IBM reshuffling top management

(This article is part of TIMES EXPRESS. It is a condensed version of a story that will appear in tomorrow's New York Times.)

c.2010 New York Times News Service@

IBM is reshuffling its top management one level below the chief executive, Samuel J. Palmisano, giving greater responsibility to four senior executives.

The move, analysts said, creates a short list for succession. But it could also signal that Palmisano would be staying on beyond the traditional retirement age of 60 for IBM chief executives. Palmisano turns 59 later this month.

The reorganization came as IBM reported a solid profit gain in the second quarter and raised its forecast slightly for 2010. But the company's stock fell in after-hours trading amid concern about future revenue and how quickly corporate spending on technology was picking up.


The management changes, announced in an e-mail message to IBM employees Monday, were intended to improve the company's products and services, Palmisano wrote. For example, computer hardware and software are for the first time being placed under the oversight of one executive.

Increasingly, Palmisano wrote, computer systems must be "designed and brought to market as tightly integrated" packages of hardware and software.

Steven A. Mills, a senior vice president, will be in charge of the hardware and software divisions. But Mills is 58 and not a likely successor, analysts say.

Mark Loughridge, 57, the chief financial officer, is being given a larger role overseeing finance, the company's financing unit, and internal information technology. But his experience at IBM, analysts suggest, has been too limited to make him a likely successor.

Michael E. Daniels, 56, a senior vice president, will be in charge of the entire services business, which had been split until now. Virginia M. Rometty, 52, a senior vice president, will oversee marketing and strategy, as well as sales, which she handles now.

Daniels and Rometty, analysts suggest, would be the most likely internal candidates to succeed Palmisano.

Still, they say, the closeness in age to Palmisano of the four executives could well mean that he is planning to remain beyond 60, while giving his top lieutenants large roles. Investors have been pleased with the tenure of Palmisano who, since 2002, has aggressively expanded IBM's operations abroad, shifted it sharply into higher-margin businesses and increased earnings per share fourfold.

In its earnings report, IBM reported a profit of $2.61 a share, up about 13 percent from the year-earlier quarter. The profit performance surpassed the $2.58 a share consensus estimate of Wall Street analysts, as compiled by Thomson Reuters.


But IBM reported a sluggish revenue increase of 2 percent, to $23.7 billion, below Wall Street's forecast of just less than $24.2 billion. In the year-earlier quarter, IBM reported revenue of slightly less than $23.3 billion.

New contract signings, the seed corn of future revenue in IBM's huge services business, also came in well below analysts' expectations, at $12.3 billion. A.M. Sacconaghi, an analyst at Bernstein Research, had forecast signings of $14 billion.

In after-hours trading, shares of IBM fell as much as $5.58, or 4.3 percent.

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