Welcome and thank you for standing by. At this time, all participants are in a listen-only mode. Today's conference is being recorded. If you have any objections, you may disconnect at this time. Now, I will turn the meeting over to Ms. Patricia Murphy, Vice President of Investor Relations. Ma'am, you may begin.

Thank you. This is Patricia Murphy, Vice President of Investor Relations for IBM. I want to welcome you to our third quarter earnings presentation. I'm here with Martin Schroeter, IBM's Senior Vice President and CFO, Finance and Enterprise Transformation. Today we're also joined by Ginni Rometty. As you know, Ginni is IBM's Chairman, President and Chief Executive Officer. First, Martin will go through our prepared remarks and then Ginni and Martin will take your questions. The prepared remarks will be available in roughly an hour, and a replay of the webcast will be posted by this time tomorrow. I'll remind you that certain comments made in this presentation may be characterized as forward looking under the Private Securities Litigation Reform Act of 1995. Those statements involve a number of factors that could cause actual results to differ materially. Additional information concerning these factors is contained in the company's filings with the SEC. Copies are available from the SEC, from the IBM website, or from us in Investor Relations. Our presentation also includes certain non-GAAP financial measures, in an effort to provide additional information to investors. All non-GAAP measures have been reconciled to their related GAAP measures in accordance with SEC rules. You will find reconciliation charts at the end of the presentation, and in the Form 8-K submitted to the SEC. Now, I'll turn the call over to Martin Schroeter.

Thanks Patricia. We've a lot to cover today, our third performance, actions that accelerate the transformation of our business, including important announcements that impact our results and the basis of our reporting, our 2014 guidance and what it means as we move into 2015. Let me start with the top level results. We reported revenue of $22.4 billion, which is down 4% or 2% at constant currency, excluding our customer care divestiture. We delivered operating net income of $3.7 billion and earnings per share of $3.68, all excluding the discontinued semiconductor manufacturing business. These results fell short of our expectations and I would attribute the shortfall to three primary drivers. First, our software revenue was weaker than expected. We had some sales execution issues and in addition we've made it easier for our clients to manage their IBM software capacity across new and more traditional workloads as they invest in our platform for the longer term. I'll expand on this later. Second, we didn't get the productivity required in our services business, impacting both our profit and margin and third, the environment including currency isn’t helping. With a sharp movement in currency rates in September, there was some effect in the quarter and we expect it to have a larger impact going forward and for the business overall, we did see a slowdown in September, which had a particular impact on us given the skew of our transactional business. I'll get into the details of the quarter shortly, but let me first describe the actions we are taking and put them into context. For some time now, we've been clear about our strategic direction and how we address the market shifts around data, cloud and engagement. All of this year, we've been launching initiatives and making significant investments to drive…

Thank you, Martin. Before we begin the Q&A, I would like to mention a few items. First we have supplemental chart at the end of the slide deck that provide additional information. As Martin mentioned earlier, we've also posted articles to our Investor website that contain additional information on the two transactions discussed today. Second I would ask you to refrain from multipart questions. And finally I want to remind you that Ginni Rometty has joining today's Q&A. Operator, please open it up for questions.

Thank you. At this time, we would like to begin the question-and-answer session of the conference (Operator Instructions) The first question comes from Bill Shope with Goldman Sachs. You may ask your question. Sir, please check your mute button.

Sorry, can you hear me now.

Yes sir. Go ahead.

Okay great, thanks. I have a bit of a broader question. Obviously, there is a lot of new inflow here. So I am trying to understand or clarify how we should think about the unifying theme here for the shortfalls you are seeing. The challenges that really began in 2013 were primarily centered on the growth market. Can you talk about how much of your current challenges are still centered on that issue and how much of it is now is well beyond just a geographic problem at this time. And I guess related to that, how are you thinking about the potential for stability and growth markets and what that would do for your turnaround potential in 2015? Thanks.

