As layoffs continue at IBM, a Planet Money listener and IBM worker forwards this letter sent by CEO Sam Palmisano on Tuesday. An IBM spokesperson confirms that it's from Palmisano. Full text after the jump. The letter reads, in part:
I am pleased to announce that we will not only be paying bonuses to IBMers worldwide, based on individual performance, but that they'll be funded from a pool of money nearly the same size as last year's. That's significant in this economy -- and especially so, given the size of the 2007 pool. Further, our salary increase plan will continue, covering about 60 percent of our workforce. As always, increases will go to our highest performers and contributors. We should all feel good about the company's ability to invest in people in these very concrete ways.
The IBM spokesperson won't says how many layoffs are coming: "We are not communicating that information." Full text of Palmisano's letter:
We have just issued our financial results for the fourth quarter and full year 2008. You can read them on w3.
Under extremely challenging economic circumstances, we had a strong fourth quarter and a great 2008. I want to thank you for everything you have done to help achieve this impressive performance.
Our 2008 results set several records: record revenue of $103.6 billion -- the first time IBM has passed the $100 billion mark; record pre-tax earnings of $16.7 billion, up 15 percent from 2007; record earnings per share of $8.93; and record free cash flow of $14.3 billion.
These results are testament to superior execution by almost 400,000 IBMers and to the strategic transformation of our company over the past several years -- our shift to higher-value businesses, our investment in growth markets, our integrated solutions that address clients' needs and our improved efficiency -- all of which generate higher profit margins.
With our strong financial position, solid recurring revenue, profit streams and global reach, we are confident about 2009 and are well positioned to achieve our 2010 earnings-per-share goals. We entered this difficult environment strong, and we expect to exit it stronger.
In the fourth quarter we had particularly strong contributions from our services and software businesses and from growth markets. Our two Global Services segments together delivered pre-tax profit growth of 32 percent and margin growth of 4 points on lower revenues compared to 2007. We signed 24 deals larger than $100 million -- the highest we've seen in quite some time. Software revenue was up 9 percent at constant currency, driven by growth in mission-critical production software. And although growth in emerging markets has slowed, it continues to be very attractive relative to the rest of the world. These markets comprised 18 percent of IBM's geographic revenue in the quarter and the year.
As always, some parts of the business did not perform as well. Systems & Technology revenue declined 16 percent at constant currency this quarter with shortfalls in our x86 and storage products offsetting gains in high-end servers. In part, this was due to clients being focused on reducing the cost of running their existing IT infrastructure. But it also reflected execution issues that we must acknowledge and address.
The current global economy clearly presents a challenge. But even more, for those with vision and boldness, it represents a once-in-a-lifetime opportunity. And it is one uniquely suited to IBM's capabilities, legacy and way of thinking.
Those capabilities and that thinking have taken new form in our Smarter Planet strategy. It is resonating with people and businesses around the world who are ready and eager for fundamental change. It has already captured the interest of numerous governments actively planning to stimulate their economies. They are looking not just to repair what's broken, but to prepare for a new century. More than $2 trillion in proposed investments have been announced to transform national infrastructures. If we hadn't already been developing the Smarter Planet strategy -- which is in many ways the culmination of everything we have done over the past decade in technology, business and global integration -- we would probably be creating something very much like it right now, in order to capture this enormous opportunity.
I will discuss Smarter Planet, our results for the quarter and the full year and our plans for 2009 in my broadcast on w3 tomorrow. I urge you to listen in.
Let me close with a word about IBM's basic approach to the complex, difficult and exciting era in which we find ourselves. As we know, many companies today are curtailing or drastically cutting spending and investment, even in areas that are important to their future. We are taking a different approach, not only because we have the financial strength to do so, but because we choose to manage IBM for long-term success. Of course, we must continue to improve our competitiveness, drive productivity, replenish skills and eliminate redundancies where they exist. At the same time, we will continue to invest -- in R&D, strategic acquisitions, growth initiatives and in taking our Smarter Planet initiative to the world.
Most importantly, we will invest in our people through our continued support for learning and skill development, through programs like the Global Citizen's Portfolio and through competitive salary and incentive programs.
In that connection, I am pleased to announce that we will not only be paying bonuses to IBMers worldwide, based on individual performance, but that they'll be funded from a pool of money nearly the same size as last year's. That's significant in this economy -- and especially so, given the size of the 2007 pool. Further, our salary increase plan will continue, covering about 60 percent of our workforce. As always, increases will go to our highest performers and contributors. We should all feel good about the company's ability to invest in people in these very concrete ways.
We stand at a unique moment in the course of modern history, and in the nearly 100-year story of IBM. More than at any time since I joined the company 35 years ago, I see the chance to align those two trajectories in powerful ways. I hope and trust that you share my sense of this moment. I believe it is a call for greatness, and I believe IBMers are ready to answer that call.
This promises to be an exciting and important year.
Chairman, President and Chief Executive Officer