IBM has also been helped in no small way by the corporate hangover from the recent business-to-business software binge. Companies are now seeking technology projects that promise solid return on investment.
In a situation like this, the company considered the equivalent of the Rock of Gibraltar looks pretty good. For decades, the saying was that no one got fired for buying IBM. "I think that still definitely rings true," says Randy Mowen, director of data management and e-business architecture at Bekins Van Lines. "I think they are much more focused on customer retention and support."
Bekins is adding to a Web-based system that uses IBM software and mainframe hardware to track product shipments and van deliveries. A decade ago, mainframes cost tens of millions of dollars and required dedicated rooms with water-cooled air conditioning. Today's zSeries 900 mainframes are air cooled and start at $750,000. They also run some of the latest software, such as Linux. "Who would have thought you'd run an open-system operating system on big iron?" Mowen asks. "That's keeping up with the times."
Earlier this month, Pathmark Stores extended a 10-year outsourcing contract with Big Blue for another five years. "We were already married to these guys," says Frank Vitrano, chief financial officer. "They do a good job of protecting your investment." Under the expanded deal, IBM will manage Pathmark's data center, software applications and PCs. "From a supermarket [industry] perspective, they are a major player," Vitrano says.
First-quarter 2001 results reflect the improved focus and brisker pace. While Gerstner has yet to keep his vow of double-digit revenue growth, quarterly net income rose 15 percent to $1.75 billion, and revenue increased 9 percent - respectable despite easy financial comparisons from last year's Y2K-induced slowdown. In contrast, Cisco posted a $2.69 billion loss, and Sun's revenue rose only 2 percent.
Gerstner's foresight about the company's potential in the services sector has certainly borne out. IBM's Global Services supplied a big piece of the quarterly growth. The $8.5 billion business accounted for 40 percent of total sales and nearly half of profits.
Gerstner hasn't used the same deftness in planning his succession. He rather awkwardly named his favored heir, Palmisano, during a televised appearance on Lou Dobbs' Moneyline instead of at a carefully scripted annual meeting or company forum. He then vaguely added that the transition will begin in "a very short period of time."
