WEB -- IBM CEO talks about cutting costs

By Bob Freund

New IBM Corp. chief executive Sam Palmisano painted only the broadest-brushed picture of the technology company on Wednesday, largely avoiding questions from Wall Street analysts about issues ranging from job cuts to the fate of IBM's main microelectronics plant in Vermont.

In his first appearance at the Analysts Spring Conference as IBM's top executive, Palmisano dwelled on long-term strategies and backed his predecessor's financial goal of sustaining double-digit earnings per share.

The new IBM leader also focused on productivity and, in answer to one analyst's questions, explicitly said that reducing costs will be necessary for the forseeable future.


"We are going to have to drive out of IBM continuously $1 billion, $2 billion (in costs) …; every year, every year," he said at the New York conference. "We understand how to do it strategically."

Some of that cutting clearly will involve a smaller work force. Palmisano said individual businesses, one of which is the Server Group, must set their own targets. But he did comment on an analyst's suggestion that conditions suggest reductions of 20,000 workers.

He implied attrition could play a part. "If we didn't hire anybody (new), we'd go down 15,000," Palmisano said.

But, with the microelectronics division already mentioned, "clearly there are other areas in our business that we need to be much more efficient in," he said.

"We are going to (do that), and you'll hear more about what we are doing to address those issues," Palmisano said. He succeeded Lou Gerstner on March 1. Gerstner remains chairman.

The Server Group, which is the largest division operating at IBM Rochester, was listed in accompanying slides as one of several areas that is declining in revenue contributions to IBM.

Palmisano acknowledged a "tough pricing environment" last year and also referred to a difficult global economic environment in which "capital spending is constrained."

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