Sure. Thanks Bill. I guess from a unifying theme perspective, the theme that we've been talking about since 2013 is both the secular and cyclical challenges we had in our hardware business and we talked about the profit loss year-to-year last year. Now relative to the growth markets, that hardware business has slight of assortment outsized effect because it does represent a more of the business there than what we see in the major market. So that theme within their current results continues despite the actions we've taken within the hardware business to reposition that. We are not yet seeing the benefits -- all of the benefits of that repositioning. So as we've talked about, we've repositioned power. We have divested of the X series business. We will ramp on the Z series cycle if you will, that's the cyclical element of this. So the ongoing theme of the hardware business continues and it does have an outsized impact on the growth markets. Now relative to the growth market, specifically the one other point I would make is that there is not a homogeneity around the performance of these growth markets. What we saw in the growth markets is a continuation of what I would call desperate revenue performance. So Brazil continues to do well. China continues to decline as that hardware business affects them fairly substantially. India declined in the quarter. What we see in the third quarter was where we have heavy transactional content we tended to have a much bigger decline in that September month. So again the unifying theme around hardware continues and specifically in the growth markets, we're seeing the disparity of performance continue and September impacted those transactional business much more dramatically.

Thanks Bill. Can we go to next question please?

The next question comes from Katy Huberty with Morgan Stanley. You may ask your question.

Yeah. Thanks. Good morning. Beyond what’s already been announced, what are the paths to accelerated transformation going forward? Are there additional assets sales on the table and also how likely is it that we see more transformative acquisitions going forward?

Well, I guess I would say a couple of things Katy. First, we do invest at a high level every year. Already we spend as you know about $4 billion in capital. We spent $5.5 billion in research and development as examples and we remain acquisitive. We've had a number of acquisitions this year to solidify if you will the core capabilities we filled around our strategic comparative. So when we think about accelerating the shift, think about it from a SoftLayer prospective for instance. We said earlier in the year, we put about $1.2 billion into capital into SoftLayer to expand their footprint around the world now. We're not going to add over $1 billion to our overall capital bill. We'll probably wind up adding just a few $100 million year-to-year, but again, we're shifting that into the SoftLayer business and that shift happens over time. And we think we have a pretty good set of facts around why and how that's working. So you saw again this quarter how the double-digit growth in our strategic imperatives. So as that shift happens over time, we've been able to shift. Now we're going to accelerate that and rebalancing our skill is an element or a means by which we can accelerate that shift. So yes, we will remain acquisitive. We still believe we have the core capabilities for our view of enterprise IT around data and cloud and engagement build and so we'll continue to add capabilities around those. But our core capabilities are in place. We do invest at a very high level and so we'll just accelerate the means by which we're shifting.

Okay. Thank you, Katy. Can we please go to the next question?

The next question comes from Toni Sacconaghi with Sanford Bernstein. You may ask your question.

Yes. Thank you. I have a question for Ginni. Ginni, IBM is missing its free cash flow goal this year by $3 billion to $4 billion, which certainly in investor's eyes is a really significant margin. The announced actions feel not that different quite frankly from what IBM has been doing for the last 10 years ongoing restructuring, organizational changes and select dispositions in the migration to a higher margin businesses. So I guess my question for you is do you think this time is different in the sense that do you view the current results as effectively a crisis at IBM and how do to gauge this magnitude of disappointment. And given that, do you believe that your responses should be outsized and different from what you’ve done historically and do you believe they are because certainly at the surface, they feel somewhat consistent with what you’ve done before.

