IBM's chief executive Lou Gerstner boosted the company's stock last week when he agreed to remain at the helm for another five years. Analysts welcomed the news as the company's share price jumped over 4%. Gerstner is well-regarded in the IT industry, being credited with reversing IBM's fortunes in the past five years. The contract renewal offer from IBM was no surprise, although some observers had begun to wonder whether Gerstner thought his job at IBM was done with the turnaround complete. Gerstner is believed to want to take the company further and improve the revenue performance in crucial areas such as the server and PC divisions. Large numbers of redundancies are still being completed as part of an ongoing battle against costs that five years ago nearly brought the world's biggest computer company to its knees. A loss of nearly $5 billion (#3 billion) in 1992 saw the stock price at $40 (#24). Then Gerstner was brought in from US food and tobacco supplier RJR Nabisco. Determined to keep the company in one piece, he refocused IBM on its mainframe and services business, despite the supposed death of the mainframe. Many other companies, such as Unisys and Digital, have since followed IBM into a focus on the services side of computing. So far, Gerstner's plan seems to have worked. Third quarter 1997 saw a profit of $1.4 billion (#0.8 billion), while the company made $5.9 billion (#3.5 billion) for the whole of 1996. IBM's share price was hovering around the $105 (#62) mark last week. "Although we still face many challenges, IBM is a much different company than it was only a few years ago," he said last year. "Our portfolio of businesses is now better balanced to reflect the changing requirements of our industry." Services made up 13% of the company's revenues in 1993. By the end of 1996, that proportion had risen to 21%. "It is clear now that this was the right strategy," Gerstner claimed. The renewed contract, which will finish shortly after Gerstner turns 60, includes a one-time option of two million shares of IBM stock.
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