Advanced Computing in the Age of AI | Friday, August 12, 2022

Rometty Out, Krishna and Red Hat’s Whitehurst In at IBM 

IBM announced this afternoon that Ginni Rometty, president and CEO of the company since January 2012, has been replaced as CEO by Arvind Krishna, IBM SVP for cloud and cognitive software, effective April 6. James Whitehurst, CEO of Red Hat, acquired by IBM for $34 billion in October 2018, has been named president.

According to a company statement, Rometty, 62, will continue as executive chairman of the board until the end of the year, when she will retire.

Wall Street cheered the news, pushing up IBM shares nearly 5 percent in after-hours trading. During Rometty’s tenure, in which IBM stock dropped 22 percent amid a tech bull market, IBM made major shifts toward cloud and cognitive computing while moving away from its traditional mainframe business, yet struggled to keep pace with strategic trends more successfully exploited by other technology companies. Whether Rometty, over time,  will be seen as a largely ineffectual CEO or a transitional leader who positioned IBM to succeed in a new tech era is yet to be seen.

The new Krishna-Whitehurst leadership duo emphasizes the critical importance to IBM’s future of the Red Hat deal, the third largest in the history of the technology industry. IBM's statement pointed out that Krishna “was a principal architect” of the Red Hat acquisition. Within IBM's latest earnings report last week, the Linux big data analytics and hybrid/multi-cloud middleware provider (now included in IBM’s cloud and cognitive software division) reported Q4 earnings of $1.07 billion, an increase from $863 million YoY as a separate company.

"This is certainly a move that investors have been waiting for, a CEO change at IBM, something to reinvigorate their strategy around the cloud," said Lisa Ellis, partner at investment firm MoffettNathanson, on CNBC. "Arvind is one of the technology leaders of the company with very, very deep technology background... I think investors are particularly excited about the pairing, with Jim Whitehurst as president coming in from Red Hat, from an external point of view, …bringing together both a long time IBMer with an external try to…really catapult IBM’s position in the cloud in a very different trajectory than where it is right now."

Arvind Krishna, IBM CEO

“IBM bet the farm on cloud with the $34 billion Red Hat acquisition," said Steve Duplessie, founder and senior analyst at Enterprise Strategy Group. "It was only a matter of time for the succession. Now the two top dogs running IBM are cloud purists. The old IBM died a while ago and they had to change – I like the move! Their stock lost 26% while the S&P rose over 150 percent. This lets them remake themselves before it’s too late.”

"Arvind is the right CEO for the next era at IBM," said Rometty. "He is a brilliant technologist who has played a significant role in developing our key technologies such as artificial intelligence, cloud, quantum computing and blockchain.  He is also a superb operational leader, able to win today while building the business of tomorrow.  Arvind has grown IBM's Cloud and Cognitive Software business and led the largest acquisition in the company's history. Through his multiple experiences running businesses in IBM, Arvind has built an outstanding track record of bold transformations and proven business results, and is an authentic, values-driven leader.  He is well-positioned to lead IBM and its clients into the cloud and cognitive era."

"Jim is also a seasoned leader who has positioned Red Hat as the world's leading provider of open source enterprise IT software solutions and services, and has been quickly expanding the reach and benefit of that technology to an even wider audience as part of IBM," Rometty said.  "In Arvind and Jim, the board has elected a proven technical and business-savvy leadership team."

In its statement, IBM said that during Rometty’s leadership at IBM, the company acquired 65 companies, “built out key capabilities in hybrid cloud, security, industry and data, and AI both organically and inorganically, and successfully completed one of the largest technology acquisitions (Red Hat) in history.  She reinvented more than 50 percent of IBM's portfolio, built a $21 billion hybrid cloud business and established IBM's leadership in AI, quantum computing and blockchain, while divesting nearly $9 billion in annual revenue to focus the portfolio on IBM's high value, integrated offerings.”

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