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Palmisano confirmed as IBM CEO

Lou 'I fell in love with IBM' Gerstner

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The only secret was when the announcement would be made: Sam Palmisano, the president and chief operating officer (COO) of IBM, will become CEO when incumbent Lou Gerstner steps down in March.

This is by way of smooth succession planning. Palmisano was anointed Gerstner's successor by everyone, including us in July 2000, when he was made president of IBM, as well as COO. At the time we wrote: "He is regarded as the catalyst who transformed IBM from a hardware company to a services company".

Palmisano is an IBM careerist, unlike his soon-to-be predecessor Gerstner, who made his reputation and fortune at Nabisco.

Last July, Gerstner told close colleagues that he would not seek a renewal of his contract when it expired in March 2002, according to Sunday Business, a UK financial newspaper. However, it's confirmed today that he is staying on as chairman until the end of 2002. Palmisano will probably get this job too.

John Thompson, head of IBM's software business, is retiring too. At one time, he was regarded as a very strong contender for the top slot at the company, but time ran out. His misfortune was to be too close in age to Gerstner - they are both 59 years-old. Palmisano is 50. ®

Gerstner's 'I fell in love with IBM' email memo to the troops

Dear Colleague:

When I joined IBM on April 1, 1993, there was no thought about my retirement date. The Board of Directors asked me to focus on one short-term objective: save the company. Given my very limited knowledge of IBM at the time, I quite honestly did not know if that could be done. I certainly didn't know how long it might take.

Well, with the support and leadership of thousands of IBMers, we did turn the company around. That work, and my original mandate, was largely completed by the mid-nineties. But along the way, something happened -- something that, quite frankly, surprised me. I fell in love with IBM. I decided, like many of you, that this was the best company in the world at which to spend my career. IBM is a fascinating, important, frustrating, exhausting and fulfilling experience -- and I've enjoyed every minute (well, maybe not every minute)!

But here we are nearly nine years later, and now it is time to address retirement. I have always used these e-mails to speak with you about the most important developments and our strategic direction. I want to do that again now. Moments ago, the Board of Directors elected Sam Palmisano to be Chief Executive Officer of our company, effective March 1, 2002. Also, John Thompson, vice chairman, announced his intention to retire from the company and the Board on September 1, 2002. I know the entire IBM team joins me in thanking John for 36 stellar years of IBM service -- a wonderful career that included building our software business, and that culminated with focusing the way we identify and pursue new market opportunities.

At the Board's request, as well as Sam's, I will remain as Chairman until the end of this year. From March 1 on, Sam is our new leader. My job will be to help him in whatever ways he seeks my time and counsel.

Let me say something about the timing of this transition, because some people believe IBM CEOs are required to step aside at age 60. That's not so. There is no rule or age limit that requires me to do this now. I am doing it because I am convinced that the time is right. The company is ready, and so is the new leader. I have never felt more optimistic and confident about our future. And those are the best circumstances under which to make this sort of change.

Over the past two years, Sam and I have forged a strong partnership to prepare the company for a transition in leadership. Supported by a fine Board of Directors, we have undertaken a process that has been disciplined, transparent and thorough.

Many of you know Sam. Thousands of you have worked for him. He's an exceptional leader, passionate about our business, committed to our principles and values, and steeped in the disciplines that are critical to our success. Beyond those critical qualities, Sam bleeds Blue. And because he does, he understands the character of our company at its soul, the incredible world-changing things it alone can accomplish -- and how it must continue to change in the years ahead. I know you will give Sam all the support you so generously provided me over many years.

It has been the privilege of a lifetime working with you these past nine years. I am so proud of so many things that we have accomplished, far too many to list in this e-mail. All our hard work has brought IBM back. Today, our strategies are correct. Our capacity to innovate is unmatched.

Our culture is moving in the right direction. And we have restored the pride all of us feel in this company. Those were pretty remote targets back in 1993, when so many had written us off and so few believed we had the will to survive. But in your gritty, classy, determined way, you never gave up. Thank you for restoring IBM's leadership.

As I said, after March 1, I'll be available to help Sam and the entire leadership team in any way I can. And long after I step aside as chairman, I want you to know that I will be cheering and rooting for this magnificent company and its extraordinary people. I am an IBMer for life.

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