Item 1. Business:

International Business Machines Corporation (IBM or the company) was incorporated in the State of New York on June 16, 1911, as the Computing-Tabulating-Recording Co. (C-T-R), a consolidation of the Computing Scale Co. of America, the Tabulating Machine Co. and The International Time Recording Co. of New York. Since that time, IBM has focused on the intersection of business insight and technological innovation, and its operations and aims have been international in nature. This was signaled almost 100 years ago, in 1924, when C-T-R changed its name to International Business Machines Corporation. And it continues today—we create sustained value for clients by helping them leverage the power of hybrid cloud and artificial intelligence (AI). Our hybrid cloud platform and AI technology support clients’ digital transformations and helps them reimagine critical workflows, at scale, and modernize applications to increase agility, drive innovation and create operational efficiencies. Our offerings draw from leading IBM capabilities in software, consulting services capability to deliver business outcomes, and deep incumbency in mission-critical infrastructure, all bolstered by one of the world’s leading research organizations.

The following information is included in IBM’s 2021 Annual Report to Stockholders and is incorporated by reference:

IBM Strategy—pages 11 to 13.

Business Segments and Capabilities—pages 13 to 15.

Human Capital—pages 15 to 16.

Competition

IBM is a globally integrated enterprise that participates in a highly competitive environment, where our competitors vary by industry segment, and range from large multinational enterprises to smaller, more narrowly focused entities. Overall, across our business segments, we recognize hundreds of competitors worldwide.

Our principal methods of competition are: technology innovation; performance; price; quality; brand; our broad range of capabilities, products and services; talent; client relationships and trust; the ability to deliver business value to clients; and service and support. In order to maintain leadership, we are optimizing our portfolio with organic and inorganic innovations, shifting resources, embedding AI and cloud into our offerings while building new solutions and modernizing our existing platforms. These investments not only drive current performance, but will extend our innovation leadership into the future.

We differentiate from other providers, as our breadth and depth of expertise enables us to take different technologies and bring them together to solve the most pressing business issues of our clients. We leverage a flexible, secure, and open hybrid cloud platform and scale up solutions integrating (1) data, (2) AI for production and automation, (3) deep expertise in industries and business processes, (4) trust and security, along with (5) a broad ecosystem of partners and alliances. All of these actions have positioned IBM for accelerated growth now with hybrid cloud and AI while preparing us for the next set of business opportunities, such as quantum computing.

As we execute our strategy as a hybrid cloud and AI company, we are regularly exposed to new competitors. Overall, the company is the leader or among the leaders in each of our business segments.

A summary of the competitive environment for each business segment is included below:

Software:

The depth, breadth, and innovation of our software offerings, coupled with our global reach, deep industry expertise and research capabilities help differentiate our offerings from our competitors. Our hybrid cloud platform based on open

technologies allows clients to realize their digital and AI transformations across the applications, data, and environments in which they operate. The principal competitors in this segment include Alphabet Inc. (Google), Amazon.com, Inc. (Amazon), BMC, Broadcom, Cisco Systems, Inc. (Cisco), Informatica, Microsoft Corporation (Microsoft), Oracle Corporation (Oracle), Palo Alto Networks, Salesforce, SAP, Splunk and VMware. We also compete with smaller, niche competitors in specific geographic regions or product segments.

Consulting:

Consulting has simplified our focus to center on strategy, experience, technology and operations to make our huge range of capabilities easier for clients to navigate. Today, Consulting competes in consulting, systems integration, application management and business process outsourcing services. We compete with broad-based competitors including: Accenture, Capgemini, India-based service providers, management consulting firms, the consulting practices of public accounting firms, and many companies that primarily focus on local markets or niche service areas.

Infrastructure:

IBM is well positioned in the growing hybrid cloud infrastructure market, providing on-premises and cloud-based server and storage solutions for clients’ mission-critical and regulated workloads. In addition, we offer a portfolio of support services and solutions for hybrid cloud infrastructure. Our principal competitors include Dell Technologies, Hewlett-Packard Enterprise (HPE), Intel and original device manufacturer systems that are often re-branded. Further, as-a-Service providers, such as Amazon, Google and Microsoft are leveraging innovation in technology and service delivery to compete with traditional providers and to offer new routes to market for server and storage systems. We gain advantage and differentiation through investments in higher-value capabilities, including security, scalability, and reliability, designed especially for mission-critical and regulated workloads.

Financing:

Financing provides client and commercial financing, facilitating IBM client’s acquisition of IT systems, software and services. Financing’s ability to manage credit and residual value risk generates a competitive advantage for the company. The key competitive factors include interest rates charged, IT product experience, client service, contract flexibility, ease of doing business, global capabilities and residual values. In client and commercial financing, Financing primarily competes with non-captive financing entities and financial institutions.

Forward-looking and Cautionary Statements

Certain statements contained in this Form 10-K may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (“Reform Act”). Forward-looking statements are based on the company’s current assumptions regarding future business and financial performance. These statements by their nature address matters that are uncertain to different degrees. The company may also make forward-looking statements in other reports filed with the Securities and Exchange Commission (SEC), in materials delivered to stockholders and in press releases. In addition, the company’s representatives may from time to time make oral forward-looking statements. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. Words such as “anticipates,” “believes,” “expects,” “estimates,” “intends,” “plans,” “projects,” and similar expressions, may identify such forward-looking statements. Any forward-looking statement in this Form 10-K speaks only as of the date on which it is made. Except as required by law, the company assumes no obligation to update or revise any forward-looking statements. In accordance with the Reform Act, set forth under Item 1A. “Risk Factors” on pages 3 to 10 are cautionary statements that accompany those forward-looking statements. Readers should carefully review such cautionary statements as they identify certain important factors that could cause actual results to differ materially from those in the forward-looking statements and from historical trends. Those cautionary statements are not exclusive and are in addition to other factors discussed elsewhere in this Form 10-K, in the company’s filings with the SEC or in materials incorporated therein by reference.

The following information is included in IBM’s 2021 Annual Report to Stockholders and is incorporated herein by reference:

Segment information and revenue by classes of similar products or services—pages 87 to 90.

Financial information regarding environmental activities—page 112.

The number of persons employed by the registrant—page 15.

The management discussion overview—pages 8 to 11.

Website information and company reporting—page 139.

Executive Officers of the Registrant (at February 22, 2022):

*     Member of the Board of Directors.

All executive officers are elected by the Board of Directors annually as provided in the Company’s By-laws. Each executive officer named above, with the exception of Gary D. Cohn, has been an executive of IBM or its subsidiaries during the past five years. Mr. Cohn is Co-Chairman of Cohn Robbins Holding Corp, a special-purpose acquisition company. Mr. Cohn previously served as Assistant to the President for Economic Policy and Director of the National Economic Council from January 2017 until April 2018. Before serving in the White House, Mr. Cohn was President and Chief Operating Officer of The Goldman Sachs Group, Inc. from 2006-2016.

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