For IBM, Size Does Matter
Shareholders might demand that Palmisano break up IBM.Timing is everything, and Lou Gerstner has it. Gerstner, of course, took over IBM at its nadir, brought it back to prosperity and then left, just months before massive layoffs and what could be the first quarterly loss in eight years. (OK, Lou is still chairman through the end of the year, but you can bet that the buck has not stopped at his desk since March 1, when Sam Palmisano took over as president and CEO.) Poor Sam. He gets the job, and practically the first order of business is to carry out layoffs not seen since, well, early in the Gerstner era. In an interview earlier this year, Palmisano told me that IBM would remain a systems, software and services company because thats what customers want. While theres a logic to having all those components working in harmony, it ignores the issue of sheer size.
One interesting fact is that IBMs total number of employees is just a little more than what it was just before Gerstner took over. In 1992, the work force was about 302,000, and last year, it reached about 320,000. Gerstner oversaw a drop to about 220,000 in 1994 and then a gradual climb back. Could it be theres a law of nature at work here? That a company that does what IBM does can get to a certain sizethe neighborhood of 300,000 employeesbut no larger?