Okay Tony, look, let's just back up one second and first let me get the context. As you said, does this time feel different? And so as you and we and I've talked with all our investors, this time in this industry is different, all right with these three shifts all going on at once. So it is unprecedented change, which then leads to your question. There is no doubt look in this quarter and part of the reason I am on the call, obviously we were disappointed in this quarter, but when we talk about what we're doing for the long term and these actions, these actions go on the heels of what has been a series of what I think are very bold actions from the entire year with a very clear strategy, one that's around moving to the enterprise IT to the era of cloud; one that's around data and analytics for transforming our client's industries and professions and then social, mobile and I can't underscore enough security. So when you step back and look at the full year, when we said these will reorder our industry and therefore we've got to reinvent ourselves like we've done in prior generations, but it will be around these things and just go back to January, Watson, $1 billion investment to start the Group. As Martin just talked about $1.2 billion to extend our data centers, 25 to 40 for cloud then a $1 for Bluemix. It is a platform, a platform-as-a-service that will provide a platform for innovation for many years to come. Not to mention the POWER8 having been redone developed bottom up for data and cloud, then $3 billion of research and development for semiconductors that secure our long-term future, not to mention what we did with Apple, with SAP, which are really a fundamental change in partnering strategy that not only apply to Apple and SAP, they really point to us being the go to enterprise that people come to and how to change and how to enter into the enterprise business along with having divested as you just heard as you well know $7 billion of revenue, which by the way was at a loss, $500 million loss right. So empty calories as some of my investors would say. And then the re-profiling of the STG business. So on the heels of those bold actions, these are three more that can sit, that continue and I consider them quite bold. The idea of cloud altogether integrated verticals and then not to underestimate this point about speed and what we're doing. In fact, I am going to really sort of punctuate this point on speed, these divestitures do give us some opportunity to go ahead and simplify the business and remove layers. Make no mistake, that's important because the strategies correct and now it's our speed of execution that needs to continue to improve.

Thank you. Can we please go the next question?

The next question comes from Benjamin Reitzes with Barclays. You may ask your question. Ben Reitzes – Barclays: Yeah, thanks a lot. Quick question I guess for both of you. I wanted to talk about earnings power. I am an old free cash flow guy call me antiquated, but the free cash flow has been averaging let's call it between $12 and $14 last two years. Your guidance now is about $12.40 if I take the midpoint and you're still reporting EPS and guiding for EPS at $16 plus and we've just had obviously a major setback here and usually when we're dealing with IBM, we've a roadmap and all those things to kind of guide us, but in my training, free cash flow EPS usually migrates towards free cash flow. So it seems like you have -- the lot of increased investments and what not that are going to keep the free cash flow low for some time, so I guess I wanted your view of earnings power and could we see flat to down EPS for several years now as these two numbers meet in the middle or is the EPS set to have growth from this $16 level despite free cash flow being significantly below. Thanks a lot.

Sure Ben. Thanks for the question. A couple of points. First from a free cash flow standpoint and your data that you just quoted, I won't re-hash it, but with the cash tax headwind this year, which we've talked about in the past, that's obviously an impact and the way the Lenovo transaction is structured has a free cash flow impact not only in the fourth quarter of this year, but that will carry through a little bit to next year as well. In terms of capital investment requirements and what we need going forward, as I mentioned on Katy's question, we'll grow -- we'll grow capital where we see opportunity and the software example is a good one, but in total, I would expect that our capital requirements to be fairly flat to up a little bit. They won't change dramatically going forward. And so once we get through some of these -- some of these impacts if you will, some of these headwinds on the cash line, I think we'll have in our relationship that is more like what you're used to from us. Now there are some other impacts that will affect if you will the ratios as opposed to the free cash flow alone. So as an example, you noted the earnings number on an earnings per share. Now that has obviously the gain from the Lenovo transaction in it, but that goes into the investing section of free cash flow. It doesn’t go into the free cash flow area. So there are some other impacts or some other dynamics around the free cash flow in the near term that are going to impact those ratios. The balance sheet itself -- when we look at the balance sheet itself, it looks -- it looks as though it's tracking. When you start and once you make some of these -- once you recognize some of the adjustments that we made, it was the balance sheet itself is continuing to track to the profitability and we would expect that to continue as well.

Thanks Ben. Christine, can we please take the next question?

The next question comes from David Grossman with Stifel Nicolaus. You may ask your question.

Thank you. Martin I can appreciate the comments you were making earlier about the hardware business and the impact that it's had on earnings and cash flow; however, you obviously have two very big important businesses beyond that both services and software. And I guess specifically in software, you had a pretty easy comparison this year and I am wondering if you could just better help us understand exactly what the issues are in software and what you mean by making software more consumable through digital channels and how that's going to impact the business?

