Executives Are Shifted By I.B.M.

By John Markoff
The New York Times

August 2, 1991

I.B.M. streamlined its top management yesterday to free its fast-growing personal computer, work station and minicomputer businesses to compete more aggressively.

The shift realigns the company's top executives. I.B.M.'s president, Jack D. Kuehler, will take direct control of the company's Personal Systems and Application Business Systems divisions.

The company also named Terry R. Lautenbach, senior vice president, one of five members of its management committee. He will also take responsibility for several lines of business -- mainframe, networking systems, programming systems and technology products.

In the company's latest move toward cooperative ventures with other computer makers, officials at I.B.M. Japan said they were near an agreement with the NEC Corporation to sell and install systems that combine NEC's largest supercomputer with I.B.M.'s own mainframes in Japan. [Page D2.]

One Less Layer of Management

The shift eliminates a layer of management at the International Business Machines Corporation. In the past, Mr. Lautenbach reported to Mr. Kuehler.

"I think this is their most important reorganization since I.B.M. broke its minicomputer business away from its mainframe systems in the mid-1970's," said Rick Martin, an analyst at Prudential Securities. He said the shift would loosen the controls on I.B.M.'s personal computer and work station businesses and permit them to act more aggressively to gain market share.

"Lautenbach has the cash cow, but it's low growth," Mr. Martin said. "You want to keep feeding the cow, but growth is increasingly on the desktop."

Mr. Kuehler, who is 58 years old, is the company's highest-ranking executive with a technology background. He has been highly visible in recent years, pushing the company into various alliances and arguing that it must act more decisively to remain internationally competitive in semiconductor and computer manufacturing. He recently played a crucial role in negotiating the Apple-I.B.M. alliance.

The realignment, analysts said, suggested that Mr. Kuehler, who is not considered a candidate to become chairman of I.B.M., would continue to push the company to be more aggressive in growing businesses.

He will directly supervise the desktop and minicomputer businesses run respectively by James A. Cannavino and Robert J. LaBant.

In a statement yesterday, John F. Akers, I.B.M.'s chairman, said, "These changes will allow increased focus on key areas of our business, further reduce structure and speed our response to the marketplace."

I.B.M. has been searching for a strategy to get its desktop computer business going again after it stalled earlier this year as consumer buying preferences shifted. Brand-name companies like I.B.M. and Compaq have been losing ground to lower-priced clone makers like Dell Computer Inc. and AST Research.

The company made the announcement of the changes after a two-day board meeting earlier this week. The meeting led to a number of rumors that the company was contemplating a variety of important executive and business changes. One analyst said yesterday that he had heard reports that the company was considering merging its Burlington, Vt., chip-making operation into a joint venture with Siemens and possibly closing its Kingston, N.Y., mainframe manufacturing and testing operation.

A company spokesman, Rob Wilson, said he could not comment on the reports.

A number of analysts speculated yesterday that the changes could be interpreted to shed more light on the issue of succession at the company, but company executives discouraged such discussion.

Nonetheless the rise of Mr. Lautenbach, 52, is certain to make him one of a select group of I.B.M. executives who are considered to be in the running for the chairmanship. Mr. Akers is now 56, and the company's top executive traditionally retires at 60.

The shifts also signal increasing influence for Mr. Cannavino, who began his career at I.B.M. as a service technician. Under Mr. Cannavino, the company has greatly altered its desktop computer strategy, ending its decade-old relationship with the Microsoft Corporation.