IBM Boss Paints Rosy Picture

Armonk, NY-based tech giant IBM Corp. on Wednesday conceded
operational issues need to be addressed urgently to stem the flow of red
ink, but maintained its long-term outlook profit growth was strong.

In his debut appearance at the Spring Security Analyst Meeting Wednesday,
IBM chief executive Sam Palmisano painted a rosy picture of Big Blue’s
long-term outlook and made it clear moves were afoot to deal with
operational issues, including a tight rein on lagging business lines.

“We’ve had some issues and challenges that need to be addressed and we are
addressing them,” Palmisano said in the meeting with Wall Street analysts.
He hinted that IBM would take a hard look at discontinuing unprofitable
business lines over time and maintained the driving force behind those
decisions would be with an emphasis on increasing profitability.

“There are businesses that have run their course. Over time, some businesses
have not positioned us as we would have liked and we’ve exited those
businesses. We will continue to do that. At the end of the day, our
shareholders want us to drive double-digit EPS over the long term and that
is our primary focus,” Palmisano said.

Without providing specifics, Palmisano said operational issues within the
PC and hard disk drives businesses were the most in need of attention but
insisted the company continues to see growth in profits which are driven by
gains in productivity and efficiency.

“(Assuming) we can continue to drive share growth and productivity across
the enterprise, those factors support our goal of double-digit EPS growth
over the long term,” Palmisano said.

Palmisano’s comments came against the backdrop of looming layoffs, missed
revenue estimates and a
prolonged reduction in global IT spending that have forced IBM to turn to headcount reductions as a means of reducing overhead.

It comes less than a month after IBM missed revenue projections for the first time in 10 years. In its 2002 first
quarter results, the Armonk, N.Y.-based company reported a slice in profits
by nearly one-third from year-ago levels to $1.19 billion, or 68 cents a
share, on revenues of $18.6 billion.

Big Blue blamed the 12 percent revenue shortfall on the “continued weak
global business environment,” and Palmisano used the meeting with analysts
to spread the gospel that the company is well-positioned to emerge from the
downturn with minimal bruises.

“The downturn in the economy creates opportunities for new leaders to
emerge. When the shift occurs, (IBM) will exit as a much stronger company,”
he said.

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