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IBM CEO Rometty: 'We Are Not Exiting Hardware'

With regard to transforming industries, the CEO noted IBM's business analytics revenue rose 9% in 2013, led by Global Business Services and Software. "This is already a nearly $16 billion business for us, and we have raised our expectations for it," she wrote. Just over a year ago, the tech giant increased its 2015 revenue target for analytics and big data to $20 billion from $16 billion.

Big data refers to the management of vast quantities of unstructured data, or information that is outside the realm of traditional databases. Examples include email messages, PowerPoint presentations, audio, video and social media information. IBM Chart IBM data by YCharts

Addressing the opportunity in cloud, Rometty wrote that IBM's cloud business grew 69% in 2013, generating $4.4 billion in revenue. "As we actively embrace cloud in order to deliver 'IBM as a Service' to our clients, we expect to see significant benefits in client experience, revenue growth and enterprise productivity," she wrote.

Experts have already identified 2014 as a crucial 12 months in IBM's 103-year history. The company has kicked off the year with a slew of major announcements such as the Lenovo deal, billion-dollar investments in Watson supercomputer and cloud technology and plans to rebalance its workforce.


Jeffrey Sonnenfeld, senior associate dean for Executive Programs at The Yale School of Management and an expert on strategic leadership, applauded IBM's shifting focus. "It's a tremendous model of an iconic brand profoundly refreshing itself from stem to stern," he said, in a phone interview. "They now have the technology infused business tools that give them business service leverage that nobody else has."

(Sonnenfeld is a former member of TheStreet's Board)

As one of the tech sector's best-known dividend payers, IBM's cash position is always of interest to shareholders. The tech giant's free cash flow, crucially important for generating healthy dividends and share repurchases, was $15.02 billion in 2013, a decrease of $3.16 billion from the prior year. Nonetheless, IBM returned $17.92 billion to shareholders in 2013 - $13.86 billion in gross share repurchases and $4.06 billion in dividends.

IBM shares, which have fallen 7.51% in the last 12 months, closed up 0.02% at $187.68 during Friday trading.

--Written by James Rogers in New York.

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