IBM Calls On Two Ex-Officers To Help in Crisis

Company Says the Return Of Cassani and Rizzo Is Not a Slap at Akers

By Michael W. Miller and Laurence Hooper, Staff Reporters. With Richard L. Hudson in London.
The Wall Street Journal

December 21, 1992

In a startling sign that its current management team isn't strong enough to handle a mounting crisis, International Business Machines Corp. is bringing back two retired executives to help embattled Chairman John F. Akers run the computer giant.

It wasn't clear if the unusual move is a signal of weakening support for Mr. Akers from IBM's board as the Armonk, N.Y., company's business deteriorates and its stock plunges to 11-year lows. Several people close to IBM suggested Mr. Akers could be trying to shore up his support with the board by enlisting two popular ex-vice chairmen, Paul Rizzo and Kaspar Cassani.

An IBM spokesman said it was Mr. Akers's idea to call on Messrs. Rizzo and Cassani, both widely described as loyal IBM lieutenants with superb command of the computer industry. The spokesman specifically denied that the board had installed the two men, or was in any other way undercutting Mr. Akers's authority.

IBM officials said Mr. Akers sent a memo Friday to about 100 top managers announcing that the veteran executives would return as his "counselors and advisers" beginning Jan. 1. "Our work will benefit from their insight and seasoned judgment," Mr. Akers wrote in the three-sentence memo.

Mr. Akers's memo said Mr. Rizzo would work with him in the U.S., while Mr. Cassani would work in Europe. In particular, he said, both men would work on making IBM's divisions behave more like independent companies.

But IBM officials said Mr. Rizzo has already begun playing a bigger role in overseeing IBM. He recently showed up in Armonk at a meeting of the three-man management committee that runs all of IBM's operations, to help map out IBM's crucial strategy in multimedia technology. Several people in the computer industry said Mr. Rizzo's comeback spotlights a hole in Mr. Akers's management team. This year, almost the entire rank of executives immediately below Mr. Akers left IBM, hastened in many cases by Mr. Akers. Mr. Akers has said he wants to bring along a new generation of managers in their 40s, but critics have said he also wanted to eliminate rivals for his job.

"Isolating himself at the top was a tactical mistake on his part," said Bob Djurdjevic of Annex Research Inc., a techonology consultant in Phoenix, Ariz. "By striving so hard to eliminate the real contenders around him, he ended up being the only one responsible."

An IBM spokesman said Mr. Akers wouldn't comment about the veterans' return or respond to charges that his management lacks depth. "We have a very strong executive team throughout the company and throughout the world, the spokesman said. Messrs. Rizzo and Cassani "offer some unique insights and unique experience that John Akers finds valuable," he said.

So far there hasn't been any definitive sign that IBM's board played a role in bringing back Messrs. Rizzo and Cassani. "The idea that this was forced or thought up or engendered by the outside directors, there is nothing to it," said retired Stanford University President Richard W. Lyman, an IBM director.

Mr. Rizzo has close ties to all three of the men described as IBM's most influential outside directors. During his IBM career he was closely associated with John Opel, a former chairman who currently heads the IBM board's powerful executive committee. He has also served on the Johnson & Johnson board with the health-care company's retired chairman James Burke and Thomas Murphy, chairman of Capital Cities/ABC Inc.

Mr. Opel didn't return calls to his home in Florida. Mr. Burke and Mr. Murphy, friends since their days at Harvard Business School, were on a vacation together last week in Vail, Colo., where they both refused to comment.

"The $64 question is who's the instigator of all this," said one recently departed top IBM executive. "I think it's plausible that John instigated it himself. It's also plausible he did it to forestall the board bringing somebody in."

IBM is reeling from its worst crisis ever, as its core business in large mainframe computers fades far more quickly than it expected. Last week Mr. Akers declared IBM's dividend is no longer safe and said the company could impose its first layoffs in half a century as it cuts 25,000 more jobs next year. All told, IBM's cuts announced this year will give it $11.4 billion in pretax charges, plunging it into its second straight massive year-end loss.

Mr. Rizzo, 64 years old, was long considered a leading candidate for the top job at IBM, but was passed over in 1985 for Mr. Akers, now 57. At IBM he was known as a pugnacious financial man who aggressively challenged any proposal that crossed his desk. "He is an extremely bright, pragmatic financial guy who understood enough of the technology to keep the engineering community honest," said Michael Hallman, a former president of Microsoft Corp. who worked at IBM as Mr. Rizzo's aide.

In 1987 Mr. Rizzo retired from IBM and became dean of the business school at his alma mater, the University of North Carolina, from which he retired in August. As a U.N.C. undergraduate, he became a football legend for catching two last-minute touchdown passes in the 1950 Cotton Bowl. Mr. Rizzo's Tarheels nevertheless lost the game to Rice University.

Born in Switzerland, Mr. Cassani, also 64, presided over IBM's European business during seven years of growth, turning what had been an IBM backwater into its largest profit engine. This year, plunging sales in Europe have been one of the chief sources of IBM's problems.

A diminutive, methodical manager known as "Kap," Mr. Cassani rose at IBM through a combination of marketing savvy and skillful navigation of European political minefields. He retired in 1989 and became executive director of one of Europe's largest business schools, the Institute for International Management Development in Lausanne, Switzerland. He had been scheduled to step down from the post next year.

Neither man could be reached for comment.

Copyright Dow Jones & Company Inc