IBM's Rometty Takes Over As Chairman Of The Board

Published: October 1, 2012

by Jenny Thomas

It hasn't quite been a year since IBM tapped Virginia M. Rometty as president and chief executive officer, and now comes the announcement from IBM's board of directors that Rometty will take over as chairman of the board, effective October 1, 2012. Rometty succeeds Sam Palmisano, who will stay on as a senior adviser to the company until he retires on December 1, 2012. So as of today, Rometty is driving the Big Blue bus.

IBM CEO, president, and newly appointed chairman of the board, Ginni Rometty.

There is no doubt that Rometty, 55, is ready to take the wheel. In January of this year, she succeeded Palmisano as IBM's ninth CEO, after holding senior leadership positions in IBM's services, sales, strategy, and marketing units. She was part of the team that helped Palmisano develop the 2015 Roadmap, which has IBM targeting at least $20 in earnings per share (on an operating basis) that year, nearly double the levels set in 2010, and she will be the person charged with reaching that goal. That's a big job by any standards, and even with the map as a guide, all eyes will be on Rometty as she navigates IBM toward that lofty goal in just three short years.

The good news for Rometty is she has stepped into a well-oiled machine with a lot of factors already in her favor. In the last 10 years, IBM has been on cruise control, increasing profits by an average of 16 percent a year, and returning billions of dollars to shareholders through share repurchases and dividends. Part of that cash flow comes from the very stable and profitable systems business (which drives hardware, software, and services revenues) and part comes from acquisitions, which Rometty is no stranger to. Top among her accomplishments in her 31 years with IBM, Rometty led the successful integration of IBM's $3.5 billion purchase of PricewaterhouseCoopers Consulting, which was the largest acquisition in professional services history until Hewlett-Packard bought EDS for $13.9 billion a few years back, and she helped build a team of more than 100,000 business consultants and services experts.

Rometty also gained a lot of experience working at Palmisano's side during his tenure, as Palmisano transformed IBM's product and services portfolio, ditching hardware like PCs, high-end printers, and hard disk drives in favor of pushing higher-value services as well as analytics and cloud computing. While at the help, generated enough cash to spend over $100 billion on stock buybacks and dividends, and the 2015 Roadmap calls for IBM to generate another $100 billion in free cash flow from 2011 through 2015. Of this cash, IBM plans to spend $70 billion on share buybacks and dividends and another $20 billion on acquisitions. It is unlikely Rometty will deviate far from the road on this plan.

When Fortune magazine recently published its annual list of the 50 most powerful women in business, it was no surprise to those of us who follow IBM that Rometty ran away with the top spot. But she is not the only female carrying the weight of growing an IT global entity into the future. Several of her peers also got a nod from Fortune, and they also all have a long road ahead.

Just behind Rometty in position 3 is Meg Whitman, 56, president and CEO of HP. She jumped up from the ranking ninth in 2011, and the pressure is on to change the tides after profits fell 19 percent in 2011. Stock is already down 19 percent this year, but HP's $127 billion in annual sales gives Whitman some room to maneuver and hopefully steer HP in the right direction.

Marissa Mayer, 37, CEO at Yahoo, jumped up 24 spots from past year to take position 14 on the 2012 list. After 13 years with Google, she took to the top job at Yahoo in July. With a background as an engineer, Mayer knows how to execute. She takes over as Yahoo is boasting $5 billion in revenues, and has around 700 million users, a good starting point, for certain, but not a time to coast.

Also of note is Rometty's fellow IBMer Bridget Van Kralingen, 49, SVP of Global Business Services, the unit that Rometty used to run, who holds position 23 on this year's list. She now manages those 100,000 employees who used to report to the new top of the top brass; this part of Big Blue drove 18 percent of the company's $107 billion in sales last year.

So how will Rometty live up to the goals she helped IBM set for its future? Like Palmisano before her, Rometty will likely continue to expand into hot technologies including moving companies into cloud computing and better business analytics. Revenue from IBM's Smarter Planet campaign jumped 50 percent last year, and will continue to be a growth area for Rometty. She will also look to create new deals in growth markets, which are expected to provide up to 30 percent of IBM's revenue by 2015.

IT Jungle readers may notice the absence of any mention of hardware explicitly in the roadmap, and a look into the past gives us some insight into where hardware falls on the priority list for the future. In an interview with Fortune magazine last fall, Rometty said she knows IBM must keep evolving, and she credited Palmisano with teaching her "whatever business you're in--it doesn't matter--it's going to commoditize over time. It's going to devalue. You've got to keep moving it to a higher value."

That may not seem like a promising statement the IBM i platform, which does its job like it has always done but doesn't hold the flash and cash that the services, cloud, and analytics businesses have brought to Big Blue in the last decade. In fact, it is unlikely that specific platforms are even on Rometty's radar; she has general managers of divisions to do that, and to make sure that all of its platforms are cloudy, data-munching, competitors. We know, based on our long history, that the IBM i platform business will continue to hum reliably and steadily along, much as the machines themselves do.

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