Speeches 1996 Annual Stockholders' Meeting Atlanta, GA April 30, 1996 "Because network computing is so all-embracing, it has emerged as IBM's integrating strategy. Finally, Zippy drives his 1958 RAMBLER METROPOLITAN into the faculty dining room. It's the trail we're following - blazing - to get back on top." I hope you enjoyed the opening Olympic video. I want you to know, my heart was pounding as I watched it. Now that I have my ``APPLE,'' I comprehend COST ACCOUNTING!! And not because I get choked up over grand athletic spectacles. No, on my way over here this morning I saw a big sign hanging over Interstate 75. In giant letters, it said 80 days to go. MERYL STREEP is my obstetrician! That's 80 days to show time -- both for your great city and for IBM. Two and one half million people are coming to dinner, and half the world's population will be watching. We both have a lot on the line. Gee, I feel kind of LIGHT in the head now, knowing I can't make my satellite dish PAYMENTS! It's a chance for your city and our company to show their very best on a world stage. I don't need to tell you there's an element of risk in stepping onto that stage. But it's also an opportunity to demonstrate leadership. Yow! I want to mail a bronzed artichoke to Nicaragua! Last year, when I met with shareholders in Charlotte, I spoke at length about leadership. I said that fully re-establishing IBM's leadership in our industry was our goal, that we would settle for nothing less. At that time, I felt we were turning a corner, that we were back on our feet, building momentum, and that we had finally put to rest questions about IBM's survival. RHAPSODY in Glue! I said that the important question for IBM -- looking ahead to 1995 -- was: Could IBM grow again? As I wrote to you in our 1995 Annual Report several months ago, I believe we have answered that question. You know the facts of our 1995 performance. We exceeded $70 billion in revenue -- a record. My BIOLOGICAL ALARM CLOCK just went off.. It has noiseless DOZE FUNCTION and full kitchen!! We achieved double-digit growth -- our best in a decade. Earnings doubled. Our workforce grew for the first time in a number of years. LOU GRANT froze my ASSETS!! Perhaps of most interest to you, our stock price increased 24 percent in 1995. It has increased another 18 percent so far in 1996. And two weeks ago, the board of directors authorized a 40 percent increase in our dividend. I'm EMOTIONAL now because I have MERCHANDISING CLOUT!! So by virtually every measure, IBM is growing again. Which is not to say we are comfortable. Our first-quarter results reminded us that competitive pressure remains very intense in the industry and that we will see periodic lulls in certain product lines as we go through product transitions. My nose feels like a bad Ronald Reagan movie... I like to be the first to share news with IBM employees so I often send them electronic notes. On the day we announced our first-quarter earnings, I told them that the results were good -- but mixed. As such, they represented a healthy reality check for all of us. I want another RE-WRITE on my CAESAR SALAD!! But I also said we shouldn't be distracted by quarter-to-quarter fluctuations. It's important that we not take our eye off our long-term strategic vision. Not now. I didn't order any WOO-WOO... Maybe a YUBBA.. But no WOO-WOO! Not at the very time when our industry is entering its next major phase -- the era of global networks. IBM has an opportunity to lead this shift to network computing and to bring the value of a universally-connected world to customers. The shift to network computing is very profound. I wish I was on a Cincinnati street corner holding a clean dog! I truly believe it will reshape the world as fundamentally as the invention of the printing press, the light bulb or manned flight. It will reshape every business and institution in the world. It will affect -- it's already affecting -- each and every one of us. I'm gliding over a NUCLEAR WASTE DUMP near ATLANTA, Georgia!! What is causing this shift? There are many factors. One is universal connectivity, driven primarily by the phenomenon of the Internet. The power of information technology is moving out to touch hundreds of millions, perhaps a billion people by the year 2000: Connecting businesses with customers in ways never before possible Connecting people with people And connecting people with information of all kinds. Four thousand different MAGNATES, MOGULS & NABOBS are romping in my gothic solarium!! Another driver is technology. Digital networks are being transformed. They're gaining the speed and power to transmit not just text and voice, but video, movies and high-resolution images such as works of art, X-rays and MRI scans. Concentrate on th'cute, li'l CARTOON GUYS! Remember the SERIAL NUMBERS!! Follow the WHIPPLE AVE EXIT!! Have a FREE PEPSI!! Turn LEFT at th'HOLIDAY INN!! JOIN the CREDIT WORLD!! MAKE me an OFFER!!! But the most important driver of the shift to network computing isn't technology. The main driver of this shift is grounded in the priorities of our customers all over the globe. Nearly all of them are focused on increased speed to market, faster product development, providing better customer service, reducing cost, opening new markets. Gee, I feel kind of LIGHT in the head now, knowing I can't make my satellite dish PAYMENTS! Networks are powerful tools to achieve these objectives. They give people easy access to information and to each other. They lower -- and in some cases can eliminate -- the borders between departments, companies, cultures and