Annual Report
2010

On June 16, 2011, IBM marks its centennial. As we reflect on our first century, it has sparked new thinking about the possibilities for our second. Join us at IBM100.com

A Letter from the Chairman

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Dear IBM Investor:

I am pleased to report that IBM had another strong year in 2010. Your company continued to outperform our industry and the market at large. We once again achieved record pre-tax earnings, record earnings per share, record free cash flow and improved profit margins, with increased revenues. At the same time, we continued to deliver superior returns to you, our owners. Most importantly, we are well positioned to grow as the global economy recovers. These results were made possible by decisions and actions that we undertook a decade ago, based on where we believed the world was shifting. But even more, they are a reflection of the mindset, ambitions and values that have guided IBM since its inception, 100 years ago. As such, our performance in 2010 marks a fitting conclusion to our first century as a corporation, and a promising start to our second. In this letter, I will explain why the long-term thinking and management that IBM has practiced over the past decade have positioned your company advantageously for the next five years and beyond.

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IBM today
IBM’s performance in 2010 is indicative both of our high-value market position and of the discipline we apply to our strategy and operations. Since 2002, we have added $14 billion to IBM’s pre-tax profit base, increased our pre-tax income 3.4 times, our earnings per share 4.7 times and our free cash flow 2.8 times. Cumulatively, we have generated about $96 billion of free cash flow. Our strong 2010 continued this record of superior performance:

Cash flow: IBM has consistently generated strong cash flow, a key indicator of real business performance. In 2010 our free cash flow,