28) | | | (21) | | Other—divested businesses | | | 25 | | | 12 | | | 580 | | Unallocated corporate amounts and other | | | (774) | | | (973) | | | (586) | | Total pre-tax income from continuing operations | | $ | 4,837 | | $ | 2,572 | ** | $ | 7,206 | |
* | Recast to conform to 2021 presentation. |
** | Includes the impact of a $1.5 billion pre-tax charge for structural actions in the fourth quarter of 2020. |
Immaterial Items Investment in Equity Alliances and Equity Alliances Gains/(Losses) The investments in equity alliances and the resulting gains and (losses) from these investments that are attributable to the segments did not have a material effect on the financial position or the financial results of the segments. Segment Assets and Other Items Software assets are mainly goodwill, acquired intangible assets and accounts receivable. Consulting assets are primarily goodwill and accounts receivable. Infrastructure assets are primarily goodwill, plant, property and equipment, and manufacturing inventory. Financing assets are primarily financing receivables, and cash and marketable securities. To ensure the efficient use of the company’s space and equipment, several segments may share leased or owned plant, property and equipment assets. Where assets are shared, landlord ownership of the assets is assigned to one segment and is not allocated to each user segment. This is consistent with the company’s management system and is reflected accordingly in the table below. In those cases, there will not be a precise correlation between segment pre-tax income and segment assets. Depreciation expense and capital expenditures that are reported by each segment also are consistent with the landlord ownership basis of asset assignment. Financing amounts for interest income reflect the income associated with Financing's external client transactions, as well as the income from investment in cash and marketable securities. Financing amounts for interest expense reflect the expense associated with the arm's length terms of the intercompany loans supporting Financing's external client transactions. Intercompany financing activities are recorded to other income and expense and are reflected in segment pre-tax income. Management System Segment View | | | | | | | | | | | | | | | | | ($ in millions) | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | For the year ended December 31: | | Software | | Consulting | | Infrastructure | | Financing | | Segments | | 2021 | | | | | | | | | | | | | | | | | Assets | | $ | 59,336 | | $ | 11,914 | | $ | 11,766 | | $ | 16,880 | | $ | 99,896 | | Depreciation/amortization of intangibles** | | | 1,204 | | | 250 | | | 1,399 | | | 49 | | | 2,902 | | Capital expenditures/investments in intangibles | | | 565 | | | 55 | | | 792 | | | 33 | | | 1,444 | | Interest income | | | — | | | — | | | — | | | 628 | | | 628 | | Interest expense | | | — | | | — | | | — | | | 129 | | | 129 | | 2020* | | | | | | | | | | | | | | | | | Assets | | $ | 58,558 | | $ | 10,548 | | $ | 12,378 | | $ | 24,974 | | $ | 106,458 | | Depreciation/amortization of intangibles** | | | 1,237 | | | 207 | | | 1,419 | | | 120 | | | 2,983 | | Capital expenditures/investments in intangibles | | | 548 | | | 26 | | | 1,093 | | | 41 | | | 1,709 | | Interest income | | | — | | | — | | | — | | | 834 | | | 834 | | Interest expense | | | — | | | — | | | — | | | 307 | | | 307 | | 2019* | | | | | | | | | | | | | | | | | Assets | | $ | 58,230 | | $ | 10,421 | | $ | 12,002 | | $ | 29,460 | | $ | 110,113 | | Depreciation/amortization of intangibles** | | | 676 | | | 179 | | | 1,348 | | | 186 | | | 2,389 | | Capital expenditures/investments in intangibles | | | 517 | | | 45 | | | 612 | | | 57 | | | 1,230 | | Interest income | | | — | | | — | | | — | | | 1,133 | | | 1,133 | | Interest expense | | | — | | | — | | | — | | | 512 | | | 512 | | | | | | | | | | | | | | | | | | |
* | Recast to conform to 2021 presentation. |
