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Palmisano to be IBM chairman, too


ARMONK, N.Y. - International Business Machines Corp. Chief Executive Officer Samuel J. Palmisano will assume the added role of chairman from Louis V. Gerstner Jr., who will retire from the world's largest computer maker at year's end.

Palmisano, 51, replaced Gerstner as CEO in March.

Gerstner, 60, was hired in 1993 and restored IBM's profit a year later, after $15.9 billion in net losses from 1991 to 1993. He will be an adviser to IBM after leaving the company and its board, spokeswoman Carol Makovich said.

Since Palmisano's promotion to CEO from chief operating officer, the 29-year IBM veteran has cut jobs and costs, and shed underperforming businesses to maintain profitability amid slumping demand. Such efforts will continue with the greater authority he will have after the departure of Gerstner, investors and analysts said.

"He's going to have limited patience for areas of IBM's business that aren't performing well," Gus Zinn, an analyst with Waddell & Reed Financial Inc., said about Palmisano. The company owns IBM shares among its $29 billion in assets.

Palmisano will need to demonstrate how he intends to revive the fortunes of IBM's struggling personal computer business, investors say.

"Dell has just continued to bludgeon them in PCs," said Steven Salopek, a computer technology analyst at Banc One Investment Advisors, which manages $135 billion and owned 5.2 million IBM shares as of June. IBM's PC business "has been losing a couple of hundred million dollars a quarter."

IBM shares rose 18 cents to $76.74 in New York Stock Exchange composite trading yesterday. They are down 37 percent this year, tied with Alcoa Inc. for the fourth-worst performance among companies in the 30-member Dow Jones industrial average.

The company is the No. 3 seller of servers, the fast computers that run networks, behind Hewlett-Packard Co. and Dell Computer Corp., according to Dataquest Inc., a research company. IBM's share of the market fell to 13.9 percent from 14.5 percent in the third quarter. Fourth-place Sun Microsystems Inc.'s market share rose, and its shipments increased 18 percent, Dataquest said.

Investors have said they backed Palmisano's decision to sell IBM's money-losing hard disk drive unit and to cut about 20,000 jobs. They also want Palmisano to have more of a public presence than Gerstner had, Salopek said.

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