The copyright-protected information contained in the ANNEX BULLETINS is a component of the Comprehensive Market Service (CMS). It is intended for the exclusive use by those who have contracted for the entire CMS service.
IBM CORPORATE AFFAIRS
CFO Resigns to Join Kirk Kerkorian
History; Thoman’s In!
to Head Up IBM’s PC Unit
June 14, 2004
(08:15 PDT) - The tough-talking, but not so quick on delivery,
IBM CFO, Jerry
York, resigned from the company today to join Kirk Kerkorian, a wealthy
Las Vegas-based investor who has been trying to take over Chrysler.
Two years and four months ago, York was hired away from Chrysler
by the IBM chairman, Lou Gerstner, after he
(York) had lost his bid for the top Chrysler job, despite Lee
Iacocca’s backing, to Robert
Eaton. York is
being replaced by Rick
Thoman, IBM’s PC business head, and a long-time Gerstner
our vantage point, this should be the day the IBM stock goes up!
That’s because thoughtfulness and empowering have replaced
bullying and centralizing at Armonk’s top financial post.
IBM went down in early trading following this disclosure, even though
the Dow was up over 20 points. Which
just goes to show us the difference between perceptions and knowledge.
And that Wall Street trades only on perceptions.
see, York left behind a legacy of a tough executive, who has been
credited by Wall Street with masterminding the IBM restructuring
efforts. But those who
worked with York inside IBM know better. “He won’t be missed much around here, I can tell you
that,” said a senior IBM executive about the news this morning. “He wasn’t a people person.”
York was lucky. Which is sometimes more important than being a “people
person.” He was a large
wrecking ball at a time when wrecking jobs were in demand at IBM. But it would be false to assume that he engineered the
project, or even made it possible, the insiders say.
He happened to be the right type of person at the right time at
the right place. He untied
the knot and let go with the wrecking ball.
it was the IBM chairman (Gerstner) who gave the nod.
“We had all this stuff (the cost cut-backs) figured out even
when Akers was still around,” said a long-time IBM insider.
“It’s just that Akers didn’t have the guts to do it.
Of course, he could better afford to do it. After all, it wasn’t the Gerstner legacy the IBM CEO had asked York to wreck.
Thoman: For a Better Tomorrow?
sort of a difference can we expect from Thoman as IBM’s CFO?
Thoman has a more rounded business background.
His international management experience is impressive. This will prove invaluable in a company like IBM, which
derives more than 62% of its revenue from non-U.S. markets. Thoman even speaks French fluently and is a good listener
(which would be a rare combination even in France J).
is also a quick study, as his re-engineering of IBM’s troubled PC
Company has proven.
York had publicly criticized the IBM PC Company performance with such a
vigor, that some media were beginning to wonder how long Thoman would
last in that job. We
thought that it was the wrong question to ask (see ANNEX BULLETIN 95-23,
announcement has shown why.
summary, York was the right sort of a CFO when something had to be
shrunk. But Thoman seems like a better choice when the challenge is
building a company back up again. Sooner
or later, Wall Street will get it, too.
But with its track record, chances are it won’t be sooner.
Happy Bargain Hunting!
SOME OF YORK’s LEGACY at IBM
Learning from History
ANNEX BULLETIN 95-36, 4/27/95)
...Some people don’t seem to learn from history. They say about the French generals, “they forget nothing, and they learn nothing.” But there are no French anymore among the top echelons at Armonk. Yet one wonders...
Until recently, we thought that the “leadership-by bullying” management style at IBM was dead and buried... Perhaps emboldened by IBM’s return to profitability, and seeing the stock in the 90s, even the “bean counters” seem to feel they should be wielding “two-by-fours” of their own.
Last January, this writer, speaking as a customer of one of his services to Jerry York, IBM’s CFO, complained that some of York’s people weren’t doing a good job. When York took no action, in late March, we wrote to him, saying, among other things:
you can rationalize the inconsistent treatment of the above two IBM
constituencies, please do. But
I am sure you realize that that’s a trick question.
Even if you do manage to do it, you’d only be confirming that the
old IBM culture is still strong at Armonk, and that you’ve become a part
of it. The former IBM leaders
have always managed to rationalize absolutely everything.
They just never seemed able to do the right thing.”
Well, York didn’t, either. The letter seemed to set him off into a rage. In a reply which read like the vintage old IBM arrogance, he did rationalize the Armonk bureaucrats’ petty little rules, and bristled at this customer(!) for having the nerve to lecture him.
to win the hearts and minds of customers/consultants, Sir, Gen. York,
Sir!” we wrote.
Kiss of Death
ANNEX BULLETIN 95-38, 4/20/95)
During a January 23 financial analyst briefing in New York, IBM’s CFO, Jerry York, perhaps unwittingly paid a tribute to his chief PC rival - the Houston-based Compaq. The IBM PC Company, York said, still had “a fair way to go to (before reaching) a good performance, namely (that of) Compaq’s.” But York’s compliment may have been a “kiss of death.” It reminded us of the old IBM (and the old Compaq) way of “forecasting by hindsight, not foresight.” For, the IBM CFO’s role model was rapidly losing ground to nimbler rivals just as York was praising it. r
Grow Share in Low Margin Business?
