Louis V. Gerstner Jr speaking about his plans for the struggling computer giant during a press conference in New York on March 26, 1993/File Photo
NEW YORK: Louis Gerstner, who took over International Business Machines (IBM) Corp when it was on its deathbed and resuscitated it as a technology industry leader, died Saturday. He was 83.
IBM chairman and chief executive officer (CEO) Arvind Krishna announced Gerstner’s death in an email sent on Sunday to its employees, but didn’t provide a cause of death.
Gerstner’s nine-year tenure as chairman and CEO of the company known as “Big Blue” is often used as a case study in corporate leadership.
On April Fool’s Day, 1993, he became the first outsider to run IBM, which was facing a choice of bankruptcy or dismemberment after a period when it had been the undisputed leader in personal computers (PCs) and mainframes.
He pivoted the Armonk, New York-based company towards business services and away from hardware production, reversing a move to break up the company into a dozen or more semi-autonomous units – “Baby Blues” – in pursuit of greater profits.
Gerstner slashed costs and sold off unproductive assets, including real estate and IBM’s collection of fine art.
He fired 35,000 of the 300,000 employees, who had become accustomed to a culture of lifetime tenure based on principles established by former CEO Thomas Watson Sr in the early 20th century.
He stressed company-wide teamwork to replace the tradition of loyalty to various divisions, and he pegged compensation to corporate performance rather than individual results.
To meet performance goals, he emphasised regular accountability rather than waiting for yearly performance reviews.
“People do what you inspect, not what you expect,” he said.
The company became the impartial integrator for companies’ networks and systems, happy to help whether the hardware used had the IBM name on it or not.
Gerstner made an early bet on the Internet and e-business, which he guessed correctly would put less emphasis on personal computers and more on servers, routers and other more sophisticated equipment that would benefit from IBM’s service know-how and involve buyers familiar to IBM’s sales force, such as chief technology officers.
Later in his tenure, he also made some strategic acquisitions such as the US$2.2bil paid for Lotus Development Corp, whose Notes product was vital for helping IBM customers collaborate on an enterprise-wide basis.
The switch in focus from hardware to services resulted in an increase in services revenue from US$7.4bil in 1992 to US$30bil in 2001.
IBM’s share price went from US$13 to US$80 in his nine years as CEO, adjusted for splits, and IBM’s market value rose from US$29bil to about US$168bil in that period.
“If I had a vote, the most significant legacy of my tenure at IBM would be the truly integrated entity that has been created,” he wrote in Who Says Elephants Can’t Dance? Leading a Great Enterprise through Dramatic Change (2002).
“It certainly was the most difficult and risky change I made.” — Bloomberg
