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CNBC Exclusive: CNBC Transcript: IBM Chairman & CEO Virginia Rometty Speaks with CNBC’s David Faber Today on “Squawk on the Street”

WHEN: Today, Tuesday, October 6th

WHERE: CNBC's "Squawk on the Street"

Following is the unofficial transcript of a CNBC EXCLUSIVE interview with IBM Chairman & CEO Virginia Rometty today on CNBC's "Squawk on the Street" (M-F, 9AM-11AM ET). Following is a link to the interview on CNBC.com: http://video.cnbc.com/gallery/?video=3000428098.

All references must be sourced to CNBC.

DAVID FABER: IBM DOUBLING DOWN ON BIG DATA TODAY. IT'S ANNOUNCING A NEW PRACTICE THAT AIMS TO CAPITALIZE ON THE COMPANY'S WATSON OFFERING. THE 2,000-PERSON CONSULTING GROUP WILL BE CALLED COGNITIVE BUSINESS SOLUTIONS AND IT WILL ADVISE COMPANIES ON HOW TO USE WATSON TO THEIR ADVANTAGE. BUT WILL IT BE ENOUGH FOR IBM, OF COURSE, WHICH CONTINUES TO SEEK GROWTH FOR SOME OF THESE IMPORTANT INITIATIVES? HERE TO BREAK IT ALL DOWN FOR US, GINNI ROMETTY, THE CEO OF IBM. SHE JOINS US FROM THE GARTNER SYMPOSIUM IN ORLANDO, FLORIDA. AND GINNI, VERY NICE TO HAVE YOU. WHAT DO I GET IF I HIRE YOUR COGNITIVE BUSINESS SOLUTIONS UNIT TO COME IN AND ADVISE MY COMPANY?

VIRGINIA ROMETTY: WELL DAVID, LET ME BACK UP A SECOND FROM THERE BECAUSE IN THE END, WHAT YOU GET IS DIFFERENTIATION. BUT JUST TO BACK UP AND KIND OF BACK TO MANY CONVERSATIONS YOU AND I HAVE HAD, THIS REALLY BUILDS ON A FOUNDATION THAT WE HAVE BEEN BUILDING FOR QUITE SOME TIME. AND AS WE'VE TALKED ABOUT THESE STRATEGIC COMPARATIVES THAT REALLY FORM THE BASE FOR ANY COMPANY BECOMING A DIGITAL BUSINESS. AND YOU KNOW WE BUILT BIG FRANCHISES AROUND ANALYTICS, AROUND CLOUD, AROUND MOBILITY IN SUCH THAT THEY ARE NOW 25 BILLION AND 27% OF IBM AT THE END OF LAST YEAR. GREW 20% AND 30% AGAIN IN THIS FIRST HALF. THAT'S THE FOUNDATION. AND THAT IS ABOUT BECOMING A DIGITAL BUSINESS. BUT, WHEN EVERYONE IS DIGITAL, WHAT'S DIFFERENTIATING? AND SO TO YOUR QUESTION WHAT DO YOU GET WHEN YOU THINK OF COGNITIVE? THINK ABOUT DIGITAL BUSINESS, MARRIED WITH DIGITAL INTELLIGENCE, AND YOU GET COGNITIVE. WHAT I WAS REALLY HERE TO TALK ABOUT, IN ADDITION TO A PRACTICE, IS THIS IS AN ERA. COGNITIVE ERA. IT'S AN ERA OF TECHNOLOGY AND IT'S AN ERA OF BUSINESS FOR COMPANIES.

FABER: AND YOU HAVE ADS TO THAT POINT, OF COURSE THAT ARE STARTING. I THINK EVEN ON OUR OWN NETWORK. A WASH IN DATA IS THE WORLD – A WORLD THAT NEEDS TO BE REINVENTED OR IS BEING REINVENTED IN CODE WITH THE ADVENT OF COGNITIVE COMPUTING. YOU ARE USING WATSON IN WAYS THAT YOU HADN'T A YEAR OR TWO AGO, GINNI. IT SEEMS TO BE BECOMING A MUCH MORE IMPORTANT PART OF YOUR OVERALL STRATEGY PARTICULARLY FOR THESE IMPERATIVES THAT YOU DESCRIBE. IS THAT THE CASE?

