IBM CEO Sees Technology Shift
By Eric Auchard
NEW YORK (Reuters) - Despite a raft of warnings from major technology companies, the world's biggest computer supplier sees a shift in favor of new Internet business tools rather than any overall slowdown in spending on technology.
``From my perspective, it's a little too early to predict that what we're seeing is in fact a slowdown in any (national) economy,'' International Business Machines Corp. Chairman and Chief Executive Louis Gerstner said in an interview on Tuesday.
``Having said that, if in fact it (an economic slowdown) does happen, I think what you'll see is a reallocation of technology spending dollars, not a diminution,'' he told Reuters after making a speech to an industry trade show in New York.
Gerstner is the top executive at the world's largest computer company -- the player with the most to lose if big corporate spenders stop buying its mix of computers, software and technical services. But whether or not markets actually see a major downturn in hardware sales, Big Blue can win either way.
The IBM chief said his company, which is battling to revive stagnating revenue growth, remains the market leader in providing the range of gear and services companies use to build Internet businesses, insulating it if a slowdown materializes.
Ceo Sees Insulation From Slowdown, Mum On Fourth Quarter
In a rare interview only weeks before the end of IBM's fourth quarter, Gerstner declined to comment on whether the Armonk, N.Y.-based company would meet Wall Street's already lowered expectations.
IBM has remained quiet in recent weeks even as a host of personal computer, semiconductor chip and communications network suppliers -- including its rivals Intel, Motorola and Gateway -- have warned investors of a sharp revenue slowdown.
Analysts are counting on IBM in the coming days to deliver a promised upgrade to its current seventh generation of mainframe computers in order to have any hope of meeting the company's growth outlook heading into the new year.
Asked how IBM's focus on handling complex business projects for companies would fare at a time when major industries appear to be cutting back capital spending, Gerstner said that IBM's positioning insulated it from the threat of spending declines.
``The retooling of the infrastructure can be self-financing, if done right,'' he said.
Shares of IBM, which were battered a year ago as customers digested equipment purchased to prevent potential Y2K computer glitches, have held more or less steady as many technology stocks were cut by half or more in recent months.
The stock was trading at $93-7/16 on Tuesday afternoon, well off its year high of nearly $135, but above its 52-week low of $87. It has proved a solid defensive play for investors seeking refuge from former high-flying companies that are now facing slower growth, declining valuations and a fall-off in investor confidence.
The Early Internet Years Were Easy, The Next Stage Is Hard
The interview followed Gerstner's speech to thousands of corporate technology buyers at the e-business Conference & Expo in New York, where he declared the death of ``easy'' Internet success stories, arguing that, ``Today, e-business is just business -- real business.''
``This is not about building some utopian world of personal convenience, personal relaxation and leisure,'' Gerstner said of IBM's focus on helping companies connect office staff and mobile workers with suppliers and consumers over the Web.
``Carmakers aren't investing millions so that you can talk to your steering wheel and ask your intelligent (house) to fill your intelligent bath -- all so you can soak four minutes earlier,'' he quipped.
Major markets exist for IBM to provide ``middleware'' -- software that acts as plumbing to connect different computer systems, as well what Gerstner calls ``e-sourcing'' -- in which companies rent software or services over the Internet from the likes of IBM instead of owning equipment themselves, he said.
To drive new business in niche markets where competitors such as Sun, Oracle and EMC have been growing far faster, IBM said Tuesday that it would direct the bulk of its $650 million annual advertising budget to convincing executives to buy its Internet tools, or what it calls ``e-business infrastructure.''
Gerstner said IBM's focus on building the connective tissues to bind together business organizations represents
``a full frontal assault on the prevailing mantra of organizational theory: Decentralization is good. Centralization is evil.
``Infrastructure,'' a term associated with the construction of roadways and pipes in decades past, now covers the massive projects designed to connect the estimated 700 million PCs, 1 billion wireless devices and a ``trillion or more connected 'things''' like toasters, car brakes and pacemakers, he said.
``We do have more infrastructure than anyone else in the world -- in the form of servers, software and storage devices -- and that opportunity will grow disproportionately compared to the PC opportunity,'' Gerstner said in the interview.
As an example, he pointed to appliance maker Whirlpool, where IBM is consolidating 45 internal order fulfillment and financial systems, putting the appliance maker's workforce on the Web, connecting suppliers, and gearing up to use the network to allow consumers to order small appliances and accessories.
Separately, oil company Royal Dutch/Shell said that it was working with IBM to install the world's largest Linux (news - web sites) supercomputer based on 1,024 standard IBM servers, marking IBM's progress in moving Linux into the commercial mainstream. |
