IBM Taps New Server GM in Wake of Scandal

Published: October 26, 2009

by Timothy Prickett Morgan

Last week, in the wake of an insider trading scandal that has implicated Bob Moffat, senior vice president and general manager of IBM's Systems and Technology Group, the company rejiggered its executive ranks after putting Moffat on a leave of absence as he copes with his legal issues. Big Blue quickly named a new head of STG and acted like nothing at all had happened, which is the best and really only course of action that it could take.

"In view of the U.S. Federal investigation into his personal activities," explained Ed Barbini, a spokesperson from IBM, "Mr. Moffat has been placed on temporary leave of absence and is no longer an officer of IBM."

IBM went into public relations lockdown as soon as the story broke on October 16, canceling briefings for the upcoming Dynamic Infrastructure set of cross-platform announcements that were slated for October 20. As it turns out, Moffat was not scheduled to be on the announcement Webcast on the 20th, so his arrest in connection with the insider trading scandal--where he is alleged to have given one hedge fund employee insider information relating to Advanced Micro Devices, IBM, and Sun Microsystems stock that the hedge fund in question, New Castle Group, was able to profit illegally from--had no direct impact on the Dynamic Infrastructure blitzkrieg.

As it turns out, Rod Adkins, who is senior vice president of development and manufacturing for IBM's Systems and Technology Group, was hosting the call, and it is Adkins who has been tapped to be the temporary general manager of STG now that Moffat has been stripped of his titles. Barbini explained that Adkins would retain his duties being in charge of development and manufacturing operations for STG as well as now handling the sales and marketing efforts, and would now report directly to Sam Palmisano, IBM's president, chief executive officer, and chairman.

Adkins is, in my estimation, one of the executives being groomed to take over at least some of the responsibility of running Big Blue as Palmisano gets closer to retirement. Adkins first came to my attention a number of years ago when he was tapped to be the general manager for IBM's Unix server business, but he has been a GM before, once in charge of desktop PCs within Personal Systems Group and once for pervasive computing inside of Software Group.

I happen to think that Moffat, who ran PCs and printers for the company and completely overhauled the company's supply chain, saving it billions of dollars in costs, was also in the running for a top job, perhaps as president or CEO if Palmisano retains the chairmanship as he edges closer to retirement, perhaps next year in keeping with IBM tradition. (Of course, Moffat sold off PCs and printers, so I was a little nervous about him being in charge of servers. That problem, at least for the moment, is gone.)

Ginni Rometty, who has run a big chunk of IBM's Global Services behemoth and who is currently a senior vice president in charge of IBM's global sales and distribution operations, is a contender for one of the top jobs, and I would also put some money on Linda Sanford, who is senior vice president of enterprise on demand transformation and information technology at Big Blue--and who has run server and storage divisions in the past.

If you read the case the FBI and the U.S. Attorneys office in Manhattan has built up against Moffat confident Danielle Chiesi, an employee at the New Castle Group hedge fund, in the complaint filed before Moffat was arrested (which you can do here), no one is (as yet) contending that Moffat gained personally from insider information, but rather that he talked about matters relating to AMD, IBM, and Sun. It seems likely that Moffat will get a very good lawyer and could even escape going to jail. But it is very hard to conceive of a man who, according to the complaint's transcripts of land and cell phone conversations, was so cavalier with insider information ever rising to a top job at IBM again. I strongly suspect that Moffat will never return to Big Blue again, unless the conversations were doctored and it can be proven that Chiesi did not benefit from insider information. I wouldn't hold my breath on that, but this is not up to us to decide, but for a jury in New York City.

The effects of the indictments of the six people associated with the insider trading sting operation are more immediate. On Wednesday afternoon last week, the Wall Street Journal reported that Raj Rajaratnam, the founder of the other hedge fund implicated in the lawsuits, told his employees and investors that he was selling off the stocks in the hedge fund, which tally up to around $3.7 billion.

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