ROMETTY: THAT'S ABSOLUTELY CORRECT. IN FACT, IF YOU THINK ABOUT COGNITIVE AS AN ERA OF TECHNOLOGY, AND YOU USE WATSON SYMBOLIC OF THAT, YOU KNOW IT IS A TECHNOLOGY ERA THAT – WHAT WATSON DOES IS IT UNDERSTANDS INFORMATION. AND WHEN YOU TALKED ABOUT A WASH IN INFORMATION, IT'S NOT REALLY JUST THE AMOUNT. THINK OF A STATISTIC THAT 80% OF THE DATA IN THE WORLD IS ACTUALLY DARK TO COMPUTERS. MEANING IT MAY HOLD IT, BUT IT DOESN'T KNOW WHAT'S IN IT OR UNDERSTAND IT. SO, THESE NEW COGNITIVE SYSTEMS – WATSON – IT BOTH UNDERSTANDS IT, IT CAN REASON, IT CAN LEARN, AND THEN IN THE END, YOU CAN ACTUALLY TAKE THOSE CHARACTERISTICS – THINKING, LEARNING – AND THEN EMBED IT IN A BUSINESS. THAT'S IN FACT WHAT COGNITIVE AND WHAT WATSON REALLY STARRING IN THAT PICTURE DOES. AND YOU'LL REMEMBER WHEN WATSON PLAYED JEOPARDY. THAT WAS 2011. AND AT THAT TIME, JUST TO SHOW YOU HOW FAR WE'VE COME, WATSON REALLY DID ONE THING – QUESTION AND ANSWER. UNDERPINNED BY FIVE TECHNOLOGIES. TODAY, THAT'S 28 DIFFERENT THINGS, GOING TO 50. AND, IN FACT, IT'S A PLATFORM. SO THINK OF THESE IN THIS WORLD MANY PEOPLE THINK ABOUT HOW YOU CREATE FUNCTION AS YOU COMPOSE IT. THE TECHNOLOGY WORD WOULD BE SOMETHING CALLED APIs. AND THINK OF WATSON AS ALL THESE FUNCTIONS THAT YOU PULL COGNITIVE INTO EVERY PART OF HOW A COMPANY OPERATES. SO THIS NOW TAKES AND ALLOWS EVERYONE TO DIFFERENTIATE NOT ONLY WITH INFORMATION OUTSIDE, BECAUSE IT WILL ALL BE ABOUT INFORMATION, BUT ALL THEIR ASSETS INSIDE. AND TURNS YOU INTO A THINKING BUSINESS THROUGHOUT EVERYTHING YOU DO. A SILVER THREAD, BOTH IN MY COMPANY AND FOR OUR CLIENTS.

FABER: RIGHT. THE LAST TIME YOU AND I SAT DOWN WAS DURING YOUR INVESTOR DAY A NUMBER OF MONTH BACKS, OF COURSE. YOU SPOKE ABOUT THESE STRATEGIC IMPERATIVES, AND YOU PUT A TARGET OUT THERE ESSENTIALLY SAYING WE ARE GOING TO ADD ANOTHER 15 BILLION, I THINK IT IS, IN INCREMENTAL REVENUE FROM THESE GROWTH BUSINESSES OVER THE NEXT THREE YEARS. GINNI, SIX MONTHS LATER OR SO, ARE YOU STILL CONFIDENT YOU ARE ON TRACK DO THAT?

ROMETTY: WELL, AS WE SAID, $40 BILLION, GREATER THAN 40% OF IBM AND IN THE FIRST HALF GREW 30%. SO WE ARE GOING TO CONTINUE, DAVID, ON THOSE FRANCHISES. THE MOST IMPORTANT MESSAGE TO REALLY GET ACROSS TO CLIENTS AND TODAY WHEN YOU TALK ABOUT AN ERA, AN ERA DOESN'T HAPPEN IN A MINUTE. AN ERA IS A LONG PERIOD OF TIME THAT NOT ONLY IS IT A TECHNOLOGY ERA, BUT CHANGING THE WAY A BUSINESS OPERATES. SO, IF I CAN JUST CIRCLE BACK AND WHEN YOU SAY I'M CONFIDENT ABOUT THE IMPACT, NOT ONLY ON IBM, THE IMPACT AS WELL ON OUR CLIENTS. AND THAT'S ACTUALLY THE MOST IMPORTANT THING ABOUT DIFFERENTIATION. SO THAT WHAT I BELIEVE COGNITIVE IS GOING TO DO FOR BUSINESS IS AT THE HEART OF IT, IT CHANGES HOW YOU ENGAGE WITH YOUR CLIENTS, IT ALLOWS YOU TO SCALE EXPERTISE, YOU WILL BUILD THINKING INTO ALL YOUR PRODUCTS AND SERVICES. YOU WILL BUILD A COGNITIVE SUPPLY CHAIN IN YOUR OPERATIONS. IN THE END, YOU WILL COMPLETELY CHANGE HOW DO YOU DISCOVERY. THE KINDS OF RESULTS WE'RE SEEING, I THINK, ARE QUITE ASTOUNDING. SO WHETHER IT'S THE IDEA THAT A SUPPLY CHAIN DRIVES ANYWHERE FROM I'VE SEEN WITH CLIENTS 2% TO 10% MORE SALES, FIVE POINTS MORE MARGIN, OR IF ON THE OTHER SIDE, WHEN THERE'S ACTUALLY COGNITION IN LEARNING AND HOW YOU ENGAGE AND FILL OUT AN INSURANCE FORM, NINE POINTS HIGHER SALES. TO ME THAT FORMS A FOUNDATION THAT IS ALL ABOUT WHAT WE DO FOR OUR FUTURE SUCCESS AND WHAT MAKES OUR CLIENTS SUCCESSFUL IN THE FUTURE.

