Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: TUESDAY, April 27, 1993 TAG: 9304270058
SECTION: BUSINESS PAGE: B-6 EDITION: METRO
SOURCE: Associated Press
DATELINE: TAMPA, FLA. LENGTH: Medium
In his 18th workday at IBM, Gerstner tried to use the annual meeting to focus on a broad outline of goals. Instead, he heard impassioned calls by a dozen stockholders - greeted with loud applause - for the ouster of the board of directors.
"If I were a director, I would be embarrassed to even show up here and have my name on a list to be elected," said Dr. Gilbert Jannelli of Clearwater, Fla. "How can you work with that group of people when their attitudes, their trusted decisions, caused this company's demise?"
About 2,300 shareholders, many of them Florida retirees and longtime company employees, attended an unusually contentious meeting that reflected just how far International Business Machines Corp. has fallen.
The meeting capped a remarkable four months at 79-year-old IBM, whose founder's credo - "Think" - set a standard of excellence for corporate America. In addition to hiring Gerstner as its first outsider chairman, IBM has laid off workers for the first time and lost $285 million in this year's first quarter.
IBM has lost more than $7 billion in the past two years, cut a quarter of its work force - or more than 100,000 jobs - since 1987, and lost significant market share amid growing competition. The company has sought to reverse itself through restructurings that have given IBM business units more freedom.
Gerstner, the 51-year-old former RJR Nabisco chairman, took over April 1 after a closely watched search for a successor to now-maligned former Chairman John F. Akers.
In a frank assessment, Gerstner said slow demand and poor economies had reshaped the computer industry, but he defended IBM's technological and market power - though he didn't try to minimize the problems.
"IBM has changed, but most people would say not fast enough," Gerstner said. "This slowness and failure to act quickly is really the root cause of IBM's problems."
Gerstner listed four priorities for 1993: completing major staff reductions, defining what businesses IBM will pursue, improving customer relations and decentralizing. He said he hadn't been working long enough to be more specific.
"I don't have answers for you yet, and we can't expect quick fixes," he said. But he promised: "I can tell you the steps we will take will not be pussyfooting but bold strides."
Wall Street seemed to welcome Gerstner's comment. IBM stock rose 62 1/2 cents to $48.37 1/2 a share on the New York Stock Exchange. That's still well off last summer's peak of $100 a share.
Before the meeting, IBM's board declared a 54 cents-per-share quarterly dividend. IBM had cut the dividend in January for the first time, from $1.21 per share.
At the meeting, shareholders vented anger over IBM's fallen stock price, the rapid and drastic nature of its cuts, and a pay package under which Gerstner can make tens of millions of dollars in stock options if IBM stock rebounds.
In a comment so candid it never could have been made at the old IBM, Gerstner praised longtime rival, Microsoft Corp., and its chairman, Bill Gates. Microsoft dominates a key computer business, operating software, underestimated by IBM in the early 1980s.
"What Bill Gates sold was service, customer service," Gerstner said of a trait once considered IBM's hallmark. "As a customer, he made it easier for me. As far as I'm concerned, that's what we have to respond to."
by CNB