In the seven years (since 1994), that Lou Gerstner has reigned over IBM, the company’s earnings per share have increased an average of 27% per year. This remarkable increase in earnings, has not gone unnoticed by the securities markets. Indeed, the company’s market value has grown from less than $30 billion to over $200 billion during this period.
Use the following financial statement data to:
1. Decompose IBM’s ROE and discuss the factors (and trends) that contribute to Big Blue’s profitability