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Gerstner: the interview
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October 31, 1997: 7:36 p.m. ET
Computer chief looks forward to restoring IBM's leadership in industry
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NEW YORK (CNNfn) - During Lou Gerstner's four-year tenure as chairman and chief executive officer of IBM, the computer industry has exploded in both complexity and size. An arrival from RJR Reynolds in 1994, Gerstner has evolved a management style that embodies many characteristics of the new high-tech sector: forward-looking and innovative, yet grounded in the market-driven strategies of traditional business.
Gerstner spoke with Lou Dobbs, CNNfn anchor, on "Moneyline" about IBM's role in the global market. A transcript follows:
LOU DOBBS, CNNFN ANCHOR: First of all, meeting with the Chinese president, Jiang Zemin. What are your impressions of his visit, and what are your impressions of the man?
LOU GERSTNER, CHAIRMAN, IBM: I think the visit is very important. Very important for China and very important for the United States. This is a very significant country as we look forward. It is today, and it'll be more important.
We need to maintain a dialogue with China - an important, constructive and, at times, a difficult dialogue - but we need to keep it moving. And that's what we did in the last couple of days.
DOBBS:: How important is China to IBM as a market?
GERSTNER: Today, if you look at it in terms of our revenue, it's small. If you look at it in terms of its future growth, we think it will be enormous. It's growing 50-60 percent a year for us. Our biggest constraint is hiring good people. The demand is almost insatiable, and it's serious, very sophisticated demand.
DOBBS: As you know, Congress is concerned about the export of U.S. nuclear technology to China. What is your reaction?
GERSTNER: I think the U.S. regime that has been set up in the Commerce Department is a good one, and we probably ought to keep that mechanism in place. But in general, I don't think it's really an issue with China from a computer point of view. They can choose from other places, and I think they are using most of the computers (if not all of the computers) for all the things that the export licenses say they should be used for. So I'm not worried about it.
DOBBS: What are you worried about right now in this business climate? Everything seems to be going your way. IBM's way. What are your concerns?
GERSTNER: Well, I've got a new set of concerns, Lou. Up until 5 or 6 days ago, I viewed the world's markets as being very strong, very constructive. I viewed most of the world's markets as moving in a positive direction all at once, in fact.
We haven't had that in a while. So now we had Asia, Europe, Latin America all moving in a constructive direction, and then we had this little bit of financial upheaval over the last couple of days. While I think it's going to remain primarily a liquidity and financial issue and not a true macroeconomic issue, there is a connection between the two. I hope that the financial markets don't lead the real market into a downturn.
DOBBS: IBM is being given credit for taking leadership in announcing a $3.5 billion buyback in the midst of the turmoil. Did you time that intentionally with the turmoil in the markets?
GERSTNER: I would admit to you that we could take some credit, but there's a fair amount of luck in that too. We don't time our buybacks to deal with day-to-day changes in the stock market. That $3.5 billion announcement that our board made was a statement of confidence in IBM, a commitment to further increase our shareholders' wealth.
But I think, importantly, it was also a commitment to markets we see around the world and the positive view we have of them. The statement wasn't addressed directly to the financial markets, but in the sense that we were making a statement of confidence, it was good that we could make it in the midst of that turmoil.
DOBBS: As you've established yourself at IBM, people may forget that you've also headed up American Express, one of the premier financial services companies as well. Drawing on that experience, give us your forecast for what the economy looks like, and how concerned people should be about these markets.
GERSTNER: Well, one of the problems with getting old is that you get to see things over again. Hopefully, you learn something from that. But I would tell you that I think we've seen this movie before. We've seen Hong Kong go through periods of market disturbance, and we've seen Latin America go through periods of financial turbulence.
I don't see anything through the eyes of our IBM colleagues across the world in those markets. This leads me to believe that there are fundamental problems. We see strong growth and good macroeconomic policies in most of these countries, and I am hoping that this is one of those adjustments that financial markets go through on a regular basis (except that it's irregular, so you never know when it's going to happen).
I'm hoping that it's not a real problem. If I were a personal investor, I would do what I think the large companies are doing, and that would be to stay the course.
DOBBS: When you took over IBM almost five years ago, lots of people didn't know how it would work out. I can remember great impatience when Lou Gerstner announced the strategy for IBM, but now the results are in. You've done an outstanding job. The company has come back from what some people considered the abyss. The question now is "what's next?"
GERSTNER: The next thing is, we can make IBM even better. We haven't even started. We brought IBM back, but we're gunning for leadership. We think there are some things we can do for IBM that can help our customers in ways that will give us true leadership over the next few years as this whole network world emerges. So the answer is, yes the IBM people around the world have done an extraordinary job over the last few years, but we are ready for more.
DOBBS: Will Lou Gerstner be leading them?
GERSTNER: I hope so. If they want me to.
DOBBS: What does Lou Gerstner want?
GERSTNER: I'm having fun at IBM. It's tough. It's a tough industry. But I'm looking forward to being here.
DOBBS: Thanks.
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