Ibm Shuffles Executives, Forms New Group

International Business Machi-nes Corp. on Tuesday announced a reorganisation of some of its major businesses and key executive changes, moves analysts said seemed to be aimed at improving sluggish hardware results.

The moves are the latest by chairman Louis Gerstner to help IBM cope in an increasingly competitive and fast-changing industry and add some new executives to his inner circle of confidants, the analysts said.

The worlds largest computer maker Monday reported second-quarter earnings that slightly exceeded Wall Street forecasts, but included areas of weakness such as declines in consumer personal computers, minicomputers and workstations.

IBM said it was giving Robert Stephenson, 59, a senior vice president, additional responsibilities, including the units that make up IBMs server group the System/390 mainframe unit, AS/400 minicomputers, RS/6000 workstations and Microelectronics.

Stephenson has been in charge of the personal systems and technology group, with printers, networking, the consumer unit, the IBM PC Co. and storage reporting to him.

The units that didnt do very well are being put under a rather hard businessman, and thats what Stephenson is, said Gary Helmig, a SoundView Financial analyst.

He gets a lot of credit for taking the fat out of the PC business.

Nick Donofrio, 51, previously senior vice president running the server business, will take a new position, senior vice president technology and manufacturing, where IBMs research division will report to him.

He will be in charge of expanding research and spending time on emerging technologies.

IBM, based in Armonk, N.Y. also said it was creating a new unit that would include the IBM PC Co., the Network Computer unit and the consumer unit because the distinctions among the businesses are blurring.

Network computers are low-cost machines meant to operate more cheaply than PCs.

This new business unit, which IBM referred to as the end-user-oriented group will be under Sam Palmisano, 44, who was promoted to senior vice president. Palmisano was most recently general manager of the PC Co. and has been credited with helping build the services business into what is now IBMs fastest-growing unit.

They have rewarded Sam for everything he has done, said Sam Albert, a Scarsdale, N.Y.-based industry consultant. He is being asked to straighten out the confusion and make sense of it all, he said, referring to the blurring lines between consumer PCs, low-cost corporate PCs and network computers.

I believe that our organisational structure should always be flexible and adaptive as we encounter and embrace change in the new IBM, Gerstner said in a memo to employees. A copy of the memo was obtained by Reuters.

I would be surprised if Lou Gerstner is happy with the lack of growth coming out of servers, said Daniel Ries at Nomura Securities.

That is one of his strengths, he says, this is not a country club and he does not accept poor performance.

In the second quarter, IBMs hardware sales were basically flat at $8.5 billion while sales of AS/400 minicomputers fell as customers waited for new products. Its workstations were hurt by the growing popularity of workstation-like PCs running Windows NT.

IBM also said Jim Vanderslice, 56, general manager of IBMs storage systems division, will become a vice president and add network hardware and printing systems to his responsibilities.

The hard disk drive business was one of the stellar performers in the past two quarters for IBM.

The changes will be effective Aug. 1. IBM stock fell 75 cents to $103 in consolidated New York Stock Exchange trading after rising steadily ahead of Mondays earnings report.