IBM's Reversal Hero: Gerstner Passed Away

Louis Gerstner died on Saturday at the age of 83. He took over the bankruptcy International Business Machines Corporation (IBM) and revitalized it as a leading company in the technology industry.

IBM Chairman and CEO Arvind Krishna announced Gerstner's death in an email to employees on Sunday, but did not provide a cause of death.

Gerstner's nine-year tenure as chairman and CEO of Giant Blue is often used as a case study in corporate leadership.

On April Fool's Day in 1993, he became the first outsider to take charge of IBM. At the time, IBM was facing bankruptcy or spin-off, having been the undisputed leader in personal computers and mainframes. He transformed the Armonk, New York, company into a commercial service-oriented business, abandoning hardware production and reversing a plan to split the company into a dozen semi-separate divisions (the so-called "Little Blue Gang") in pursuit of higher profits.

Gerstner slashed costs and sold non-productive assets, including real estate and IBM's art collection. He laid off 35,000 of his 300,000 employees who had become accustomed to a lifelong corporate culture based on principles laid down by former CEO Thomas Watson (Watson Sr.) in the early 20th century.

He emphasized company-wide teamwork to replace previous loyalty to various departments and linked compensation to overall company performance rather than individual performance. To achieve performance goals, he emphasizes regular accountability rather than waiting for annual performance reviews.

"People will do what you check, not what you expect," he said. "

The key change for Guo is to abandon IBM's previous sales model of bundling products that can only be used with other IBM products, from PCs to operating systems to software. He believes that the failed products have been abandoned. He ended the development of OS/2, an operating system designed to challenge Microsoft Windows, which was not popular with users.

Krishna wrote, "His leadership during that time reshaped the company. Instead of looking back, he remains focused on the future needs of his clients. "

BM focuses on so-called middleware – software for databases, system management, and transaction management. The company became an unbiased integrator of enterprise networks and systems, willing to help regardless of whether the hardware used was branded with IBM.

Early on betting on the Internet and e-commerce, he correctly predicted that this would put less emphasis on personal computers and more on servers, routers and other more complex devices that would benefit from IBM's service expertise and involve buyers familiar to IBM salespeople, such as the CTO.

Later in his tenure, he also made strategic acquisitions, such as the $2.2 billion acquisition of Lotus Development Corp., whose Notes products are critical to helping IBM customers collaborate across the enterprise.

The shift from hardware to services has increased IBM's service revenue from $7.4 billion in 1992 to $30 billion in 2001. During his nine years as CEO, IBM's stock price (adjusted for splits) rose from $13 to $80, and IBM's market capitalization grew from $29 billion to about $168 billion.

"If I had the right to vote, my most important legacy during my tenure at IBM was the creation of a truly integrated entity," he wrote in 2002. "This is undoubtedly the hardest and riskiest change I've ever made."

Louis Vincent Gerstner Jr. was born on March 1, 1941 in Mineola, New York, to Louis Gerstner Sr., a milk transport driver, and Marjorie Rutan, a secretary and university administrator. He was one of four brothers in the family.

He graduated from Chaminade High School in Mineola, a highly competitive Catholic school. He earned an engineering degree from Dartmouth College and an MBA from Harvard University.

McKinsey & Company

After graduating from Harvard, he joined McKinsey & Company as a consultant. Four years later, he became a partner and worked there for 12 years before joining American Express.

He worked in the company's credit card department before taking over travel-related services. Under his leadership, American Express, which at the time primarily offered travel credit cards, expanded its presence in retail stores and introduced high-end credit cards that allowed customers to keep their outstanding balances.

As a result of American Express CEO James M. D. Robinson III blocked Gushner's promotion to an executive position, agreeing to take the helm of RJR Nabisco, where he worked for four years before joining IBM. His main task at RJR Nabisco was to cut the tobacco and consumer goods company's $25 billion debt due to leveraged buyouts.

After the IBM board forced John Ackers to leave in January 1993, the search for a new CEO began. At the time, the company was posting its largest annual loss in its history. In choosing Gerstner, the board valued management experience rather than computer expertise. (Gushner's older brother, Richard, worked at IBM for 30 years and led divisions including personal computers.) )

From the time Gerstner took office in April 1993 to the announcement of his resignation in January 2002, IBM's stock price rose ninefold, while the S&P 500 index rose 154%. Sam Palmisano took over as CEO and then chairman after Gerstner retired at the end of 2002.

In 2003, Gerstner became chairman of the Carlyle Group, a Washington-based private equity firm. He oversaw the company's expansion in Asia and Latin America, as well as early preparations for the company's successful IPO in 2012. He retired in 2008 but remains as a senior consultant.

He and his wife Robin have two children. Their son Louis III died in 2013 after choking on a restaurant.

Through the Gerstner Charitable Foundation, the family supports biomedical research, environmental and education programs, and social services in New York City, Boston, and Palm Beach County, Florida. The family has long been a supporter of the Mayo Clinic.