# MCI to Acquire SBS

During the year, IBM, Aetna Life & Casualty and MCI Communications Corporation reached agreements in principle under which MCI would acquire substantially all the assets and operations of Satellite Business Systems (SBS).

Under the agreements, IBM has purchased Aetna's interests in SBS. MCI will issue approximately 47 million shares of common stock to IBM in exchange for the SBS assets and operations. Completion of the merger is subject to the approval of the FCC and review under the provisions of the Hart/Scott/Rodino Act.

IBM has a continuing interest in the telecommunications services industry. We believe that combining the operations of SBS and MCI will strengthen both organizations, as well as competition in the industry, and telecommunications customers will benefit.

## Prospects for the Future

Varying rates of economic growth and capital investment, changes in international trade and tax policies and currency fluctuations may continue to affect near-term growth for our industry. However, we continue to be optimistic about IBM's long-range prospects.

We believe demand for our products and services has always been driven by scientific and technological progress; by continuous improvements in price/performance and quality; by development of new products that help make our customers more efficient in everything they do; and by the steady emergence of new problems to be solved to better the lives of people around the world.

We see no changes in any of those long-range fundamentals, however uneven rates of growth may be in the short term.

## Deficit Reduction

While we are optimistic about the future, our experience in 1985 makes it clear that much depends on the United States setting its economic house in order, beginning with reduction of the federal deficit.

Debt service on the deficit depletes resources that could be more productively applied to strengthening our economy and our society. Because it has kept interest rates higher than they would otherwise have been, the deficit also has been a significant factor in the overly strong U.S. dollar, relative to other currencies. The effect on the economy and on many of our customers is double-edged: a flood tide of imports into the United States, with profound consequences for our industrial sector; and a significant disadvantage for U.S. companies which depend on export business, as the strong dollar makes their products less competitive in other countries.

The dollar's strength has recently moderated, and the Congress' renewed interest in deficit reduction is a positive first step. We all will have a stake in the difficult choices that must be made over the next several years to achieve meaningful and lasting change.

## People are Key

In large measure, IBM's prospects rest with our people, who have confirmed once again that they are remarkably energetic, resourceful and dedicated, whether in adverse circumstances or expansive ones. We are deeply grateful for their continued support and mindful that they are the best assurance of the company's continued prosperity.

January 28, 1986, by order of the Board of Directors

John R. Opel  
Chairman of the Board  

John F. Akers  
President and Chief Executive Officer

## Continuing Partnerships

Just as no country is an island in today's global marketplace, an international company like IBM continues to rely on many interdependent resources and relationships as we participate in the growth of this remarkable industry.

Our associations may be with customers, suppliers, remarketers or university researchers. The results may be innovative products and services to meet new opportunities, advances in science and technology, or ways of demonstrating that we are a responsible and responsive citizen of the countries and communities around the world in which we do business. Each party contributes; each benefits.

The following pages describe the range of these relationships. Some are traditional and long-standing, while others are distinctly new. All of them point the way to our future.