FABER: GINNI, OF COURSE WE ARE TALKING A GOOD DEAL HERE ABOUT THE FUTURE, BUT IN TERMS OF THE PRESENT RIGHT NOW, AND SOME OF THE HEAD WINDS YOU'RE FACING, WHETHER IT BE CURRENCIES, GIVEN OF COURSE YOUR INTERNATIONAL EXPOSURE, OR EMERGING MARKETS, WHICH ARE AN IMPORTANT PART OF YOUR BUSINESS, ARE YOU SEEING CONTINUED WEAKNESS THERE? WHETHER IT BE CHINA OR BRAZIL OR SOME OF THE OTHER MAJOR MARKETS? AND WILL THAT HAVE AN IMPACT ON YOUR NEAR-TERM EARNINGS?

ROMETTY: WELL, AS YOU KNOW, AROUND THE WORLD THERE ARE DIFFERENT KINDS OF HEAD WINDS THAT WE ALL DEAL WITH. AND IN FACT, WHAT IT REQUIRES IS A DIFFERENT STRATEGY FOR ALL DIFFERENT PARTS OF THE WORLD. AND OBVIOUSLY, WE'VE TALKED ABOUT CURRENCY IN A NUMBER OF THESE THINGS BEFORE. THESE ARE ALL THINGS THAT ARE PART OF THE GLOBAL DYNAMICS THAT WE'RE MANAGING, OBVIOUSLY, RIGHT NOW, DAVID. SO, THAT IS ALL PART ABOUT BEING A GLOBAL BUSINESS, AND IT'S ALL PART ABOUT, YOU KNOW, HAVING A VIEW ON THE LONG-TERM AS WELL. AND A VIEW ON WHAT IT IS THAT WE DO TO REINVENT THIS COMPANY. THAT'S ACTUALLY WHAT TODAY HAS REALLY BEEN ALL ABOUT. TO STAY AT STEADY COURSE, THOSE STRATEGIC IMPERATIVES, DO EXACTLY AS YOU SAID, THEY FORM A STRAIGHT SOLID FOUNDATION THAT WE ARE GOING TO CONTINUE TO INVEST IN. AND AS WE TALKED ABOUT, CONTINUE TO SHIFT 40% OF OUR – 4 BILLION OF SPENDING INTO THOSE STRATEGIC IMPERATIVES THIS YEAR. AND AS I SAID, FIRST HALF, CLOUD, 70%. AS YOU SAW, DATA ANALYTICS, BIG NUMBER. UP 22%. MOBILITY, AS YOU SAW, FOUR TIMES. SO, THIS IS WHAT'S FORMING THE FOUNDATION FOR THE IBM COMPANY AS IT TRANSFORMS. AND THIS NEXT ERA IS ALL AROUND COGNITION.

FABER: RIGHT. AND GETTING PEOPLE TO FOCUS ON IT. FINALLY GINNI, THOUGH, YOU KNOW I DID NOTE THAT YOU HAD TIME TO SPEND THERE WITH PREMIER XI JINPING FROM CHINA WHEN HE RECENTLY VISITED. THERE'S A LOT OF TENSION, WHETHER IT BE CYBERESPIONAGE OR JUST SIMPLY PROTECTIONISM. DID YOU HAVE AN OPPORTUNITY TO TALK TO HIM? AND IF SO, WHAT DO YOU TALK TO HIM ABOUT? GIVEN YOU ALSO HAVE A LOT OF EMPLOYEES IN CHINA, NOT JUST SELLING A LOT OF STUFF THERE.

ROMETTY: WE HAVE A BUSINESS IN CHINA, EMPLOYEES AS WELL. AND ACTUALLY, I THOUGHT THE VISIT WAS QUITE PRODUCTIVE. THIS IS NOT THE FIRST TIME THAT WE HAVE HAD MEETINGS, AND QUITE PRODUCTIVE. IN FACT, I THINK IT WAS A GOOD DIALOGUE BETWEEN THE COMPANIES FROM BOTH PARTS OF THE WORLD TALKING ABOUT WHAT EVERYONE NEEDS TO BE SUCCESSFUL.

FABER: WE ARE GOING TO LEAVE IT THERE. I KNOW YOU'RE RUNNING TIGHT ON TIME. GINNI ROMETTY AS ALWAYS, WE APPRECIATE YOU CHECKING IN WITH US. GINNI ROMETTY, CHAIR, CEO OF IBM JOINING US FROM THE GARTNER SYMPOSIUM.

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