Sure David. A couple of things on software, first when we say more consumable through digital channels, when we look at how the world is evolving in terms of how our clients will try, will then buy, a lot of that's moving into a model where they essentially have it through like what we have with our Bluemix or our store if you will, our platform that allows them to try and get access to Bluemix. So if you haven’t looked at our Bluemix content yet, I would encourage you to get a sense of what we mean by moving to a more digital engagement. On software specifically on performance, we did see as I mentioned in the prepared remarks, we did see a slowdown in September and that was true in software as well and obviously the software performance has a pretty profound impact on our profit given the margin. Within software when we looked at our performance, you saw that our WebSphere business continued to grow. It did reasonably well. Our SaaS business, our software-as-a-service business across all of software continue to do well. Where we had a bit of a struggle was in our IM business, in our Information Management business. Some of that's due to product transitions and some of it as we said in the call is the way we're providing flexibility around our clients as they engage in these enterprise license agreements as they engage to try to manage their capacity requirements. So again, the software performance impacted certainly in September, but not uniformly we did have pretty good growth in -- as I mentioned in WebSphere and some challenges in IM business, but disappointing as we said, a disappointing quarter for us in software.

Okay. Thank you, David. Can we please go to the next question?

The next question comes from Steve Milunovich with UBS. You may ask your question.

Thank you. Ginni, thanks for joining us today. A question for you. I believe you recently took some of your executives out to the Valley and I know when I go out, I generally come back pretty depressed, they all argue of course they're going to disrupt the large companies that the large companies basically have to break up. There is an inevitability to the difficulties that companies like IBM face. I was curious what you took away from that if you feel better or worse about IBM's ability to come back and conversely our survey suggests a lot of your customers do want IBM to help them to move forward, but I think investors are concerned that you won't get a lot of these new companies who do start out with a different kind of infrastructure. I wonder if you could comment on that.

Okay. That's a great question Steven. From a couple of different perspectives, first I've out there many times actually. So not even just one and you take a look at our software business and I think this is actually an important point as we've moved not only Watson, but software itself to be a platform for innovation for many companies. And so what we are finding is that many are very interested in software and software runs some of the most interesting start-up companies that there are. So on one hand, it's about providing them with infrastructure, but then Bluemix and this platform as a service and then the idea that Watson as a platform, which as you know the very different approach we've taken already 3,000 of those partners are in line to get on to Watson, many of those from the West Coast. So that's one set of messages I pick up that pertain from our what I would call the start-up, but to your other question I think as well an equally interesting to our current client base, I was with 30 CIOs of our biggest clients, just the tail end of last week and to me it was very interesting to hear them talk about what they really need and are going to need even more of our help from. And if the one -- of all that one of them called being a navigator that there are many of these startups out there and that's interesting for innovation and I agree. Every company will do some innovation and many of these are cloud companies and the like, but at the end of the day this gets integrated with how their businesses operate today and you can see this now sort of peaking into a point to say, hey look, you are the one that understand how an enterprise operates and how we should pull all this together. This is a wonderful opportunity for us and it really matches and I believe we've placed the right bet when we said in cloud one of the most important attributes would be hybrid and that's idea of all of us will build businesses part on the cloud. In fact you'll see most of that around things that need to move fast and then you'll have your systems of record. You'll need to integrate them, that's the world hybrid and we're seeing that play out. That's what people are looking for and that as you know, where we doubled down in creating a lot of capabilities around hybrid in the cloud, about data. We said at the end of the day, it's going to be all about data and it's going to be about security and I believe sure enough all three of those are coming to pass.

Thank you. Can we please go to the next question?

The next question comes from Tien-Tsin Huang with JPMorgan. You may ask your question.

Great. Thanks so much. Just wanted to ask a big picture question on people, labor and culture and things like that. I heard words like workforce, rebalancing, it sounds like you're shifting more to global delivery, more automation right in sales and processes. So what does this all mean for headcount? Could we see a big change in headcount and more importantly what's the impact on culture? Thanks.