** | Segment pre-tax income from continuing operations does not include the amortization of acquired intangible assets. |
Reconciliations of IBM as Reported | | | | | | | | | | | ($ in millions) | | | | | | | | | | | At December 31: | | 2021 | | 2020 | * | 2019 | * | Assets | | | | | | | | | | | Total reportable segments | | $ | 99,896 | | $ | 106,458 | | $ | 110,113 | | Elimination of internal transactions | | | (1,608) | | | (4,686) | | | (4,317) | | Other—divested businesses | | | 193 | | | 254 | | | 1,942 | | Unallocated amounts | | | | | | | | | | | Cash and marketable securities | | | 6,222 | | | 12,463 | | | 7,271 | | Notes and accounts receivable | | | 1,622 | | | 1,655 | | | 1,601 | | Deferred tax assets | | | 7,158 | | | 8,175 | | | 4,917 | | Plant, other property and equipment | | | 2,196 | | | 2,449 | | | 2,488 | | Operating right-of-use assets | | | 1,945 | | | 2,368 | | | 2,531 | | Pension assets | | | 9,848 | | | 7,557 | | | 6,819 | | Other | | | 4,530 | | | 3,514 | | | 3,184 | | Total assets of discontinued operations** | | | — | | | 15,764 | | | 15,638 | | Total IBM consolidated assets | | $ | 132,001 | | $ | 155,971 | | $ | 152,186 | | | | | | | | | | | | |
* | Recast to conform to 2021 presentation. |
** | Refer to note C, “Separation of Kyndryl,” for additional information. |
Major Clients No single client represented 10 percent or more of the company’s total revenue in 2021, 2020 or 2019. Geographic Information The following tables provide information for those countries that are 10 percent or more of the specific category. RevenueÈ | | | | | | | | | | | ($ in millions) | | | | | | | | | | | For the year ended December 31: | | 2021 | | 2020 | * | 2019 | * | United States | | $ | 22,893 | | $ | 22,258 | | $ | 23,389 | | Japan | | | 5,648 | | | 5,680 | | | 5,755 | | Other countries | | | 28,810 | | | 27,241 | | | 28,570 | | Total revenue | | $ | 57,350 | | $ | 55,179 | | $ | 57,714 | | | | | | | | | | | | |
È Revenues are attributed to countries based on the location of the client. * Recast to conform to 2021 presentation. Plant and Other Property–Net | | | | | | | | | | | ($ in millions) | | | | | | | | | | | At December 31: | | 2021 | | 2020 | * | 2019 | * | United States | | $ | 3,375 | | $ | 3,452 | | $ | 3,513 | | Other countries | | | 2,293 | | | 2,656 | | | 2,273 | | Total | | $ | 5,668 | | $ | 6,108 | | $ | 5,785 | | | | | | | | | | | | |
* Recast to conform to 2021 presentation. Operating Right-of-Use Assets–Net | | | | | | | | | | | ($ in millions) | | | | | | | | | | | At December 31: | | 2021 | | 2020 | * | 2019 | * | United States | | $ | 1,148 | | $ | 1,165 | | $ | 1,305 | | Japan | | | 398 | | | 532 | | | 599 | | Other countries | | | 1,676 | | | 1,870 | | | 1,947 | | Total | | $ | 3,222 | | $ | 3,566 | | $ | 3,850 | | | | | | | | | | | | |
* Recast to conform to 2021 presentation. Revenue by Classes of Similar Products or Services The following table presents external revenue for similar classes of products or services within the company’s reportable segments. Client solutions often include IBM software and systems and other suppliers’ products if the client solution requires it. For each of the segments that include services, Software-as-a-Service, consulting, education, training and other product-related services are included as services. For each of these segments, software includes product license charges and ongoing subscriptions. | | | | | | | | | | | ($ in millions) | | | | | | | | | | | For the year ended December 31: | | 2021 | | 2020 | * | 2019 | * | Software | | | | | | | | | | | Software | | $ | 20,098 | | $ | 19,046 | | $ | 18,574 | | Services | | | 3,934 | | | 3,770 | | | 3,670 | | Systems | | | 109 | | | 110 | | | 165 | | Consulting | | | | | | | | | | | Services | | $ | 17,563 | | $ | 15,986 | | $ | 16,663 | | Software | | | 173 | | | 183 | | | 160 | | Systems | | | 108 | | | 89 | | | 116 | | Infrastructure | | | | | | | | | | | Maintenance | | $ | 4,743 | | $ | 4,804 | | $ | 5,171 | | Servers | | | 3,363 | | | 3,549 | | | 3,829 | | Services | | | 2,616 | | | 2,656 | | | 2,927 | | Storage | | | 1,908 | | | 1,813 | | | 1,936 | | Software | | | 1,426 | | | 1,563 | | | 1,725 | | Used Equipment Sales** | | | 131 | | | 149 | | | 186 | | Financing | | | | | | | | | | | Financing | | $ | 628 | | $ | 834 | | $ | 1,120 | | Used Equipment Sales | | | 145 | | | 140 | | | 95 | | | | | | | | | | | | |
* Recast to conform to 2021 presentation. ** Represents Global Asset Recovery Service transferred from Financing segment.
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