A jaunty Louis Gerstner faced tough questioning as he told shareholders at the annual meeting, IBM is back on its feet, but the item that was top of the agenda as far as the assembly was concerned was the dividend: when is it going to be raised again. According to Reuter, Gerstner tried dodging the dividend questions with responses about goals to increase shareholder value, noting that the share price had more than doubled in the past two years, but investors were relentless. With $10,500m free cash, what can we expect in the future regarding dividends? asked one. Gerstner acknowleged the figure was correct but cautioned that a significant percentage of the cash was needed to run the business, and listed other steps the company could take to boost shareholder value, such as reinvesting in the business, acquisitons and stock buybacks – and later said there were no plans for acquisitions. In the end, however, Gerstner was worn down. We have no plan to change the dividend, but that decision can be revisited at any quarterly meeting of the board of directors, he said. The issue is a burning one for long-term holders, because IBM is now paying just a dollar a year, compared with $4.84 before it was first cut. Gerstner recalled addressing IBM shareholders for the first time in 1993 when, he said, the public perception was that the company was a dinosaur and the lingering question was: Can IBM survive? Gerstner attributed the good first quarter figures to improvements in technology and marketing and continued cost-cutting, adding that those priorities would remain to answer a more relevant question: What kind of company will IBM be? He admitted that IBM needed to do a better job forecasting demand for our products. Gerstner found himself defending other decisions, such as hiring a chef at $80,000 a year and use of only one advertising agency. He declined to reveal the advertising budget, but Spreading advertising around is like having 10 doctors: none of them care much about you, he said. A shareholder who didn’t know whether to buy OS/2 Warp or wait for Microsoft Corp’s Windows95 was told Warp is far superior to anything out there. I can’t comment on Windows 96. I haven’t seen it yet.