Thanks Tien-Tsin. It's a good question. So a few things, we have -- we have been reducing headcount just as a function of some of the divestitures that we've been in. So as an example when we divested our customer care business, our headcounts come down and when we finish the x series divestiture, again same kind of pattern. So our overall headcount is obviously down. From a culture perspective around the shift to -- around the shift to global delivery centers, quite frankly we've not been as aggressive here as others have been. So we think we have an opportunity -- we have an opportunity move more that work to where we can put it into a more common platform. So yes, the overall -- yes the overall headcount is coming down and yes, we will be moving more aggressively into the global delivery centers, but again we have not been as aggressive as others and then the other thing I point out is that reduction in overall headcount also allows us now to think about how we simplify our business and some of what you heard in my prepared remarks were around trying to simplify the business. So yes, the overall headcount is coming down and I think what we would expect is not a dramatic shift if you will in the employee base, but just a reflection of what you’ve seen us publicly announce.

Yes and let me Tien-Tsin, let me go ahead and add, I really want to talk about this point on culture because this is something that we've been working on and I think it's again important as part of any reinvention of any company you have to go and match the culture with it. And I think of a couple defining characteristics of the culture we are building is. One is speed. The second is the word “engagement” and the third Martin just mentioned around simplification. And so make no bones about it on speed with the whole team and as many of you know, I've been on this and with our teams and it's not enough to tell teams about that you need to go faster. The point is you point them to where we're going to go. We've been very clear about the strategy and then it's also how you work and many people call that agile or DevOps. It's this kind of speed that comes with you try things, you fail, you correct them, you keep moving forward and that in fact is what we're building around the company in many of the places where we've done that already; great results and we're going to continue down that path. So I underscore speed and then the second is this idea about engagement, which really our use of social and mobile within our own company. This of that as a production engine that makes things go faster and it's also by the way what we do with commercial clients, but we've done a great deal of work on this topic to allow the IBMers across the 170 countries to both move to the future and move there with speed, this idea of engagement. And then as I said Martin mentioned simplify, and partly simplifying is this idea of taking layers out, which is what I just talked about a minute ago. So culture is paramount, take away the word speed and engagement.

Thank you. Can we please go to the next question?

The next question comes from Jim Suva with Citi. You may ask your question.

Thanks very much and Ginni, appreciate you coming on the call giving the changes in challenges and what's going on. Maybe if you can help us understand a little bit, when we look at the results geographically, it looks like all geographies were down and some may say it's more of an industry situation, but then when we look at IBM's results and compare them to the peers out there and the contenders who may be unique individual companies, they are all seeing a lot better growth. So then when they say, it's actually IBM focused challenges, can you help us better understand if you view this more as industry or IBM not being nimble enough or how is you kind of view the value trying to paint the culture in IBM to adjust to this new age and these new three focus areas.

So Jim first let me, when I think about revenue in our company, I think first and foremost about moving us to higher value and so when you think of higher value, as we've clearly staked out this idea around data and analytics, around cloud and around social, mobile and security, I want to take you back and just remember that in this quarter and in fact by the way those collectively grew almost 20% and it's improved every quarter, grown every quarter a higher number. And you take a look at, they're not small businesses. Big data and analytics which ended last year at what we think $16 million and now this quarter, year-to-date 8% and you take a look at cloud, already greater than 50% year-to-date and I think of how we ended last year what we were about $4.4 billion and the as-a-service was about $2.1 billion. On a run rate, we just now left or exited the $3.1 billion. If these were individual businesses, they would be very highly applauded for their growth rate and then on social, mobile and security, again eight quarters double-digit and so these are in and of themselves large businesses with very high growth rate. So I view those compared to their peers in those areas. They're doing quite well. Now when I take a look and you say what do I see overall, now we do at core franchises, core franchises that we've said they do mission critical work. In many cases, we need to keep innovating on them to improve their margin, but they may not be in growth markets and as you know we just as well added to the growth challenge and no apologies for divesting a revenue that is not high value, not core, we need…

Thank you. Can we please go to the next question?

The next question comes from Keith Bachman with Bank of Montreal. You may ask your question.

