Gerstner Credited With Turnaround

When Louis V. Gerstner was hired as IBM's CEO in 1993, the short-term objective he was given by its board of directors was simple, according to an internal memo he wrote last week: "Save the company."

Gerstner joined IBM in the midst of a deep crisis. The company was losing money and was thought to be in danger of going the way of many other once-dominant hardware vendors that missed the shift from proprietary mainframes and minicomputers. Even the namesake IBM PC business was passing IBM by.

But Gerstner gets credit for turning the company around. IBM still isn't viewed by analysts as a high-growth company, but it has become competitive across a broad range of technologies where it was previously an also-ran.

Gerstner was also praised for significantly increasing IBM's focus on the lucrative IT services market, to the point where services revenue surpassed hardware sales during the second half of last year.

"In the past, services was [an afterthought] offering at IBM," said Tom Bittman, an analyst at Gartner Inc. in Stamford, Conn. "Under Gerstner, [IBM Global Services] would go out and sell their strategic capabilities and, by the way, sell hardware and software. And that's been great for the company."

Expressing a viewpoint shared by other analysts, Bittman described Gerstner as a "buttoned-down and intense" CEO who was exactly what IBM needed as it looked to cut costs and overhaul its internal structure. He also engineered acquisitions of vendors such as Lotus Development Corp. and Tivoli Systems Inc.

Gerstner came to IBM with no experience in the computing industry, having worked previously as CEO of RJR Nabisco Inc. and president of American Express Co. in New York. IBM said Gerstner will remain chairman until the end of the year, and he will then be given a 10-year consulting contract.

IBM last week also said that John M. Thompson, 59, will retire from his position as vice chairman effective Sept. 1. Thompson built up IBM's software group under Gerstner and is currently in charge of business and technology strategy.

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Copyright © 2002 IDG Communications, Inc.

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