News: Analysis & Commentary: EXECUTIVE SUITE
AT IBM, THE GREAT SHRINK-DOWN MAY BE OVER
For a time, IBM Chief Financial Officer Jerome B. York was just what the struggling computer giant needed. In a little more than two years, the blunt-talking executive engineered a balance-sheet turnaround by relentlessly slicing corporate fat. Then, on Sept. 1, he dropped a bombshell: He resigned to become vice-chairman of Kirk Kerkorian's Tracinda Corp. and join its bid to take over Chrysler Corp. York acknowledges he's leaving IBM just as Chairman Louis V. Gerstner Jr. is making a major strategic shift, from York's no-holds-barred cost-slashing to a new focus on boosting revenue. "Lou's charter is, at this point in time, certainly the opposite [of mine]," York says.
That change in emphasis is largely behind what's shaping up as a major management shuffle at IBM. To replace York, Gerstner named longtime colleague G. Richard Thoman as CFO, yanking him off the as-yet-incomplete task of turning around Big Blue's struggling PC business. Gerstner also moved four executives up the ladder. The big surprise: Longtime IBM executive Robert M. Stephenson, unknown outside the computer giant, was given the high-profile job of running the PC business. What's more, IBM shuffled executives in its troubled software business. In all, nearly a dozen executives changed jobs.
SOFTWARE CZAR. Meanwhile, Gerstner has been quietly bolstering the ranks with outsiders. The latest example: Gian Carlo Bisone, lured from rival Compaq Computer Corp. to be software marketing chief. Up and down the ladder, Gerstner has recruited scores of executives to run everything from PC manufacturing to high-level consulting units. Since April, 1993, when Gerstner took over, 12% of IBM management has come from places such as Black & Decker, Booz Allen, NEC, Citibank, MCI Communications, and Compaq. "I'm sorry to see York go, but Gerstner does seem to be building a strong team," says William Milton Jr., an analyst with Brown Brothers Harriman & Co.
Gerstner's main goal: To shift IBM's mix of skills from old-line mainframes and minicomputers to high-growth businesses such as networking, software, and services. That job is far from complete, as became obvious on Sept. 13 when IBM stock sank 3% to 945/8, on the news that mainframe delays would hurt third-quarter earnings.
Gerstner's latest top-management picks are executives he thinks can produce greater growth. As head of North American sales, Stephenson helped streamline the sales organization, establish industry-specific sales units, and devise a compensation plan that boosted PC sales dramatically. David M. Thomas, who once headed IBM's successful AS/400 minicomputer business and recently ran Asia/Pacific sales, now gets the North American sales job.
Bolstering IBM's critical software business is another key element of the shakeup. Software units contribute $11 billion a year in revenue and an estimated $2.5 billion in IBM profits. But those numbers have been slipping this year. So in January, Gerstner made experienced troubleshooter John M. Thompson IBM's software czar--its first. In addition to bringing in Bisone, Thompson shook up the troubled OS/2 software unit, moving in longtime marketing executive John W. Thompson. John W., who is not related to John M., has been working to expand IBM's stable of independent software developers.
GLOBAL SAVVY. Thoman could be another big asset, analysts say. He has worked with Gerstner for 23 years in various capacities. Moreover, he ran several IBM businesses, including PCs. And, he's the first IBM CFO with a heavy dose of international experience--an area where the company already does 62% of its business and one that Gerstner is stressing.
At IBM, cost-slashing remains an important goal. To make room for new recruits, the company has cut workers in administration, finance, and marketing. Now, analysts expect it to launch a new round of cuts in its North American workforce--anywhere from 6,000 to 10,000 employees--by the end of this month. The cuts will allow Gerstner to add a substantial number of employees in fast-growing businesses, while keeping employment at around 215,000 to 220,000, analysts say.
Now, if all those new managers will just lead the way, maybe IBM could get on to the next phase of its recovery--revenue growth.
SHUFFLING THE DECK
-- GIAN CARLO BISONE, 48, general manager of software marketing. Strength: an ex-Compaq Computer exec with global marketing expertise.
ROBERT STEPHENSON -- 57, senior vice-president and PC chief. Strengths: no-nonsense attitude and ability to carry out existing strategy.
-- RICHARD THOMAN, 51, chief financial officer. Strengths: longtime Gerstner confidant, rich international experience, has run several IBM businesses.
DAVID THOMAS -- 46, general manager in charge of North American sales. Strength: well-respected by IBM's sales force.
-- JOHN M. THOMPSON, 52, senior vice-president and top software exec. Strengths: analytical skills, willingness to bring in outside people and suppliers.
JOHN W. THOMPSON -- 46, general manager of IBM's Personal Software Products Div. Strength: has worked with companies developing software for IBM.By Ira Sager, with Amy Cortese, in New York