IBM Chief Turns Up Heat as Computer Giant Faces Slump

Bart Ziegler
The Associated Press

May 29, 1991

New York -- IBM Chairman John Akers has been making blunt speeches to his managers warning that the computer industry is in a crisis and that company employees are "too damn comfortable" as it loses business.

Akers' comments may indicate deeper trouble at one of the nation's most important companies than it has publicly let on. IBM has blamed the poor economy worldwide - not internal shortcomings - for lower sales and profits it reported in the first quarter.

On top of the recession, International Business Machines Corp., like other computer makers, must contend with a more competitive industry that is seeing historic growth rates slow.

IBM's worldwide market share has slipped to about 23 percent, down from 37 percent in 1983, according to Gartner Group Inc., a technology research firm.

In recent weeks, a number of analysts lowered their earnings projections for IBM for this quarter and the year. IBM shares fell $1 to close at $104.12 1/2 in New York Stock Exchange trading Wednesday.

One industry analyst said Akers' comments, reported in several newspapers Wednesday, appear to represent a change in tone.

"I never felt a sense of urgency" before, said Martin Ressinger of the Chicago investment firm Duff & Phelps Inc. "Now you sort of sense that it is time to get a little bit tough."

According to the newspaper accounts, based on notes taken at one Akers session by an unidentified IBM employee, the chairman told managers a few weeks ago that the company had "too many people standing around the water cooler waiting to be told what to do."

Akers was said to have told the managers to fire more marginal employees.

"The fact that we're losing market share makes me goddamn mad. I used to think my job as a (sales) rep was at risk if I lost a sale," Akers was quoted as telling the managers. "Tell them theirs is at risk if they lose" one.

"The tension level is not high enough in the business - everyone is too damn comfortable at a time when the business is in crisis," Akers was quoted as saying.

Akers also was quoted as saying IBM needs to improve product quality.

Copies of the notes from Akers' talk were widely circulated inside IBM through an electronic mail network, and printed copies were sent to several newspapers by an IBM employee who acted on his own, according to an IBM source. IBM spokesman Peter Thonis said he could not confirm Akers' actual words, but said the tone of the reported comments was accurate.

He said Akers' concern wasn't prompted solely by IBM's poor showing in the first quarter, when sales fell 17 percent from a year earlier and operating profit dropped 50 percent.

"He's been making these speeches for several months," Thonis said.

Analyst Bob Djurdjevic of Annex Research said Akers' sharp comments could hurt the 6-year IBM chairman.

"This would be like the manager blaming the team for the fact that they lost the game. And that sort of manager starts to lose the respect of the players," Djurdjevic said.

One IBM employee posted a memo on the company's computer mail system several days ago calling on Akers to resign over the comments, he said.


Copyright 1991. The Associated Press. All Rights Reserved.