IBM’s CFO to head services div

Caroline Humer

NEW YORK: IBM said on Monday that Chief Financial Officer John Joyce would head its services division, where growth has been slowing, as part of an executive reshuffling spurred by the departure of its sales head to run Siebel Systems Inc.

International Business Machines Corp. Chief Executive Officer, Samuel Palmisano said the changes, which include moving services head Douglas Elix to run sales and naming global financing chief Michael Loughridge as CFO, were simply to better combine IBM's various businesses.

Analysts, meanwhile, said the move would increase the company's attention on computer services, an area that has been criticized for not increasing sales fast enough and for low profitability.

Moving Elix should help sales, they said. "IBM has this huge sales force and they want to make sure that their services business leverages the size of their sales force," said John Jones, an analyst at Schwab Soundview Capital Markets.

In addition, Joyce's attention on the division should help it increase profitability, one analyst said.

"With Joyce's focus on the services engine of the company, the company should see an accelerated return to double-digit services operating margins," Prudential Equity Group analyst Steven Fortuna wrote in a research note.

IBM, which had $89 billion in revenue last year, sells services, computers, software and tiny microchips. After tough times during the downturn in technology spending, IBM has returned to regular quarterly earnings growth, but its revenue growth has been largely due to favorable exchange rates and acquisitions.

Elix, 55, who has run the company's services business since October of 1999, was also put in charge of IBM's operating team, a role currently held by Palmisano and which aims to make company divisions work together.

He replaces Michael Lawrie, 50, who is leaving IBM to run software company Siebel. Lawrie, who joined Armonk, New York-based IBM in 1977, has been the head of sales since 2001 after running IBM's operations in Europe, the Middle East and Africa.

"I've been led to believe that they've been talking about this for some time and Lawrie's departure was the catalyst," Jones said.

The move makes veteran IBM-er Joyce, who once ran the company's Asia Pacific operations, a possible candidate for a bigger operational role, he said.

"Joyce wasn't going to stay CFO for his whole career. He's not the professional CFO type ... He's always wanted broader responsibilities," Jones said.

Joyce, 50, became CFO in November of 1999 under then IBM head Louis Gerstner. Jones rates the stock an "outperform," does not own the shares and his firm has not done banking for IBM.

Loughridge, 50, joined IBM in 1977 as an engineer and was controller before being named to head its global financing division, which has a $30 billion portfolio, in April of 2002. The global financing group will continue to report to Joyce after he moves to services.

© Reuters