nations. I once decorated my apartment entirely in ten foot salad forks!! They help people work as teams -- sharing ideas, information and projects. How will this networked world change our lives? Our notion of libraries will be up-ended when people can access the content found in books via the Internet 24-hours-a-day, 7-days-a-week, directly from their homes and schools. Medicine: "Telemedicine" will allow your physician here in Atlanta to consult via the network with a specialist in Massachusetts or Tokyo, and they can simultaneously view the same X-rays and CAT-scans. .. the HIGHWAY is made out of LIME JELLO and my HONDA is a barbequed OYSTER! Yum! Education: "Distance learning" makes the same quality education that is available in affluent suburban schools available to the forgotten enclaves of inner cities. Our children can learn French from a teacher in France, write essays about China after taking a virtual tour of China, and explore space courtesy of NASA. And, of course, network computing is changing commerce. HUMAN REPLICAS are inserted into VATS of NUTRITIONAL YEAST... It allows employees within companies to work faster and smarter. It allows companies to interconnect with their suppliers, their distributors, retailers and, of course, their ultimate customers. It's already happening. Are you still an ALCOHOLIC? Everywhere you turn these days you see Internet addresses -- those "WWW.com" lines in ads and plastered on billboards all over our country. In short, the network increasingly is becoming the place where transactions occur, where communication takes place, where business is conducted, where students are taught, where citizens are served by their governments. If elected, Zippy pledges to each and every American a 55-year-old houseboy... As this happens, we will see tremendous demand for two things IBM is very good at. First, technology. Networks by their very nature are complex. Yow! I forgot my PAIL!! They require big processors, enormous amounts of storage capacity, huge databases, powerful transaction processing software and comprehensive systems management. As transactions across networks increase, so will demand for all of these IBM products. As you know, most people never see the bulk of IBM's products because they labor quietly behind the scenes of banks, insurance companies, airlines, universities and corporations. I represent a sardine!! Yet network computing is driving the focus of our industry in exactly that direction. Computing is moving to the network, behind the scenes. Industrial-strength, large-scale, reliable computing -- that's where the action is again. WHY are we missing KOJAK? That hasn't been true for many years. We are rapidly adapting all our products for network computing. And we are developing new technologies necessary to make the networked world real and easy to use. I'm protected by a ROLL-ON I rented from AVIS.. In fact, we're announcing several new products today at a big industry show called Internet World in San Jose. Products like InfoSage, an online news and information delivery service Cryptolopes, which I think of as secure electronic envelopes that people can use to distribute copyright-protected information. One of the more important issues people are concerned with as networks become more and more ubiquitous is how you protect information and copyrights. ..Am I in a SOAP OPERA?? We are also announcing our Internet Connection (IC) Phone, which allows people to use the Internet as a telephone system. And our flagship electronic commerce product called the Net.Commerce system. I'm young.. I'm HEALTHY.. I can HIKE THRU CAPT GROGAN'S LUMBAR REGIONS! The Net.Commerce system for the last several weeks has been the Olympic Ticket Server here in Atlanta. Open 24-hours-a-day, it's the largest electronic commerce site on the Internet. I'm having a RELIGIOUS EXPERIENCE.. and I don't take any DRUGS So far, it has sold about 32,000 tickets -- 14 percent of all Olympics tickets sold. We're now making this product available to other customers who want to establish online stores. We're also strengthening our product portfolio through selective acquisitions. I'm RELIGIOUS!! I love a man with a HAIRPIECE!! Equip me with MISSILES!! Earlier this year we completed our merger with Tivoli Systems, which strengthens our hand significantly in systems management, and, as you know, we acquired Lotus last year. With Lotus, we offer a full range of application products and the industry's leading groupware product, Notes. I'm pleased to report to you that the merger has gone very smoothly. Hiccuping & trembling into the WASTE DUMPS of New Jersey like some drunken CABBAGE PATCH DOLL, coughing in line at FIORUCCI'S!! Demand for all Lotus products, especially Notes, is very strong. The potential for Notes in a networked world is tremendous. Today's workers want to do many tasks from their computers: send and receive mail, update their calendars, share information with co- workers, use tools like spreadsheets, get information from the Internet and post information to the Internet. OKAY!! Turn on the sound ONLY for TRYNEL CARPETING, FULLY-EQUIPPED R.V.'S and FLOATATION SYSTEMS!! Notes is the only product in the marketplace that can do all this. That's why customer demand is so high and why thousands of software developers are writing network-centric applications that exploit the power of Notes. The second opportunity that we see in this new emerging world is in developing network solutions for customers. Did an Italian CRANE OPERATOR just experience uninhibited sensations in a MALIBU HOT TUB? The