Hi. Thank you. My question relates to services and it's a two part question, can you grow services? Outsourcing is about 45% of revenues, services revenues and outsourcing backlog is down about 8% in constant currency, outsourcing signings and constant currency declined 17%, coupled with that, maintenance is about 13% of services revenue continues to decline. So when you think about that question, I wanted to add on to, why is IBM underperforming Accenture so dramatically? Is this part of the organizational structure so it really, Ginni you mentioned speed and engagement, it seems like IBM continues to underperform. Would IBM be better off with a different organizational structure perhaps even breaking up the company further allowed for greater speed and organization. So the two part question is can you grow services and then why is IBM underperforming market leader like Accenture so dramatically? Thank you.

Sure Keith. A couple of things. So in terms of services, we did not have the signings performance that we were looking for. Now we have some pretty big deals. I wouldn’t say that those deals are gone. Those deals are still out there and the teams continue to work them. There are -- as always, there are series of complexity in a regulatory environment and things. So we had a large pipeline and when we entered and unfortunately because we didn't get them done or fortunately maybe we have a larger pipeline as we exited the quarter as well. So we did not get the signings that we wanted. Now as we've talked about in the past, within any given quarter, but if I look at it over a longer term, about 70% of our revenue growth is driven by the backlog that we enter a year with and our backlog now adjusted for -- adjusted for the divestiture of our customer care BPO business is down about 2%. But what we've been seeing is better yield out of that backlog than what we've seen in the past and so a few dynamics. Backlog down a little bit, but with better performance in terms of what we were getting out of the backlog we've done a bit better. And then on the in quarter signings what we've in the past talked about in terms of base growth, which the way to think about that is sales into existing customers where we already have contracts there are generally two what I call forms of that. One form is where we are adding more work, deploying more service on their behalf or something of that sort and we did not see that as much as we expected in this quarter and…

Yes, I will just add a couple of points here in that, one the comment about versus Accenture right, now remember, managing for high value. So when you look at that from a margins point of view, you would say something different and so a couple of things. As Martin just described where we grow, I think it's important to see in their business, the team has aligned across where the growth areas are and then aligned in other areas where they need to really just focus on efficiency and productivity. That will allow them to continue to go faster. So as an example, the team is aligned around strategy and analytics together. We just talked about that result. They’ve aligned around what they call mobile and interactive. In fact we put another $100 million into these mobile studios, interactive design studios around the world. We are now the largest digital agency as measured by Ad Age, not ourselves, the largest digital agency out there. So their strategy and analytics, big practice, big practice around mobile and interactive. Both of those have very good growth and then I'll just complement it where Martin said, the other two practices ERP and then the other is application development and maintenance and between those you saw pricing pressure on application packages and you saw it as well as you just described it on application and maintenance area. But I believe the right way to grow, they’ve actually aligned themselves two different formulas and that is the right focus because remember again it's about managing for higher value.

Thank you. Can we please go to the next question?

The next question comes from Sherri Scribner with Deutsche Bank. You may ask your question.

Hi. Thank you. Martin, I was hoping you could give us a little more detail on the FX impact specifically. So it was going to get worse in the fourth quarter and continue into 2015. So just hoping you could give us some detail on the magnitude and how that runs through the P&L? Thanks.

Sure. So as we've talked about in the past and I mentioned on the -- in my prepared remarks as well. As currencies have a kind of a one directional long-term trend here, our hedging programs to help us manage our cash position really have no benefit to the INE anymore. So it was the sharp move in the third quarter, was relatively small. It was an impact in the quarter, but relatively small to what we see coming in the fourth and next year. Now this is all based on the most recent exchange rates and we don't know where this is going to wind up, but in the fourth quarter alone, as an example, FX could be up to the $0.25 in EPS on a year-to-year basis just from the moves to date. So it has a pretty profound impact on our profitability in the near term and again the hedging programs don't have an INE benefit if you will on a year-over-year basis as the currencies continue to move. Now next year, we'll talk more about next year when we get together in January, but that magnitude of impact is consistent with what we see in the fourth. Again it's a pretty substantial impact to us and as I noted in the prepared remarks, it wasn’t just, but it was a sharp move, it was that interestingly each of the currency seem to work against us. Most of the time we see some benefits from some of the crosses, some of the cross FXs, but we just did not see that this quarter.

