For, having Louis Gerstner, alias "Louis XIX of Armonk," run the
IBM Company for another five years means:
Five more years of fluff over substance;
Five more years of cuts instead of growth;
Five more years of throwing good money after
Five more years of exporting American jobs
Five more years of putting personal interests
of Armonk's "aristocracy" ahead of that of the IBM Company;
In short, a disaster if you believe in substance; a bonanza, if you like
the PR fluff.
IBM's third quarter revenue growth, for example, was a groaner - 3%. Four
of IBM's five business segments had been flat or declining in the recent quarterly
reports. Even its only growth area - services - slowed down in the third quarter to below
20%. IBM's equity dropped; its liabilities grew; its cashflow was negative.. yet its stock
soared! Go figure...
The two million stock options which the IBM directors awarded "Louis
XIX of Armonk" in November to make him stay five more years certainly qualifies as
throwing good money after bad. It also demonstrates anew that Gerstner's compensation is
running ahead of that of the IBM's performance.
No wonder. All three members of the IBM Executive Compensation Committee
were appointed by Gerstner early on in his tenure at the IBM helm (C.F. Knight in 1993, A.
Trotman and C.M. Vest in 1994).
"Scratch my back and I'll scratch yours?" You bet. This IBM
chairman has certainly elevated the moral corruption in the American corporate boardrooms
to new heights. The two Watsons, who built the Big Blue into one of the world's greatest
companies, might be turning in their graves at such a brazen example of self-dealing by an
IBM has also squandered over $16 billion of its shareholders' money
creating an illusion of prosperity by buying back its stock. Gerstner's IBM had spent more
money investing in its P/E ratio in the first nine months of 1997 than it did on IT
products or software investments. And in late October, the IBM Board approved another $3.5
billion for stock repurchases.
More worryingly, as IBM was buying back its stock by the billions, some
insiders were exercising their stock options by the millions, Gerstner included.
IBM employees should brace themselves for Gerstner to wield his axe again
because of its lack of growth. (It's one of the few things he is good at. Don't be
surprised, though, if such cuts are spun as "good news" stories.)
On Nov. 17, the Wall Street Journal reported that IBM was planning to
build a $700 million computer chips making facility in upstate New York, which would
generate 400 new jobs. Gerstner and the New York state's governor, George Pataki, never
mentioned, however, the thousands of jobs which IBM is about to cut.
Nor did anyone mention IBM's deal with Dongbu Group, a Korean
conglomerate, to which IBM had agreed to transfer some of its chips technology only 11
days earlier. According to a Nov. 6 Korea Herald report, the Dongbu-IBM contract will
result in about a $2.1 billion investment in the new semiconductor manufacturing facility,
and 1,000 new Korean jobs.
Now, even the most elementary economics students could conclude from the
preceding that 600 American jobs and about $1.4 billion in investments had just crossed
the Pacific - heading WESTWARD from the U.S.! (Editor's note: Due to the Korean financial
crisis, this agreement has been put on hold).
"Louis XIX of Armonk" decided over two years ago that the Big
Blue needed a new, modern HQ building at Armonk. Never mind that most multinational
companies' HQs in the Westchester County, NY, area were looking like ghost towns. And even
though IBM was unable to sell its old headquarters building for over two years now,
Gerstner plunged ahead with the costs of building a new one - an example that cost
cutbacks expected of others don't apply to the Emperor's palace.
French king Louis XIV was similarly vain and out of touch with reality
when he ordered the construction of the Versailles. He, too, considered the Louvre an
old-fashioned and an insufficiently modern palace.
Those who think that GREED and VANITY are acceptable principles upon which
to run IBM for another five years, should contemplate what eventually happened to the
former masters of the Louvre AND of Versailles.
Moral of the story? Money and technology will never be a substitute for
ETHICS and MORALITY! Which is why a resounding "yikes" was this writer's
reaction to five more years of Gerstner.