GlobalServicesDESCRIPTIONOFBUSINESSGlobalServicesisanimportantpartofthecompany'sstrategyofprovidinginsightandsolutionstocustomers.Theapplicationoftechnologyisbecomingincreasinglycriticaltocustomers'advantageinthemarketplace.Asaresult,thevaluethatcustomersplaceonIBM'sbusinessinsightandsolutionsisincreasing.Asthecompanycontinuestoevolve,theexpectationisthatGlobalServiceswillplayalargerroleinterfacingwithIBM'scustomers.GlobalServicescomprisesthreemainlinesofbusiness:ooStrategicOutsourcingServices(SO)providescustomerswithcompetitivecostadvantagesbyoutsourcingcustomers'processesandoperations.oBusinessConsultingServices(BCS),formerlyBusinessInnovationServices,deliversvaluetocustomersthroughbusinessprocessinnovation,applicationenablementandintegrationservices.TheacquisitionofPwCCgreatlyenhancesIBM'scapabilitiesintheseareas.oIntegratedTechnologyServices(ITS)designs,implements,andmaintainscustomers'technologyinfrastructures.HISTORICALRESULTS(dollarsinmillions)FORTHEYEARENDEDDECEMBER31:200220012000GlobalServicesrevenue$36,360$34,956$33,152GlobalServicescost26,81225,35524,309Grossprofit$9,548$9,601$8,843Grossprofitmargin26.3%27.5%26.7%GlobalServicesrevenueincreased4.0percent(3percentatconstantcurrency)in2002over2001and5.4percent(10percentatconstantcurrency)in2001over2000.Theincreasein2002resultedfromtheacquisitionofPwCConOctober1,2002andgrowthintheSObusiness.GlobalServicesrevenue,excludingmaintenance,increased4.5percent(4percentatconstantcurrency)in2002versus2001and6.8percent(11percentatconstantcurrency)in2001versus2000.Maintenancerevenueimproved1.3percentto$5,070million(1percentatconstantcurrency)in2002versus2001anddeclined2.2percent(up2percentatconstantcurrency)in2001whencomparedto2000.SOrevenueincreased2.4percentto$14,995million(2percentatconstantcurrency)in2002versus2001.SOremainsattractivetocustomersinbothstrongandweakeconomies.46----------------------------------------------------------------------------------------------------------------------------SOrevenuein2001increasedversus2000primarilyasaresultofstronggrowthinAsiaPacific.BCSrevenueincreased8.8percentto$9,331million(7percentatconstantcurrency)in2002versus2001.TheincreasewasduetotheadditionofPwCCresultsinthefourthquarter.BCSrevenueexcludingPwCCwouldhavedeclinedyearoveryear.BCScontinuestobeimpactedbytheindustrypressureonconsultingservices.TheintegrationofPwCCisonschedule.BCSrevenuein2001increasedversus2000.Thefourthquarter2002resultsofBCS,whichincludethePwCCbusinessacquiredfromPricewaterhouseCoopers(PwC)onOctober1,2002,werenotauditedbyPwC;instead,suchresultswereauditedbyanotherBig4auditingfirm.ITSrevenue,excludingmaintenance,increased5.1percentto$6,593million(4percentinconstantcurrency)in2002versus2001.Thisrevenuegrowthresultedfromincreasesinthedeploymentofnetworkhardwareandconnectivityservices,businesscontinuityservicesandOEMalliances.ITSrevenueincreasedin2001versus2000insupportofserverconsolidations,businesscontinuityservicesandOEMalliances.GlobalServicesgrossprofitdollarsdecreased0.6percentin2002comparedto2001andincreased8.6percentin2001versus2000.Thegrossprofitmargindecreased1.2pointsin2002versus2001andincreased0.8pointsin2001versus2000.Thedeclinesinbothgrossprofitdollarsandgrossprofitmarginsin2002wereattributabletomarketconditions,particularlyintheCommunicationsandFinancialsectors,andcontinuedweaknessintheconsultin...
