Peter Henderson

SAN FRANCISCO: Louis Gerstner came to an ailing International Business Machines Corp. with "no vision," but the chief executive once dismissed as "the cookie salesman" ended up steering the world's largest computer maker through a world-class transformation.

Gerstner on Tuesday said he would step down as chief executive of Big Blue in March, when his contract expires and he turns 60, handing the reins over to chief operating officer Sam Palmisano.

Gerstner will remain IBM chairman until the end of 2002.

He took over IBM on April Fools Day -- April 1, 1993 -- and will be remembered as a tough businessman who forced IBM to focus on the customer and services rather than just technology, analysts say. He did not win popularity contests.

"With Lou, what you see is what you get," said John Chambers, the chief executive of new economy bellwether Cisco Systems Inc., and a former IBM-er who knows Gerstner.

He credits Gerstner with changing the culture of a troubled dynasty and said he "dealt with the world the way it is, not the way that some wished it would be," Gerstner bristled at first when investors asked what he would do for the company, which lost money the year before he arrived, beyond cutting costs. He said he had no "grand plan".

"The last thing IBM needs right now is a vision," he said four months into the job, to the consternation of Wall Street. Gerstner moved to IBM from food and tobacco company RJR Nabisco, a source of ridicule for many critics and for analysts who questioned whether he understood technology.

'Not quick on his feet'
"He wasn't viewed as a brilliant sage when he took over," said John Jones, an analyst at Salomon Smith Barney and an ex-IBMer who spent more than 30 years either working for the company or following it for Wall Street.

But IBM's stock price since has risen 10-fold and the company is in good shape, as well as the good hands of successor Palmisano, Jones said. "You can't quibble with it," he added.

"Gerstner wasn't quick on his feet," said Frank Dzubeck, president of Communications Network Architects, an industry analyst firm. But the aloof Gerstner was "the right person at the job at the time," he added. "He had to say 'stop', then destroy it and rebuild it. Now it works."

Gerstner began by slashing costs and firing tens of thousands of people. He is thought of as the man who turned IBM into a services powerhouse, but Salomon's Jones said his main achievement was to keep IBM whole.

"There were a lot of things that were working at IBM when he showed up. Services already had a significant momentum. He gets credit for leveraging the momentum," said Jones. "The biggest single decision he made that should go down in the annals is not to break the company up," said Jones.

Instead, according to Cisco's Chambers, Gerstner repositioned IBM as a company that built open systems that worked with other companies' machines. IBM championed the free Linux operating system rather than a closed, proprietary system of its own, for instance.

IBM focused on bringing value by providing software and consultants who could tie together systems, as well as leading-edge microchips. Gerstner leaves behind a profitable company with some $86 billion in sales, and he has had at least the latest laugh in the dot-com saga.

He long called the Internet a tool for business, rather than a business itself, saying in December 2000, as the dot-com meltdown was in full swing, "Today, e-business is just business -- real business."

(C) Reuters Limited.