IBM CEO Ginni Rometty will step down as chief of the technology giant.
IBM’s board of directors said on Thursday that they have elected Arvind Krishna to become the company’s new CEO on April 6, 2020. James Whitehurst, an IBM senior vice president and CEO of enterprise software firm Red Hat—which was acquired by IBM in July for $34 billion—will become IBM’s president in April.
Rometty will remain IBM’s chairman until the end of the year, when she will officially retire after a 40-year tenure at Big Blue.
“Arvind is the right CEO for the next era at IBM,” Rometty said in a statement. “He is a brilliant technologist who has played a significant role in developing our key technologies such as artificial intelligence, cloud, quantum computing and blockchain.”
Rometty’s plans to retire from IBM comes after years of declining revenue and a slumping share price, as the over-100-year-old company tried to retool itself amid a rapidly changing information technology market. Under her tenure, IBM experienced 22 consecutive quarters of sales declines that ended in 2018. In the company’s latest quarter, sales dropped 3.9% year-over-year to $18 billion.
The day before Rometty officially took over as IBM CEO in January 2012, IBM stock closed at a price of $183.88. Since then, IBM shares have dropped 26% to around $137. In after-hours trading on Thursday after IBM announced the upcoming executive change, its shares jumped 4.7% to $143.30, signaling that investors are pleased that Rometty will step down.
Some CEOs of major companies praised Rometty in light of IBM’s announcement. For instance, Apple CEO Tim Cook, whose company is an IBM partner, called her “a trailblazer — a keen leader and innovator on behalf of one of America’s great companies.”
“Throughout her career, she has fought tirelessly to make sure technology’s benefits reach everyone and that diverse and representative voices are heard from the laboratory to the board room,” Cook said. “Her values and success are now a central part of IBM’s story, and they will be carried forward by the many leaders that she has mentored and inspired.”
JPMorgan Chase CEO Jamie Dimon said in a statement that “Ginni is an individual with extremely high character and exceptional capabilities – a truly excellent partner and a trusted leader.”
“She also played a critical role in advancing workforce development in the U.S. through her great work at the Business Roundtable,” Dimon added. He was referring to Rometty’s efforts involving the influential non-profit that recently updated its “purpose of a corporation” manifesto to include more than simply making money for shareholders.
Former American Express CEO and chairman Ken Chenault (also a former IBM board member) said in a statement that he was “highly confident that IBM is on the right path as a result of her strong leadership.”
Rometty was IBM’s first female CEO and steered Big Blue during a time of massive disruption in the information technology market. The advent of cloud computing, in which companies like Amazon and Microsoft began selling computing resources on-demand, hurt IBM’s core businesses of selling software licenses, servers, and consulting services.
Some of Rometty’s biggest moves to help turn the company around included buying cloud computing company SoftLayer technologies for $2 billion to bolster IBM’s cloud business and spending billions on its Watson data crunching technologies. But those big investments failed to significantly lift IBM’s sales, resulting in a slumping share price, with some analysts wishing its big bets would pay off sooner rather than later.
R “Ray” Wang, founder and chairman of Constellation Research, said IBM has been looking for CEO candidates for the last year. Wang believes Krishna’s background as a technologist will help IBM better compete with companies like Amazon and Google. Although maintaining customer relationships was one of Rometty’s strengths, an executive with technical know-how can potentially help IBM win more customers, Wang believes.
“You need a tech person with a product background to go toe-to-toe, and IBM hasn’t had that for a long time,” Wang said. “In this battle, you need to have a really good understanding of the technology and what it means for the business,” Wang said.
Patrick Moorhead, Principal Analyst at Moor Insights and Strategy, says it’s too early to judge Rometty’s tenure at IBM, explaining that it may take years for the company’s big investments to succeed.
“I have to give them credit, it could have been a lot worse.” Moorhead says. “I know they didn’t grow financially, but people were saying they were dead.”
Moorhead likened IBM to other massive tech giants like the former Hewlett Packard and Dell Technologies, which all significantly upended their businesses to deal with the advent of cloud computing. For instance, Hewlett Packard split into data center specialist Hewlett Packard Enterprise and PC and printing giant HP, Inc. in 2015. Dell Technologies, meanwhile, bought data storage company EMC for $67 billion in 2016.
Daniel Ives, a managing director and analyst at Wedbush Securities, said in a research note that traditional IT companies like HPE, Cisco, and IBM will continue to face pressure in 2020, due in part to the growing cloud businesses at Microsoft and Amazon. However, Ives said that IBM’s “new CEO and cloud veteran Arvind Krishna a major step forward in our opinion” for Big Blue.
Moorhead notes the significance of Red Hat’s Whitehouse becoming IBM’s president, saying “I don’t recall in the history of IBM an outsider being that close to the top, ever.” But the decision to hand the CEO title to Krishna, who has worked at IBM for nearly 30 years and oversaw the company’s Red Hat acquisition, implies that IBM’s board was not looking for a “complete revamp” of IBM’s executive leadership.
“Arvind has to execute the strategy flawlessly,” Moorehead says. “With Red Hat, there’s no going back.”
Correction, January 31, 2020: An earlier version of this story misstated Ginni Rometty’s start date as CEO and the stock price at that time. She became CEO on Jan. 1, 2012 and IBM’s stock price closed at $183.88 the day prior.
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