NEW YORK (CNN/Money) - International Business Machines Corp. named new CEO Samuel Palmisano chairman Tuesday, succeeding Louis Gerstner, who will retire from the board at the end of the year.

Palmisano, whose chairmanship is effective Jan. 1, 2003, took the reins at the world's biggest computer maker in March after Gerstner retired from the CEO spot.

Shares of IBM (IBM: down $1.97 to $74.59, Research, Estimates) were down slightly early Tuesday.

Before assuming the CEO spot, Palmisano, 51, served as Big Blue's president and chief operating officer. He became a director of IBM in July 2000 and remains president.

As CEO, Palmisano oversaw the company's acquisition of consulting firm PricewaterhouseCoopers, the sale of IBM's disk drive business, a restructuring of the microelectronics unit, and outsourcing of desktop PC manufacturing.

Gerstner, 60, is credited with leading IBM through a turnaround by shifting the company's focus to networking technologies and services.

IBM has been cutting costs and restructuring amid the dour technology industry, which has been struggling with a steep drop in business spending in the tough economy.

The company said last week it plans to cut 2,100 jobs in Hungary as it closes a hard disk drive plant there.

Those cuts are on top of 15,000 other jobs IBM has trimmed this year.

The company also cut an additional 600 jobs from its services division due mainly to the PwC acquisition, which closed Oct. 2.