On Tuesday evening, John Akers attended a dinner at the Hotel Pierre in New York, hosted by the US Council for International Business, and received the council’s International Leadership award. The award was made in recognition of Akers’ leadership role in shaping the modern-day international business of IBM, a company that epitomises the global, multinational […]
On Tuesday evening, John Akers attended a dinner at the Hotel Pierre in New York, hosted by the US Council for International Business, and received the council’s International Leadership award. The award was made in recognition of Akers’ leadership role in shaping the modern-day international business of IBM, a company that epitomises the global, multinational corporation, and that has helped change and define the way the world does business today. On Tuesday morning, the IBM chairman and chief executive was revealing to New York stock analysts that IBM would be taking a $2,300m hit against its fourth quarter figures – $500m to induce 10,000 employees to leave with two weeks’ pay for each year of service, with a maximum pay-off of 52 weeks’ pay; $500m to write down research and development and investments in software companies; and $1,300m for plant consolidations – although no plants are to be closed. Akers’ two public engagements on Tuesday present a neat juxtaposition, and highlight why the market’s reaction to the restructuring was so muted: IBM’s shares ended Tuesday only 37.5 cents up, and back below the $100 watershed. It was the New York Times – where John Akers is on the board – that pointed up the crux of the problem at IBM. During yesterday’s meeting, John Akers showed emotion only once, when a questioner suggested that IBM’s management was to blame for the company’s performance, it reports, and quotes a heated Akers saying I believe that a management team is measured by its ability to deal with the problems and I believe that we are identifying the problems and dealing with them.
So on a day when Moody’s Investors Service took the almost unprecedented step of downgrading the rating on a $1,300m issue of IBM debt, and at a time when Gartner Group reports that in a large sample of IBM mainframe customers, nearly a third had received discounts of 15% to 25%, and more than a third discounts of over 25%, and yet another group has had 40% off, none of IBM’s problems are its own fault. It’s not IBM’s fault that Sun Microsystems yesterday announced its latest products in one of the hottest sectors of the market, RISC-based servers, while IBM does not have a server in the market at all. Not IBM’s fault that in the one area that currently really is moving in a sluggish market, where Sun has sold 40,000 Sparcstation-1s since May, IBM still hasn’t been able to announce, let alone ship, its own offering for the RISC workstation market, ensuring thereby that when the thing is announced in January, it will have to be dramatically repriced from the levels originally intended or be laughed out of the market. And that is just one sector of the market where IBM seems unable to grasp that the slow, deliberate approach to new product introductions that served it so well in the 1970s and early 1980s is simply inappropriate to today’s markets, where even a once equally ponderous DEC now realises that it has to update its product line every six months – not with cosmetic changes but with major price-performance improvements. The constant tone of all the statements out of IBM these days is one of ever-more-strained Micawberism: constantly reiterated promises that the corner has been turned and that something is just about to turn up. How do we know we won’t all be back here two years from now having another meeting like this? one analyst asked Akers on Tuesday. If costs had to be cut further, he would cut them, Akers replied. Without Armonk’s rose-coloured glasses, the rest of the world can see little likely to turn up over the next couple of years to transform the state of the market in which IBM has to do business, so the betting has to be that they’ll all be there again hearing about the next round of cuts well before the end of 1991.