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IBM Sees A Big Boost As It Turns 100
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IBM Sees A Big Boost As It Turns 100

STEVE INSKEEP, HOST:

2011 was a lousy year for a lot of businesses and many people seeking work. It was also for some companies a very good year, and that includes IBM, which turned 100 in June and which is one of the success stories we're following this week. IBM stock climbed this year even more than Google and Apple. NPR'S Ben Bergman explains why.

BEN BERGMAN, BYLINE: Don't just take my word for it, here's what Warren Buffet announced on CNBC last month.

(SOUNDBITE OF CNBC NEWS BROADCAST)

WARREN BUFFET: We've bought about $10.7 billion worth of one stock - IBM.

UNIDENTIFIED WOMAN: You - wait, you've bought over $10 billion in IBM?

BERGMAN: Buffet's bet was surprising because he normally doesn't go near tech stocks and no one was more surprised than IBM.

(SOUNDBITE OF CNBC NEWS BROADCAST)

UNIDENTIFIED WOMAN: The company's finding out right now that you own five percent of the company?

BUFFET: Five and a half.

UNIDENTIFIED WOMAN: Five-and-a-half percent, by you talking about this right now?

BUFFET: Right. Right. I have not talked to the company.

BERGMAN: So how did the third richest man in the world discover IBM? Well, he says he got the annual report in the mail and spent a Saturday reading it. What impressed Buffett is how much IBM has moved away from being a computer company. IBM managing partner Adam Klaber points out that his company sold its PC business six years ago.

ADAM KLABER: There is no such thing as an IBM PC. And I think that that really defines how we look at evolving and innovating as a company as we saw that we were moving towards the end of the PC-centric era, and that we wanted to move forward.

BERGMAN: Eighty-three percent of IBM's business now is services and software. Sign a contract with Big Blue and you get their consulting, their cloud computing, their servers, their analytics, even their financing. Bobby Cameron analyzes IBM for Forester Research.

BOBBY CAMERON: That's the game they're playing, where it's this broad set of technologies brought to bear. And it's very difficult for anyone else to pull all that together.

BERGMAN: When the NYPD needed a system to track crime and better deploy cops, they hired IBM. When the telecom company Bharti Airtel wanted to build wireless coverage in 16 African countries - IBM. And why is this all-you-can-eat approach better than selling hardware? Because, as Cameron explains, being in the computer business just isn't very profitable anymore.

CAMERON: Over the last 15 years, the cost of the equivalent amount of computing has been reduced by a factor of 23. So it's 23 times cheaper. So a computer sale is no longer an individual component that all by itself can drive a lot of business value.

BERGMAN: To find out what happened to companies that stuck to selling PCs, take a look at HP or Dell, which has seen their value plummet right alongside the price of computing. Meanwhile, IBM has become the one-stop-shop of choice for many governments and companies.

(SOUNDBITE OF IBM CORPORATE AD)

UNIDENTIFIED MAN: Over the next 20 years, air traffic is expected to double. The systems that track, manage and connect these flights weren't built to handle all that data. IBM's working with Boeing on the next generation's system to help integrate global air traffic more efficiently and in real time.

BERGMAN: And more reasons investors are flying high on IBM? It's been aggressively building up its presence in the fastest growing countries - China, Brazil and India - where it says it'll get 30 percent of its revenue in four years. In China alone, IBM has deployed 20,000 consultants.

The company also named a well-liked new CEO who will take over next week - Virginia Rometty - though its most famous employee still plugs into the wall.

(SOUNDBITE OF TV SHOW, "JEOPARDY")

WATSON: What is Christchurch?

ALEX TREBEK: Yep.

WATSON: Hedge Hogpodge for $1,200.

BERGMAN: That would be the Supercomputer Watson playing "Jeopardy" in February.

(SOUNDBITE OF TV SHOW, "JEOPARDY")

TREBEK: The Hedgehog and the Fox is an essay on this Russian count's view of history. Watson?

WATSON: Who is Leo Tolstoy?

TREBEK: Yes.

BERGMAN: And yes, in case you hadn't heard, Watson crushed the competition, delivering IBM another win this year.

Ben Bergman, NPR News.

(SOUNDBITE OF "JEOPARDY" THEME SONG)

INSKEEP: This is NPR News.

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