The Skinny blog is written by Rick Smith, editor and co-founder of WRAL Tech Wire and business editor of WRAL.com.

RESEARCH TRIANGLE PARK, N.C. –  Virginia Rometty, IBM’s first woman chief executive officer who took over that job from Sam Palmisano on Jan. 1, hasn’t devoted much time to talking with the press or giving press conferences, so little insight has really been gained from those outside the executive suite about where she plans to take Big Blue.

IBM is currently undergoing what has become an annual ritual – a “rebalancing” in which its U.S. and North American work force is reduced with jobs offshored – even as company headcount swells over 400,000.

So what does she have in mind for next steps and for meeting long-range profit goals as set forth last year by Palmisano?

In IBM’s annual report for 2011, Rometty shares her plans through a letter to shareholders.

“I am pleased to report that IBM had another strong year in 2011,” she began. “Your company continued to outperform our industry and the market at large. We capped IBM’s first century by achieving record revenue, profit, free cash flow and earnings per share. At the same time, we continued to deliver superior returns to you, and we are well positioned for future growth in a globally integrating economy.”

She noted 7-percent revenue growth, a ninth straight year of margin growth and a continuing shift away from hardware.

“We achieved this by continuing to shift our business mix to more profitable segments and by driving productivity. More than 90 percent of our segment profit in 2011 was from software, services and financing.”

Earnings grew as did cash flow and dividends.

“Our cash flow has enabled us to invest in the business and to generate substantial returns to investors, while spending $6.3 billion on R&D,” Rometty noted.

“In 2011 we invested $1.8 billion for five acquisitions in key areas of software and $4.1 billion in net capital expenditures. We were able to return $18.5 billion to you—$15 billion through share repurchases and $3.5 billion through dividends”

 ”A road map to the future”

How is IBM doing this?

“This performance was the result of disciplined execution by more than 400,000 IBMers and the strategic repositioning of the company over the past decade,” Rometty said. “We have steadily realigned our business to lead in a new era of computing and to enable our clients to benefit from the new capabilities that era is creating. As a consequence, our investors benefit from a business model that is both sustainable over the long term and fueled by some of the world’s most attractive high-growth markets and technologies.”

Looking ahead, Rometty noted that earnings per share “road maps” were introduced as a key performance benchmark in 2007 and in 2010 those were “surpassed.”

“Now, we are well on track toward our 2015 Road Map goal of at least $20 in operating earnings per share. As before, the road map is not simply a list of targets, but a management model built on exploiting multiple ways to create value. Operating leverage will come from our continuing shift to higher-margin businesses and improving enterprise productivity—expected to be $8 billion over this five-year period. We will create value for shareholders through an anticipated $50 billion in share repurchases and $20 billion in dividends.”

(Note: Emphasis added.)

The key objectives:

“1. Growth Markets. Revenue for our Growth Markets Unit was up 11 percent at constant currency for the second year in a row. Growth markets contributed 22 percent of IBM’s geographic revenue in 2011, up from 11 percent in 2000, and we expect them to approach 30 percent by 2015.

“2. Business Analytics. Our analytics business grew 16 percent for the year. Having spotted early the emergence of “big data,” IBM built the world’s leading analytics software and consulting practice, and we are translating it into powerful new capabilities, which enable our clients to identify, manage and even predict outcomes that matter to their success.

“3. Cloud. IBM has helped thousands of clients adopt aspects of cloud computing, where IT resources are virtualized, highly automated and accessed by self-service. Our cloud revenue in 2011 was more than three times the prior year. Our strong strategic positioning, solid balance sheet, recurring revenue, robust profit streams and unmatched global reach give us confidence that we will achieve success in the next five years, as we have during the past decade.

“4. Smarter Planet. All of this comes together in our solutions to build Smarter Planet systems, transforming systems such as supply chains, retail, energy, transportation, telecommunications, food and water. It includes the successful establishment of large new market categories, such as Smarter Cities and Smarter Commerce. Smarter Planet revenue grew by almost 50 percent in 2011.”

“The decade ahead”

Rometty is enthusiastic about IBM’s prospects.

“Without question, the world is undergoing disruption,” she wrote. “But IBM now stands out among our industry peers and in business at large as distinctively able to keep moving to the future, and to keep generating differentiating value for our clients, our employees and the citizens of the world. And that, in turn, promises to continue generating high value for our owners.
The fact that we enter IBM’s second century with such strength and confidence is a testament to the extraordinary leadership of Sam Palmisano as IBM’s CEO. … But there is no doubt that IBM today is far stronger than it was a decade ago, in both its performance and its impact on the world.”

After praising shareholders “for your unwavering support,” Rometty closed by saying:

“I trust you share our excitement about your company’s performance and the way in which IBMers are building on our storied past to build an even brighter future.”

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