Shares in IBM Corp. are up almost 4% late today after the company announced that its long-serving Chief Executive Officer Ginni Rometty will retire, to be replaced by veteran IBM executive Arvind Krishna.
In addition, Jim Whitehurst, former CEO of the recently acquired Red Hat Inc., will take over as IBM’s president. The changes will be effective April 6.
Rometty, 62, has served at IBM for more than four decades, leading the company as its president and CEO since Jan. 1, 2012. During Rometty’s tenure, IBM’s stock declined by about 25% as she struggled to transform the company to keep it relevant in the new era of cloud computing.
“Big Blue” has undergone some radical changes during that time, with Rometty making cloud services a big priority while also choosing to exit some businesses. For example, she oversaw the sale of IBM’s x86 server business to Lenovo Group Ltd. in 2014.
Incoming CEO Krishna (pictured), currently IBM’s vice president of cloud and cognitive software, is said to be the principal architect of the Red Hat acquisition, which was completed in July 2019.
In a statement, Rometty said Krishna is a “brilliant technologist” who has played a key role in the development of its artificial intelligence, cloud, quantum computing and blockchain services.
“Arvind has grown IBM’s Cloud and Cognitive Software business and led the largest acquisition in the company’s history,” Rometty said. “Through his multiple experiences running businesses in IBM, Arvind has built an outstanding track record of bold transformations and proven business results, and is an authentic, values-driven leader. He is well-positioned to lead IBM and its clients into the cloud and cognitive era.”
Analysts liked the news. “IBM’s election of Arvind Krishna as its next CEO signals that the company wanted to maintain continuity of succession and hire from within, while at the same time promoting new blood in the form of Jim Whitehurst to assist in the transformation of the company,” said Dave Vellante, chief analyst at SiliconANGLE Media’s sister market research firm Wikibon. “It also signals a shift to leadership with deeper technical depth and execs with an affinity toward Red Hat — its clear linchpin for the future.”
Krishna is a logical pick to lead IBM now, given the importance of cloud to IBM’s future, added Charles King of Pund-IT Inc. “He’s an excellent technologist and has done a great job leading the company’s cloud organization,” King said.
Moor Insights & Strategy’s Patrick Moorhead told SiliconANGLE the announcement came as a surprise, since the company didn’t have a very visible succession plan in place. But he added, “I am pleased to see Whitehurst appointed president because it means there’s both an outsider and a longtime IBMer running the company.”
Moreover, he said, “Krishna spearheaded many of the next-generation IBM initiatives like the Red Hat acquisition, blockchain and quantum.”
But Rob Enderle of the Enderle Group said he was in fact expecting such a move as IBM CEOs historically last around 10 years on average, and Rometty was fast approaching a decade in the top job. He said the move parallels somewhat with Microsoft Corp.’s decision to replace its previous CEO Steve Ballmer with Satya Nadella, as both executives were leading the business units that were seen as key to their respective company’s futures.
“Watson and Cloud are increasingly becoming the platforms that define IBM’s future,” Enderle said. “If the Microsoft model holds, and it generally does historically, of putting the person in charge of the company who is responsible for the firm’s future, this is an ideal selection.”
Enderle also pointed out that IBM is one of the very few companies around that formally trains its CEOs before they take over the job.
“Given the businesses that Arvind has been running, he appears to represent the best choice for a new CEO that IBM could make and, I expect, a similar progression for IBM that we saw with Nadella at Microsoft,” he said. “I’ve met and been impressed with the guy and he is very well regarded both technically and interpersonally. I think this is an excellent choice.”
Krishna was interviewed on SiliconANGLE’s mobile livestreaming studio theCUBE during the IBM Think 2019 event last February, where he discussed IBM’s plans for Red Hat shortly after that acquisition was first announced:
TheCUBE host John Furrier said he also saw parallels between Krishna’s hire and that of Nadella at Microsoft. He added that he believes Krishna will do well for IBM because he’s a “smart executive” with a key understanding of the cloud.
“I see a future where Arvind can implement a Microsoft-like turnaround just like Satya Nadella did,” Furrier said.
Vellante added that Rometty’s tenure might be judged harshly, perhaps too much so. “She set forth bold transformation goals that never materialized into shareholder value,” he noted. “However Rometty will always be remembered first and foremost as the first woman to lead the company in a male-dominated business.”
Part of the problem, he said, is that Rometty’s background was steeped in professional services and despite a spate of acquisitions, such as the $2 billion SoftLayer acquisition, she was unable to realize her goal of returning IBM to growth.
But it wasn’t all her fault, Vellante added, because she inherited a bloated organization from previous CEO Sam Palmisano, whose reliance on IBM’s legacy of professional services was undercut by technology shifts such as cloud computing.
“Rometty invested to keep IBM in the public cloud game, doubled down on software and through a variety of moves cut its portfolio by selling nonstrategic assets,” he said. “But aspirational goals to remake IBM as a leader in AI with Watson never trickled down to the P&L and led to the imperative to spend $34 billion on Red Hat to set up IBM’s next chapter.”
Ultimately, he said, “she kept the ship from crashing into the rocks” and should be judged down the road on how well Krishna and Whitehurst leverage the foundation she set. “While not a grand slam, her tenure was far from a disaster,” he said.
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