IBM names new president and COO

IBM has named Samuel J. Palmisano as its president and chief operating officer, in which is widely seen as part of CEO Lou Gerstner's succession strategy.

          IBM has named Samuel J. Palmisano its president and chief operating officer and gave him responsibility for all of the company's product, services, sales, distribution and financing divisions.

          At the same time, IBM said John M. Thompson will become its vice chairman. Both appointments are due to become effective Sept. 1, and both Palmisano and Thompson will continue to report to Louis V. Gerstner, IBM's chairman and CEO. The two longtime company executives also were elected to IBM's board of directors.

          Bob Djurdjevic, president of Annex Research in Phoenix, said the moves are evidence that Gerstner -- who has been IBM's president and CEO since 1993 -- is putting in place the insiders who he expects will lead the company when he eventually departs.

          But Djurdjevic added that the changes are "not a very significant move" for the company from an immediate standpoint because Palmisano was identified several years ago as Gerstner's most likely heir apparent. "I don't see any fresh new blood, I don't see any shake-up," Djurdjevic said. "I just see musical chairs being played."

          Until now, though, Gerstner has held all of IBM's top management titles. Palmisano and Thompson also are the first inside executives to be named to the company's board in recent years, Djurdjevic noted.

          The management changes came a week after IBM reported a 19% drop in second-quarter profits on a year-to-year basis, with revenue dipping 1%. But Gerstner said in a statement when the results were released that they were "right in line with our expectations." He added that IBM "exited the second quarter with a significant shift in momentum in several areas," including its server and professional services units.

          At the end of last year, Djurdjevic said, Gerstner gave his management troops six months to start turning around the company's financial performance -- an order that the analyst saw as further evidence that Gerstner is working hard to raise IBM's performance in preparation for eventually handing over its reins. "He doesn't want to leave on a down note," Djurdjevic said.

          Palmisano, 48, has worked at IBM since 1973 and most recently was senior vice president and group executive in charge of IBM's server and enterprise storage operations. Prior to taking on that job, he ran the company's services and PC divisions.

          IBM said Thompson, 57, will be responsible in his new job for integrating and accelerating the company's initiatives in emerging markets such as Linux and next-generation Internet and wireless technologies. Thompson previously was senior vice president and group executive of IBM's software operations.

          Like Djurdevic, many IBM watchers view the appointments of Palmisano and Thompson to their new jobs and to the company's board as a potential first step in setting up a succession plan for Gerstner's eventual replacement as CEO.

          Rob Enderle, an analyst at Giga Information Group Inc. in Cambridge, Mass., said the announcements could be aimed at ensuring that IBM doesn't lose either Palmisano or Thompson. "In these types of situations, you want to promote somebody so [he] won't leave," Enderle said.

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