ANNEX BULLETIN 95-32, 4/20/95)
York danced on a key question by an analyst who wondered (as we did in 1992) - why it was necessarily a good idea for IBM to try to grow the share of a low-margin business? (i.e., the PC Co.).
Or that of the OEM, if we may add to it?
Perhaps unwittingly, York did a typical George Conrades-type “two-step side-step” from the 1980s - appearing to answer the question in a humorous way, without addressing its core. Basically, the IBM CFO said that company ought to be in the PC business “because it’s there, and it’s big” (paraphrasing his comment).
Now, if York were New Zealand’s Edmund Hillary, and Mount Everest were the PC business, some people may applaud the man’s courage and determination. But York is no Sir Hillary. And IBM’s PC business is certainly no prize achievement, such as climbing the world’s highest mountain peak. It’s a high-profile, but low-margin, money-losing operation.
Even the much-maligned former IBM chairman (Akers) said at an analyst meeting in San Jose, in June 1986, that if the PCs ever became a commodity, IBM would exit the market (see ANNEX BULLETIN 86-29, 7/07/86).
York’s handling of this question was one of the disappointments in today’s otherwise “gala blue chip” Big Blue event. Is there a chance that maybe even this “new and improved IBM” hasn’t quite yet come to grips with the reality of its business? r
ANNEX BULLETIN 95-36, 4/27/95)
On PC Business:
is not the rocket science business of computing... This is successful
marketing and managing to build enough boxes.”
micromanaging this business right now to get it up and running.
April 20, 1995
On Future Acquisitions:
is no King-Kong acquisition on the horizon at the moment.”
(Some six weeks later, IBM bought Lotus for about $3.5 billion in the
biggest-ever acquisition for IBM and the software industry).
On Mainframe Outlook:
1993, the mainframe business was at about 50% of the 1991 revenue; in 1994
it will be down another 50%.
(The actual decline was about 3%).
again sounded bearish about the IBM mainframe business, forecasting
another revenue decline of about 15% for 1995.
(The business is up so far this year.
Our forecast for all of 1995 is for about a 3% growth - as
it was, by the way, in December 1994 - see ANNEX BULLETIN 94-55,
On Worth of Analysts
probably forgotten more than I’ve learned” (about the IT industry),
York said to this writer.
BOB STEPHENSON’s LORE
IBM Account Execs
ANNEX BULLETIN 95-23, 3/23/95)
This was Bob Stephenson’s first conference of this kind (in Orlando, FL). It didn’t look like it. Except that perhaps he could have cracked a smile on stage once in a while. But then, George Burns never smiled, either. He left the laughter to the audience. So, there is hope...
Also, during a breakfast with a relatively small group of consultants, Stephenson seemed more relaxed and showed a good sense of humor.
For example, he said that he saw the client executives’ new roles in an IBM organized by industry similar to that of orchestra directors. “They’ll call in the violins, or the brass instruments, as needed” (from the IBM industry units).
IBM Account Executive
Don’t Own Anything
ANNEX BULLETIN 95-23, 3/23/95)
“This (the new industry organization) is a counter-culture to IBM,” he explained. “The IBM people (of the old) always liked to own things. Yet (the fact is that) we don’t own anything...”
Well, not quite. But we get the point.
He also said, tongue-in-cheek, that IBM was responsible for the growth of the customers’ accounts payable departments. “Immigration service is sometimes mild compared to the rules that the IBM bureaucracy imposes,” he said. Vowing to make it easier to do business with IBM, he added that, “we are exposing too much of our internal plumbing to customers.”
(from ANNEX BULLETIN 95-23, 3/23/95)
Later on, in the “main tent,” Stephenson showed a video which illustrated the bonding which goes on in the new, customer and industry-driven IBM. One IBM rep in Kentucky, for example, even spent a week working at a KFC restaurant serving chicken meals so as to better appreciate his customer’s business.
The new IBM top North American executive also described the new IBM in a nutshell: “We build globally and support locally.” To that end, “everything that supports the client executive must be as good as they are.”Judging by the KFC example, some of them seem pretty good... Which should drill fear into the hearts of the remaining IBM loafers. So watch out the old IBM chicken-eating buck-passers! There is a big loafer-eating fox which has just moved into the IBM North American headquarters in White Plains. r
 York was late on delivering the Annual and the 10Q reports to analysts (see ANNEX BULLETINS 95-54, 95-24).
 The sign was the KGB logo.
Also, check out: ICC: More Armonk
Editor: Bob Djurdjevic
5110 North 40th Street, Phoenix, Arizona
|Annex Research | Annex Bulletins | Quotes | Workshop |
| Feedback | Clips | Activism | Columns |