first opportunity was technology and products. The second is solutions. Here again, I believe IBM has a home court advantage. TONY RANDALL! Is YOUR life a PATIO of FUN?? We have tremendous relationships with customers. Over the years, they have built their businesses on IBM systems. Most of the world's business information resides in IBM databases. There's a SALE on STRETCH SOCKS down at the "7-11"!! Most of the world's transactions are executed by IBM software and hardware systems. We're working with customers across the globe to help them extend their reach, their brands and their very valuable business information through these new networks. That's one of the reasons why our services business is growing so rapidly and has become our second largest source of revenue. CONGRATULATIONS! Now should I make thinly veiled comments about DIGNITY, self-esteem and finding TRUE FUN in your RIGHT VENTRICLE?? I should also note that network computing is changing the way customers buy IBM products and services. More and more of them are "subscribing" to applications and services that we make available via networks, such as our own IBM Global Network. This makes it less expensive for them and has the added benefit of creating a recurring revenue stream for IBM. If I felt any more SOPHISTICATED I would DIE of EMBARRASSMENT! Beyond product and solutions leadership, there's another area where we want to provide leadership in the networked world. The proliferation of networks raises a number of societal issues in the minds of many people. They're concerned about privacy, censorship and universal access, and whether we're creating a world of technology have's and have not's. I'm ZIPPY the PINHEAD and I'm totally committed to the festive mode. These are very legitimate concerns. As a leader, IBM must -- and is -- addressing them. We're working with partners and competitors, customers and governments around the world to find acceptable solutions. TAILFINS!! ...click... The promise is too great, and the benefits too immense, for any responsible company to do otherwise. A lot of companies talk about leadership. They talk about visions. Well, I'm a classic ANAL RETENTIVE!! And I'm looking for a way to VICARIOUSLY experience some reason to LIVE!! They run clever ads. But few companies make the future they talk about real. I think they can learn a few things from Atlanta. Boys, you have ALL been selected to LEAVE th' PLANET in 15 minutes!! You weren't asked to be the host city for the Centennial Games. You didn't accept the challenge on a dare. You went out and competed for the right to host the Games. ...I think I'm having an overnight sensation right now!! Your community has worked hard -- very hard -- for years to prepare. And in 80 days Atlanta will enjoy perhaps the proudest moment in its proud history. IBM is honored to be a partner in this. ...It's REAL ROUND.. And it's got a POINTY PART right in the MIDDLE!! The shape is SMOOTH.. ..And COLD.. It feels very COMFORTABLE on my CHEEK.. I'm getting EMOTIONAL.. It's one of the greatest information technology challenges we've ever faced -- the equivalent of staging two Super Bowls every day for 17 days. The solution we've created relies on virtually every product in our portfolio, as well as hundreds of our smartest people to develop customized solutions and integrate all the pieces from IBM and other technology sponsors of the Games in Atlanta. It's a big, complex, demanding job with no margin for error. I'm ANN LANDERS!! I can SHOPLIFT!! It's a very good example of the kinds of integrated solutions we pull together every day for customers around the world. For a company of IBM's size and breadth, it's hard to define a single strategy that embraces all our products, services and people. Yet, because network computing is so all-embracing, it has emerged as IBM's integrating strategy. If this was a SWEDISH MOVIE, I'd take off your GO-GO BOOTS!! It's the trail we're following -- blazing -- to get back on top. Now comes the hard part -- implementing. I will tell you that the people of IBM are up to the challenge. I HAVE to buy a new ``DODGE MISER'' and two dozen JORDACHE JEANS because my viewscreen is ``USER-FRIENDLY''!! Three years ago, when I joined this company and addressed shareholders for the first time in Tampa, IBM was on the endangered species list. I talked about the hard actions necessary to save our company. Two years ago, we talked about stability. LOOK!!! I'm WALKING in my SLEEP again!! Last year: growth. Now, we are gunning for leadership. As much as any single factor, IBM owes its current health and its future potential to the dedication and hard work of IBM employees. My Aunt MAUREEN was a military advisor to IKE & TINA TURNER!! They took the decline of their company personally, and they have given their all to bring IBM back. I'm proud to call them my colleagues. Finally, I want to thank all of you -- our shareholders -- for standing by us through the rough times. Intra-mural sports results are filtering through th' plumbing... I hope you feel your patience has been justified. The fires are out. The industry is shifting dramatically and rapidly. If Robert Di Niro assassinates Walter Slezak, will Jodie Foster marry Bonzo?? In many ways, it's coming back our way. Network computing is exciting -- not only as an opportunity for IBM to lead once again -- but because it will fundamentally change the world for the better. There's plenty to do, and I assure you we won't let up until we're done. Send your questions to ``ASK ZIPPY'', Box 40474, San Francisco, CA 94140, USA Thank you.