Thanks Sherri. Can we go to the next question please?

The next question comes from Amit Daryanani with RBC Capital Markets. You may ask your question.

Good morning, guys. So may be just wanted to talk a little bit on the capital -- free cash flow usage as you go forward. We're obviously talking about a bit of a down tic on the free cash flow number, but I am curious how do you view the buyback program as you go forward? It's only has decelerated in the last few quarters and then when you talk about, excluding your initiatives into the newer IT markets, does that suggest maybe we start to look at more deals or maybe even bigger deals. So maybe if you can start on the buyback and the M&A side of the equation as we go forward?

Sure Amit, sure. So maybe I'll address the acquisition side of this first. We do continue to see ourselves being active. Now our acquisition model, which we think is a powerful one that works quite well for us is really built around a couple of basic principles. One is that we're not looking to acquire to change if you will who IBM is right. We have a very good position in enterprise IT and our acquisition strategy is to supplement our view of where we see enterprise IT moving around data, cloud and engagement. Two, we need to in order to drive the economics out of these acquisitions; we need to find things that we can put into our distribution channel immediately and get the -- and start to get the returns immediately and what that tends to me for us then is that acquisitions tend to be smaller because they have not yet fully globalized and we want to take advantage of that by bringing those products out to our clients. And then three, the basics here and my boss sitting next to me is going to remind me as well, we don’t do what I would call strategic and I’ll do the air quote, strategic acquisition they have to make sense economically and we will continue to make sure that our acquisition content is on a sound economic basis. In terms of share repurchase, we have been quite aggressive and the share repurchase and the resulting reduction in shares is -- it's fairly linear. It's something we've been doing for a long time. We've been returning capital to shareholders. The result or the impact is as mentioned fairly linear, so if we were to reduce -- if we were to reduce our share repurchase going forward, it would have a commensurate reduction in how many shares we take obviously. That’s not going to surprise you, but remember we've been -- since we've been aggressive, we can still have -- going forward, we can still have a very meaningful share reduction even if we were to reduce our levels going forward. And we feel very comfortable with the capacity and the flexibility we still have to continue to return capital to shareholders both through share repurchase as well as through dividend.

Okay. We've run a little late here. So Christine, why don’t we take one last question.

Thank you. The last question comes from Brian White with Cantor Fitzgerald. You may ask your ask your question.

Good morning, I just wanted to be clear what did the chip business lose in 2013 and what are the expectations for loss in 2014? Thank you.

I think. Hi Brian, I think we have provided this detail in the portal article, but just to go through the data, 2013 we had a loss of $700 million on a pretax basis and '14 is basically flat to what we saw in 2013.

Slightly better than that.

Little bit better. So 2013, $700 million loss, 2014 a little bit better and again the details are in the portal.

Okay. So let me -- I think it's probably good time for me then to wrap up here and I would like to make a couple of comments. And first I would like to just really summarize for everyone why I thought it was important to join the call today. As many of you referenced in your comments, we had two strategically important announcements that we made. One was this divestiture of the Microelectronic business. It's an important strategic move and very important to us. Martin just commented about some of the financial around it, but it is more than that. It is about strategy. The second is and the second important reason I wanted to join is, we no longer expect to deliver that 2015 EPS objective, which we have talked about and as you know it has been in place for some time. But these two things do come together and are underpinned by what I believe is a singularly importantly message to our investors and that we are reinventing and we are managing this company for the long term. So while make no mistake, our results this quarter were disappointing and we don’t want to minimize that. We have though been very clear that this industry is shifting and we have been executing our strategy that moves this company to the future. In fact, I’ve asked you just to keep remembering that the divestitures this year alone represent $7 billion of annual revenue, but revenue that is absolutely with considerable loss this time. So our company it is fundamentally better positioned than it was a few years ago, but as I said, we have more to do and we need to do it faster. Now while many things are changing, as I always say to our team,…

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