International Business Machines Corp at UBS Global Technology and AI Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: David Vogt - UBS - Analyst : And so we thought it would be great to have Dinesh here given the theme for most of the meetings this week has been around data center, AI, software, giving you uniquely, I think, qualified to speak to it, we wanted to start with your perspective of IBM's software portfolio, how we got to where we are today, either through organic growth, inorganic growth? We could, I guess, maybe go back five, six, seven years start with Red Hat. And maybe let's kind of level set where we are today from a portfolio perspective that falls under your purview.

Question: David Vogt - UBS - Analyst : Now that's a great overview and it opens up a lot of different vectors here. But let me just go back to the software -- pure software side first. If you look at the transactions over the last five years, obviously, Red Hat was foundational to the business today. Recently, you've done Apptio, Hashi is pending. As you look at the portfolio today, kind of maybe what's the common thread in addition to AI that all of these assets sort of pull together this multi-cloud strategy. So when you look at, for example, going forward, obviously, I think Arvind's talked about doing incremental software deals REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 04, 2024 / 4:35PM, IBM.N - International Business Machines Corp at UBS Global Technology and AI Conference that bring multi-cloud more functionality to customers or clients together. Where do you see the business going from here on the software side? Presumably, Hashi closes in Q1 of this year. Kind of what's the next sort of initiative, the next step within software?

Question: David Vogt - UBS - Analyst : You mentioned resiliency. Can you expand upon that? So today, as the portfolio is currently configured, what does IBM bring to bear to a corporate customer to help them along their resiliency journey given all these complexities and risks and challenges that you just sort of articulated?

Question: David Vogt - UBS - Analyst : So can you take all of those offerings and that view that IBM has and talk about sort of specifically within AI from the software portfolio? To date, really, it seems like the consulting business has been sort of leading sort of the initiative, right? If I just look at the metrics that the company has reported, 80% of your sort of AI-focused orders to date have been really on the consulting side. So maybe can you expand upon how that sort of helps lead the software business? And what are the initial feedback or learnings that you're getting from large corporate enterprises on AI, particularly around your software portfolio? And how do you think that sort of evolves over the next couple of years with consulting obviously taking the lead?

Question: David Vogt - UBS - Analyst : I just want to make sure I understand. So the way I thought about Watson and what you've announced over the last couple of years, it's more of a platform of technologies and tools and applications that can help enterprises move down their journey, but also help automate and improve your existing functional software technologies. Is that the right way to think about how Watson will get developed over the next couple of years? So Watson, all this capability you're building helps the security side of your business. It helps the data, the automation side. Is that the right way to frame it? And so it's not necessarily a stand-alone offering. It's integrated in everything under your purview that you're thinking about developing over the next couple of years?

Question: David Vogt - UBS - Analyst : Got it. And does -- watsonx does -- you mentioned COBOL to Java. So that would help assist on the mainframe transaction processing side as well, I would imagine.

Question: David Vogt - UBS - Analyst : So it permeates other sort of sectors within IBM.

Question: David Vogt - UBS - Analyst : Got it. I wanted to maybe take a step back and talk about the common thread for a second. So Red Hat, and you talked about all these other companies that you've acquired, Apptio, Hashi is part of it. We get a lot of questions on Red Hat in terms of hybrid cloud, multi-cloud versus public cloud. And Red Hat has had fairly recently good acceleration in growth. Can you maybe talk to what the markets look like that are driving that underlying demand for Red Hat, primarily, I think you talked about OpenShift bookings being incredibly strong in teens, and recently, Ansible, strong. Is that stand-alone pre-GenAI demand? Or is there some sort of element to customers looking for multi-cloud/hybrid cloud solutions because they're going to embark on a GenAI journey effectively?

Question: David Vogt - UBS - Analyst : Did you see that VMware impact in the business over the last couple of quarters? Or is that more of a recent phenomenon given sort of the pricing dynamic?

Question: David Vogt - UBS - Analyst : Got it. In the interest of time, we get a lot of questions on your transaction processing business. I think the business over the last 5 to 10 years has been somewhat misunderstood, right, in the sense that it's been tied inextricably to the mainframe business for all intents and purposes and had been sort of a source of headwind from a growth perspective. It appears to have changed over the last couple of years, obviously, during COVID, now post-COVID. Can you kind of walk through and kind of articulate what the growth trajectory of that business looks like? What are some of the underpinnings to support that growth? And why that business now going forward is actually on much steadier footing than it was two, three, four, five years ago?

Question: David Vogt - UBS - Analyst : Got it. Is the business at all tied to the somewhat cyclicality around the launches of new iterations of the mainframe? Or is it just strictly transactional intensity effectively has improved dramatically? So we do have a new mainframe cycle later next year. At some point, I would imagine, I don't think it's been announced, but it's been in your 10-Q. Do we see an acceleration in transaction processing with a new generation of mainframe? Or is it really the installed base of transactional capacity is what really drives that business?

Question: David Vogt - UBS - Analyst : Perfect. Maybe just in the interest of time, I know you've been incredibly generous with your time. I want to bring it back to your perspective of where IBM sits today with the portfolio under your purview. What do you think is maybe misunderstood from a market or investor perception that really hasn't resonated yet that you think IBM is not getting credit for? And how you think about the portfolio as we move forward over the next couple of years that really gets you the most excited about IBM today versus IBM five years ago? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 04, 2024 / 4:35PM, IBM.N - International Business Machines Corp at UBS Global Technology and AI Conference

Question: David Vogt - UBS - Analyst : Got it. All right. I think we're out of time. Dinesh, thank you for your time. Thank you, everyone, for joining, and we'll speak soon. And again, Olympia is in the audience, if you want to hit her with the hard-hitting questions. So thank you again, everyone.