It’s not the sort of thing you ever got from John Akers, who managed to remain chirpy in whatever he committed to paper for public consumption, but Louis Gerstner is not John Akers, and he presents an outspoken, no-nonsense message to shareholders in the annual report: 1993 was the worst year in the company’s history, he declares emphatically. He criticises IBM’s inability to keep pace with the significant changes in the industry, and adds that We have been too bureaucratic and too preoccupied with our own view of the world. Echoing what observers have said for years, he goes on to say We have been way too slow getting new things to the market. We had all this great technology coming out of our labs, but time and again someone else beat us to the marketplace. Indeed the Wall Street Journal highlights the difference in tone between Gerstner and his predecessor as chairman by quoting Akers last year: the increasing pace of our participation in opportunities was not enough to offset generally weakened business conditions around the world and severe competitive pressure on revenue, price and profit…

Without a vision

Gerstner was clearly stung by the reaction to his comment last summer that the last thing IBM needed right now was vision, and addresses it head-on. I caused quite a flap in the press in July when, at a press conference, I said ‘The last thing IBM needs right now is a vision.’ A lot of the reports forgot the ‘right now’ and clucked about where IBM was headed without a vision. Some call it mission. Some call it vision. I call it strategy, Gerstner says, adding that no company will succeed without a set of tough-minded strategies. His top priority, he says, is getting IBM to an appropriate size as quickly as possible, and he believes that the work force reduction of 35,000 people announced last year and still going through should be the right number based on current business conditions. He is optimistic that the mood is improving among the people that are left, saying I believe that morale in most parts of the company is now on the upswing – especially after we reported a profit for the fourth quarter. As to that vision, he highlights client-server computing, with products and services, as a key strategic area of growth for IBM, adding that moving rapidly to microprocessors to power all its computer lines will make it easier to integrate its systems into distributed computer networks. He believes that IBM is fu-elling advances in software to make complex computer networks more seamless and programmers more productive, and notes that it is expanding its services. He acknowledges that the old IBM may have been arrogant but promises it won’t be arrogant on my watch and concludes when I joined the company in April, the pri-rities were clear: IBM must be profitable. IBM must be more competitive. IBM must increase shareholder value. IBM must grow: almost a year later, I think we can do it, – but not overnight. Elsewhere in the report, IBM says that hardware remains under price and gross profit margin pressure. Mainframe processor revenue and margins declined significantly last year and this trend may continue, it says, re-peating that the personal computer business competes in a relatively low margin area, a trend IBM expects to continue. Due to the changing mix of revenue and gross profit margins, it is uncertain when pressure on the company’s cost structure will be diminished.