IT & Network Infrastructure : IBM's Palmisano: Top 12 Milestones as CEO
On Jan. 29, 2002, IBM announced that Samuel J. Palmisano would become the company's eighth CEO of IBM. Palmisano replaced Louis V. Gerstner, who would retain his position as chairman of IBM through the end of 2002. Gerstner came to IBM in 1993 and helped turn the company around after a few years of losses by focusing on Big Blue's strengths, such as services, and tapping into the Internet during the e-commerce craze. But if Gerstner's tenure was a turnaround phase, Palmisano's was one of value creation. "Without the work that Gerstner did, Palmisano could not have been successful," analyst Judith Hurwitz told eWEEK. "But with a stable and profitable IBM, Palmisano was able to focus on the future. I think his greatest contribution was to change the focus away from simply creating new tools and products to putting these products in context with business goals and objectives, first with on-demand computing and then with Smarter Planet. He made IBM look visionary and valuable to the customer." Palmisano made several key strategic moves that have paid off handsomely for IBM. He signed off on the deals to buy Pricewaterhouse Coopers Consulting and to sell off IBM's PC business to Lenovo and its hard disk drive business to Hitachi. Basically, he got IBM further out of low-margin commodity businesses and into high-margin activities. Palmisano also realized the value of research and increased upped IBM's R&D budget by 20 percent, to $6 billion a year. That strategy continues to pay off as IBM has led the world with the most U.S. patents granted for the last 18 years. Palmisano's tenure was also good for the company's shareholders and bottom line. Under Palmisano, IBM's earnings quadrupled. At the same time, he has driven more than $8 billion in annual costs out of the business with his quietly kept internal business transformation plan. On Oct. 25, 2011, IBM announced that Virginia M. Rometty would succeed Palmisano as CEO, effective Jan. 1. Palmisano will remain chairman of the board. This slide show offers a glimpse at some of the highlights of Palmisano's tenure at IBM.