Two years have passed since Rometty assumed the helm at IBM, and it’s been anything but smooth sailing. Thanks in part to declining growth in its hardware business, IBM saw a 5% revenue decline in 2013 to $99.8 billion. Still, that’s bigger than Google. Rometty also earned kudos when she passed on an annual bonus. It’s that kind of leadership that has propelled Rometty’s rise up the ranks of the technology company, where she first began working at 24 in 1981 as a systems engineer.
IBM’s revenue has shrunk for nine quarters in a row. Its historic businesses are fading, its century-old culture a relic of the past. CEO Ginni Rometty has a plan to turn things around—but can anyone make this elephant dance again?
Virginia “Ginni” Rometty, the ninth chief executive officer in IBM’s 103-year history, is making her way down a long corridor at the company’s headquarters in Armonk, N.Y. To her left, a series of large, gold-framed oil paintings depicting her predecessors—men like Samuel Palmisano, Louis Gerstner, John Akers, and founder Thomas Watson—looms over her, shadows of IBM’s storied past. Dressed in crisp dark suits and ties, the former CEOs gaze at Rometty, the first woman to run the $100-billion-a-year tech giant, as she passes by.
Her ascension to the top job at Big Blue may have made history, but Rometty, 57, doesn’t waste time waxing on about the significance of her glass-ceiling-smashing career. In addition to being the first woman to head IBM, she is one of just 24 female CEOs in the Fortune 500 (for the third year in a row, she also tops Fortune’s list of Most Powerful Women). In fact, Rometty doesn’t waste much time on anything not viewed as essential to “transforming” the company to which she has devoted much of her adult life.
1. Don’t protect the past.
2. Never be defined by your product.
3. Always transform yourself.
An IBMer since the early ’80s, Rometty assumed the top job in 2012 and has since made a series of sweeping changes. She snapped up cloud-services provider SoftLayer Technologies for $2 billion last year and has pledged to invest $1 billion toward the development and commercialization of Watson, a so-called cognitive-computing system capable of sifting through millions of scientific papers in seconds. She has also sold off some of IBM’s lower-margin businesses, made cuts in its still-massive employee base, and even simplified contracts for clients (bringing down the typical number of pages from 30 to just four).
More recently she has brought the dowdy centenarian IT company into head-turning relationships with some hot California celebrities. Witness its unprecedented alliance with its old rival Apple, announced in July, which will bring IBM services to the iPhone maker’s iOS platform.
“I think she’s wicked smart,” Apple CEO Tim Cook says of Rometty (more on this truly yin-and-yang partnership later). “She has an incredible ability to partner and can make tough decisions and do so decisively. And she sees things as they really are.”
The way things really are can be summed up with one word: challenging. Despite Rometty’s push into explosively growing areas like cloud, mobile, and Watson, IBM’s revenue has shrunk for nine quarters in a row. In its most recent quarter the company reported sales of $24.4 billion, down 2% from the year before. (Annual sales of $99.8 billion in fiscal 2013, meanwhile, were down nearly 5% year-over-year.) Revenues from its three core businesses—services, software, and hardware—have been sluggish or, worse, in a downward spiral. Perhaps most disruptive is that corporate customers are changing their buying habits. More and more of them are opting for a software-as-a-service model instead of investing in clunky, costly hardware that requires armies of consultants just to get up and running.
To complicate things even more, while Rometty is hard at work trying to ramp up growth areas to offset the declines in the company’s core products, she is simultaneously hampered by an aggressive profit road map passed down by her predecessor, Palmisano, who pledged that earnings per share would reach $20 by 2015. (IBM expects $18 in EPS this year.) “They created a model which the street loved until it hated,” says one Wall Street investor who does not wish to be named. Indeed, since January 2012, when Rometty became CEO, shares of IBM have inched up only 4%, compared with the 58% rise of the benchmark S&P 500 index.
Pirates of Silicon Valley IBM Scene
This feature was far better than the movie ‘Jobs’! Ashton Kutcher was miscast! 🙁