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The Info List - Louis V. Gerstner Jr.



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LOUIS VINCENT GERSTNER JR. (born March 1, 1942 in Mineola, New York
Mineola, New York
) is an American businessman, best known for his tenure as chairman of the board and chief executive officer of IBM
IBM
from April 1993 until 2002 when he retired as CEO in March and chairman in December. He is largely credited with turning around IBM's fortunes.

He was formerly CEO of RJR Nabisco , and also held senior positions at American Express and McKinsey ">

As chairman and chief executive officer of the Travel Related Services division, Gerstner spearheaded its successful "membership has its privileges" promotion. Not only was the division continually the most profitable in the company, it led the entire financial services industry. Despite these successes, Gerstner hit a ceiling at American Express, as chief executive James D. Robinson III was not expected to retire for another 12 years. The analyst Perrin Long at Lipper Analytical told the Los Angeles Times
Los Angeles Times
: "Lou is a very personable guy. But more than anything else, he is a leader more than a follower" (March 14, 1989). During Gerstner's 11-year tenure at American Express, membership had increased from 8.6 million to 30.7 million. He left AmEx in 1989 to succeed Ross Johnson as chairman and chief executive officer of RJR Nabisco following its $25 billion leveraged buyout by Kohlberg Kravis Roberts & Co .

IBM

Gerstner was hired as chairman and CEO of IBM
IBM
in April 1993. The company's board had forced his predecessor John Akers to resign, looking first within the computer industry for his successor. However Apple's John Sculley , Motorola
Motorola
chairman George Fisher , and Bill Gates of Microsoft
Microsoft
were not interested (other rumored candidates included Eckhard Pfeiffer of Compaq and Scott McNealy of Sun Microsystems ). IBM
IBM
then turned to Gerstner, an outsider with a record that suggested success whose older brother Richard had run the company's PC division until retiring due to health issues four years earlier. Gerstner was the first IBM
IBM
CEO who was hired from outside the company.

Upon becoming chief executive of IBM, Gerstner declared: "the last thing IBM
IBM
needs right now is a vision", as he instead focused on execution, decisiveness, simplifying the organization for speed, and breaking the gridlock. Many expected heads to roll, yet Gerstner initially changed only the CFO, the HR chief, and three key line executives.

In his memoir, Who Says Elephants Can\'t Dance?, he describes his arrival at the company in April 1993, when an active plan was in place to dis-aggregate the company. The prevailing wisdom of the time held that IBM's core mainframe business was headed for obsolescence. The company's own management was in the process of allowing its various divisions to rebrand and manage themselves — the so-called "Baby Blues." Then-CEO John Akers decided that the logical and rational solution was to split IBM
IBM
into autonomous business units (such as processors, storage, software, services, printers,) that could compete more effectively with competitors that were more focused and agile and had lower cost structures. Gerstner reversed this plan, realizing from his previous experiences at RJR and American Express that there remained a vital need for a broad-based information technology integrator. He discovered that the biggest problem that all major companies faced in 1993 was integrating all the separate computing technologies that were emerging at the time, and saw that IBM’s unique competitive advantage was its ability to provide integrated solutions for customers – a company that could represent more than piece parts or components—something he only learned by going beyond just listening to the proponents of different technologies within IBM. His choice to keep the company together was the defining decision of his tenure, as these gave IBM
IBM
the capabilities to deliver complete IT solutions to customers. Services could be sold as an add-on to companies that had already bought IBM
IBM
computers, while barely profitable pieces of hardware were used to open the door to more profitable deals.

While IBM
IBM
had been credited with turning the personal computer (PC) into a mainstream product, the company could no longer monopolize its market. A proliferation of cheaper IBM-compatible PC clones that used the same Intel chips and Microsoft
Microsoft
operating system software simply undercut it and eroded market share. Outgoing IBM
IBM
chairman and CEO Akers, a company lifer, was excessively immersed in its corporate culture, remaining loyal to traditional ways that masked the real threats. As an outsider, Gerstner had no emotional attachment to long-suffering products IBM
IBM
had developed to try to regain control of the PC market. Gerstner wrote that in spite of OS/2
OS/2
's technical superiority to the dominant Microsoft
Microsoft
Windows 3.0 , his colleagues were "unwilling or unable to accept" that it was a "resounding defeat" as it "was draining tens of millions of dollars, absorbing huge chunks of senior management's time, and making a mockery of our image". By the end of 1994, IBM
IBM
ceased new development of OS/2
OS/2
software. IBM withdrew from the retail desktop PC market entirely, which had become unprofitable due to price pressures in the early 2000s. Three years after Gerstner's 2002 retirement, IBM
IBM
sold the PC division to Lenovo .

In his memoir, Gerstner described the turnaround as difficult and often wrenching for an IBM
IBM
culture that had become insular and balkanized . After he arrived, over 100,000 employees were laid off from a company that had maintained a lifetime employment practice from its inception. Long allowed by their managers to believe that employment security had little reference to performance, thousands of IBM
IBM
employees had grown lax, while the top-performing employees complained bitterly in attitude surveys. In the goal to create one common brand message for all IBM
IBM
products and services around the world, under Gerstner's leadership the company consolidated its many advertising agencies down to just Ogilvy -webkit-column-width: 30em; column-width: 30em; list-style-type: decimal;">

* ^ A B C D DiCarlo, Lisa (November 11, 2002). "How Lou Gerstner Got IBM
IBM
To Dance". Forbes. Retrieved April 26, 2012. * ^ A B C " IBM
IBM
Corp. Turnaround". HBR.org. Retrieved April 26, 2012. * ^ "Forbes.com: Forbes 400 Richest in America 2002". Forbes. Archived from the original on 2011-05-24. * ^ "Former Steering Committee Members". bilderbergmeetings.org. Bilderberg Group . Archived from the original on 2014-02-02. Retrieved 2014-02-08. * ^ Wayne, Leslie, "American Express's Ace in the Hole," New York Times , June 30, 1985 * ^ A B Cornwell, Rupert (August 1, 1993). "Profile: The iconoclast at IBM: Lou Gerstner enacted unprecedented cuts at the giant computer firm last week, but he will need to do more than wield the axe to revive it.". The Independent. London. * ^ Black, Larry (January 27, 1993). " IBM
IBM
fires Akers and slashes dividend". The Independent. London. * ^ Cornwell, Rupert (August 1, 1993). "Profile: The iconoclast at IBM: Lou Gerstner enacted unprecedented cuts at the giant computer firm last week, but he will need to do more than wield the axe to revive it. Rupert Cornwell reports". The Independent. London. * ^ Charan, Ram; Colvin, Geoffrey (June 21, 1999). "Why CEOs Fail It\'s rarely for lack of smarts or vision. Most unsuccessful CEOs stumble because of one simple, fatal shortcoming". CNN. * ^ A B C * ^ A B Denning, Steve. "Why Did IBM
IBM
Survive?". Forbes. * ^ A B * ^ * ^ * ^ * ^ Berger, Joseph (December 22, 1993). "The Pain of Layoffs for Ex-Senior I.B.M. Workers; In Dutchess County, a Disorienting Time for Employees Less Hardened to Job Loss". The New York Times. * ^ "Louis Gerstner III, Son of Celebrated IBM
IBM
Chairman, Dies at 41". B