IBM taps Rometty to succeed Palmisano as CEO

By Jim Finkle and Edwin Chan

             

(Reuters) - IBM global sales chief Virginia Rometty will take over as CEO from Sam Palmisano in January, becoming one of the most powerful women in business and technology today.

             

In taking the helm of the storied industry icon, she makes it the largest U.S. corporation by value to be headed by a woman.

             

IBM, which over the decades had a reputation of being a strait-laced, plodding, male-dominated business empire, will formally appoint the 54-year-old engineering and computer science graduate its first female CEO on January 1.

             

The selection went down well with Silicon Valley and Wall Street, especially because the 60-year-old Palmisano -- who helped transform Big Blue from a computer hardware company into a global services and software behemoth -- is staying on as chairman.

             

"Given Ginni's experience running the largest portion of the business by revenue, she was a logical choice," said Macquarie Securities analyst Brad Zelnick.

             

Her ascension will set up a rivalry with Hewlett-Packard CEO Meg Whitman for the mantle of most powerful woman in technology, mirroring a long-running rivalry between the two companies.

             

Rometty joins a relatively small circle of top female CEOs, including Whitman, Pepsico's Indra Nooyi, Xerox's Ursula Burns, Kraft Foods' Irene Rosenfeld and DuPont's Ellen Kullman.

             

Rometty -- who most recently served as senior vice president of global sales -- made her mark with the smooth 2002 integration of PriceWaterhouseCooper's consulting arm, a landmark move that catapulted IBM into the upper echelons of the technology consulting business.

             

Colleagues say that Rometty, often clad in elegant pastel-colored suits, cut a striking figure in IBM's staid hallways and impressed co-workers with both her cool-headedness and enthusiasm.

             

"She exudes energy," said Nelson Fraiman, professor at the Columbia University Graduate School of Business.

             

Fraiman, who has known the computer science and electrical engineering graduate from Northwestern for about a decade, said she was a good strategist and an early advocate for IBM's expansion into business analytics, or tools and services that help companies quickly analyze trends.

             

"She thinks in a very analytical way. That's part of her engineering training," he said.

             

One former IBM executive said Rometty -- who sometimes carries a backpack rather than a briefcase -- worked long hours and demanded that her subordinates do the same.

             

"People who work for her just don't sleep," said the source. "She has a style that is very different from anybody else's, but is all her own."

             

THE TRANSFORMATION

             

In nine years as IBM's leader, Palmisano exited low-margin businesses including PCs, printers and hard drives. He expanded the company's offerings in services, consulting and software.

             

Since the former history major took the reins, Big Blue's stock has outperformed HP's and matched Oracle's, according to Thomson Reuters data.

             

Wall Street appeared to approve of the choice of Rometty, and some analysts said that Palmisano had put in place a structure that would ease the way for anyone to follow in his footsteps.

             

Sources told Reuters in 2010 that Rometty had rebuffed advances from arch-rival HP, which was then looking to replace the ousted Mark Hurd, to stay at the company where she was seen as a rising star.

             

"She has done well at IBM. She has contributed to their expansion overseas -- emerging markets -- and has done a fantastic job in that space," said Morningstar analyst Sunit Gogia. "All the public knowledge about her performance is very encouraging."

             

But "computing is an industry that is always evolving," Gogia said. "It's moving into an era of cloud computing. The company will have to reinvent itself for the future, stay with the times and maintain the revenue base when they do that."

             

Shares in IBM slipped about a dollar from their $180.36 close following the announcement.

             

(Additional reporting by Jennifer Saba and Liana Baker in New York and Bill Rigby in Seattle; Editing by Robert MacMillan, Gary Hill)